Despite Israel’s gas riches, about half the power produced by the Israel Electric Corporation (IEC) comes from coal – and with coal prices on world markets higher, the company says it has no choice but to raise electricity prices by 3.7 percent. As of 1 January, Israelis will pay 47.25 agurot (about 12¢) per kilowatt hour.
Prices for coal in recent months have risen by more than 40 percent, the company said. Even though the IEC is gradually lowering its use of coal in favor of natural gas, the change has been slower than expected. “We need to speed up the process,” said IEC chairman Yiftach Ron-Tal.
One reason for the lack of progress on converting to gas is that the price the company pays for gas is set by the government, which has signed deals with the gas producers setting prices at higher than current market costs. Although world gas prices have fallen, the IEC is still required to pay a higher price set several years ago. Ron-Tal said that the initial agreements will expire in 2021, and the company will be able to negotiate a better deal on the private market.
Ron-Tal believes that the IEC – and customers – got a raw deal. “We are the main customers for gas from the Tamar reserve,” currently the main reserve that Israel is drawing gas from. “The whole project was developed with us in mind. We asked the powers that be to ensure that we would always get the cheapest price, but that is not the way things worked out. I think this can be fixed, however.”