The Public Utilities Authority (Electricity) is examining whether it is possible to compensate electricity consumers who lost power during the mid-December 2013 snowstorm. Besides the issue of eligibility for compensation, the authority will review whether the consumers who lost power should be compensated via an electricity rate hike or if the money should come from the state budget as part of the general compensation for the storm's damage.
60,000 Israel Electric Corporation (IEC) (TASE: ELEC.B22) customers, mostly in and around Jerusalem, the Judean Mountains, Samaria, and the Upper Galilee, were left without power for three days during the storm. Most of the outages were caused by falling trees bringing down power lines. In some cases, the restoration of full power took several days.
During discussions on the matter in the past few days, it was discovered that compensating these customers raised complicated legal questions. IEC is required to compensate electricity consumers for damage caused by breakdowns at power stations or on the grid, but it is not responsible for customers who suffered outages due to falling trees breaking power lines. In principle, the consumers who lost power can sue for damages caused by IEC's negligence, but such claims are difficult to prove.
In some case, IEC employees were delayed in making repairs because of blocked roads, and municipalities or the police are responsible for clearing the roads.
Another legal question is whether it is possible to compensate consumers who lost power in Jerusalem by a general electricity rate hike, which means that consumers elsewhere in Israel will finance most of the compensation.
The Finnish model
The usual practice in European countries which face frequent blizzards is to compensate electricity consumers for outages that exceed 12 hours. For example, in Finland, a law was passed two years requiring the companies responsible for the electricity grid to compensate such consumers in an amount equal to 10% of their annual electricity consumption, 25% of their annual electricity consumption for an outage lasting more than three days, and 100% compensation for an outage lasting five days or more. To meet these strict service requirements, the grid companies were required to invest heavily to improve the electricity infrastructure, which raised electricity rates in remote rural areas by up to 30%.
It is important to note that IEC's responsibility is limited to a normal snowstorm, and not to incidents caused by force majeure.
Published by Globes [online], Israel business news - www.globes-online.com - on January 1, 2014
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