The Public Utilities Authority (Electricity) is again refusing to recognize contract costs between the Tamar natural gas reservoir partners and private power stations. Three contracts between private power stations and the Tamar partners failed to win approval at yesterday's plenum session of the Public Utilities Authority. This is the second time that the Authority has refused to recognize the full costs stated in these contracts.
A senior electricity source said, "The power stations' developers will be the losers from this." The Tamar partners were due to sign contracts to supply gas to power stations in Alon Tabor, Ramat Gavriel, and Sorek linked to the US and Israeli Consumer Price Indices in 2014. The Public Utilities Authority (Electricity) refused to sign the contracts, however, claiming that the base price of gas in the contracts was too high, and that linkage would lead to an unjustified increase in the price of gas purchased by the power stations developers.
The Tamar partners therefore agreed to alter the linkage mechanism, so that the price would be linked to the Israel Electric Corporation (IEC) (TASE: ELEC.B22) electricity production component, a form of linkage that enables the private power producer to remain competitive if the electricity rate changes. The base price set in the contracts is $5.85 (although this will rise significantly over the years). As revealed yesterday in "Globes," the contracts and obtaining final approval from the Authority were slated for signing in the next few days.
The Public Utilities Authority (Electricity), however, today published its decision not to recognize the contracts, asserting that it was willing to recognize only a gas price in the $5.35-$6.25 range. The Authority further argued that the gap between the costs that it recognized and the costs according to the agreements presented to it amounted to billions of shekels. The decision angered senior energy sources, who stated that the Authority was engaging in "public relations exercises." "The contracts will eventually be signed, and the gas will reach the power stations; the question is how much damage the Israeli economy will suffer by then," one of the sources complained, adding, "In the end, the developers are the injured parties, because the Authority will recognize a lower price for them than the one they signed for in the contract."
Public Utilities Authority (Electricity) chairperson Orit Farkash-HaCohen said, "This decision maintains the delicate balance between continued promoting of a competitive and efficient electricity industry and the good of the public, which bears the cost of the gas agreements. We hope that all the relevant government parties continue their urgent efforts on this issue from a general governmental perspective."
Published by Globes [online], Israel business news - www.globes-online.com - on March 26, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015