Friends of Syrian People Meeting Produces No Good Options

Article Summary
The increase in electricity rates scheduled to take effect as of April 2012 is the failure of both the Israel Electric Corporation and the Israeli government, who relied too heavily on Egyptian gas supplies and failed to anticipate and prepare for their cutoff in early March.

The increase in electricity rates by "only" 8.9%, scheduled to take effect as of April 2012, shows that the Israeli government treats its citizens no better than any regular seller who uses the all-too-commonplace marketing trick of fixing a price just under a round figure (e.g. 9.99) to deceive potential clients into believing that the price is lower. It is precisely the same trick Prime Minister Benjamin Netanyahu employed when, earlier in March (on the eve of the recent oil-price hike), he lowered the tax on gasoline by 0.1 shekel so as not to cross the red line of 8 shekels per liter.

Raising the electricity rates by 8.9%, the government has thus used the same old trick. To be honest, it should be noted that there is no choice but to raise the electricity rates. According to objective data, electricity rates should have soared by no less than 30%. However, pulling off yet another trick, the government has come up with a creative accountancy ploy: It plans to spread the electricity rate hikes over several years — the same way credit-card payments are spread — so as not to burden the public too heavily.

Meanwhile, the government is shamelessly subsidizing Israeli electricity consumers in a regressive manner, rather than progressively, so that the well-to-do get to enjoy the subsidizing much more than the poor. All this is done in the absence of any inspection or control by the Knesset Finance Committee or some other parliamentary supervisory body. How is the government implementing this subsidizing? Well, the government allows the state-owned Israel Electric Corporation (IEC) to spread tax payments (VAT and possibly also tax deductions from its workers) and, at the same time, collects from the IEC reduced tax on diesel oil. Furthermore, the finance ministry has agreed to give the IEC state guarantees to raise NIS 1.5 billion through bond issues on the Tel Aviv Stock Exchange (TASE).

Israel Electric Corporation is a monopoly that controls electricity supply in Israel. Unfortunately, Israel is not connected to the pan-European electricity grid or to the electricity-supply network of any of its Arab neighbors. Regrettably, electricity cannot be imported in tankers either.

The finance ministry's panic over the IEC financial fiasco has another cause. The responsibility for the sharp rise in the price of electricity lies squarely with the IEC and the Israeli government. The IEC management holds responsibility for relying on the Egyptian EMG gas company as the chief natural-gas supplier to Israel and for failing to anticipate and prepare for the cutoff in natural-gas supplies from Egypt, last halted in early March. The Israeli government, finance ministry and ministry of national infrastructures, for their part, are accountable for enabling the Egyptian gas failure by giving their consent to the deal. On top of all this, the planning authorities in charge have not done enough to step up the development of alternative natural-gas resources — first and foremost, the huge Tamar offshore gas field (which is not scheduled to begin commercial production before mid-2013). In this case, the authorities (namely, the national planning and building commission) failed to face up to pressures by environmental-protection organizations and rejected the plan for the construction of an onshore gas terminal for the offshore Tamar gas field at the Dor beach (south of Haifa), not taking into account the far-reaching consequences of their decision and the high costs involved.

Finance Minister Yuval Steinitz himself is also to blame. At the time, he vigorously promoted the recommendations by the Sheshinski Committee, which was set up to examine the fiscal policy on oil and gas resources in Israel, and was all for increasing the state’s share in the expected revenues of the gas-drilling companies. However, he failed to make an allowance for potential delays in the development of the gas fields. The cost of short-term fuel procurement by the IEC for the immediate future is estimated at some 18 billion shekels. However, the increased royalties from the natural-gas fields are not expected to flow in for another four or five years.

So, here is the next issue awaiting examination by the over-busy state comptroller. However, he has not yet submitted his report on the 2010 Mount Carmel forest fire disaster. It is quite unlikely that he will have time now to look into the natural-gas fiasco.

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