Bethel Finance: Electricity Authority proposes 6.6% rate hike

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Bethel Finance news:
The Public Utilities Authority (Electricity) proposes a 6.6% electricity rate hike in 2012, instead of the 13% rate hike that Israel Electric Corporation (IEC) (TASE: ELEC.B22) wants. It proposes spreading the 13% rate hike over three years: 6.6% this year, 2.6% in 2013 and 3.7% in 2014.

The Public Utilities Authority cites uncertainty about natural gas deliveries from Egypt, due to the repeated attacks on pipelines in Sinai over the past year, and the decline in deliveries from Yam Tethys as its reservoir dwindles, which have forced the government to come up with corrective measures.

"Spreading the rate hike over three years is supported by measures that the finance minister is expected to implement, instead of a 13% rate hike for consumers. The rate will increase gradually, with a desire to minimize as much as possible the burden on electricity consumers, while enabling IEC to function under these conditions."

"The Public Utilities Authority proposed limited rate hike is partly based on government guarantees for IEC to reduce the cost of its borrowings to make up the shortfall in revenue from electricity rates, a large reduction on the diesel excise paid by IEC, and deferral of VAT payments" says Mr. Peres Sailam (Bethel Finance Ltd).

In exchange, the government demands that IEC undertake extensive streamlining measures, including its first public offering in many years, and the immediate release of hundreds of millions of shekels from the trustee account, which are designated for paying benefits and bonuses to employees, but which are not recognized as deposited in the employees' central severance fund.