Paying
Too Little For Power?
Zev Golan, IASPS Associate Director
Ha’aretz
informed its readers on Feb. 5 that the price of electricity in Israel is
too low to be maintained. Actually, Ha’aretz
misinformed its readers.
The
news report even published a table of prices of electricity around the
world, showing Israel twelfth out of eighteen countries. Even that, were it
true, would not justify the headline that gives the impression Israeli
prices are unacceptably low; even lower than Israel, according to this
table, are Canada and Australia, neither of them exactly examples of
collapsing Third World economies. But the table is in any case far from the
truth.
First
of all, one must remember when comparing prices of electricity that it is
critical to take into consideration the relative size and characteristics of
the countries being compared, since these have an effect on the price of
electricity production. In Policy Studies
no. 38, “Israel’s
Electricity Market,” IASPS analyst Yossi Borochov
therefore compared Israel to the Czech Republic, Chile, Austria and Great
Britain, all of which were acceptable for purposes of comparison. The
result: Israel was most expensive in price of electricity for industry and
second to Austria in price for householders. Interestingly, of these
countries IASPS evaluated as fit for comparison, the table used in Ha’aretz
included only Great Britain.
Even
more interesting is that the newspaper got Great Britain’s number right
but Israel’s for some reason is listed as lower than in reality.
On
the other hand, in terms of low prices, Policy
Studies
no. 38 concluded that the Israel Electric Corporation (IEC) was forcing
household consumers to subsidize industrial users.
The
electricity expert quoted by Ha’aretz,
Dr. Daniel Czemanski, further states that the IEC state monopoly, because it
is not allowed to charge higher prices, is unable to pay private producers a
realistic price for their electricity, thus making it unprofitable for
private producers to produce electricity and endangering Israel’s supply.
Neither the expert nor the reporter thought it worthwhile to note that years
ago the law required allowing private production, and that despite legal
rulings that it could not do so, the IEC state monopoly itself issued the
tender for private production and chose the winner; thus maintaining its
monopolistic state control despite the appearance of “privatization.”
Today “experts” express astonishment that private production has not
materialized, or that prices are too low.
If
the IEC cannot get by with the price charged consumers, perhaps it should
cut the high wages and numbers of employees at IEC. That would allow it to
make profits even with the price of electricity where it is. Following
Czemanski/Ha’aretz’s line
of reasoning, no matter high the price charged Israeli consumers, by raising
wages and distributing even more electricity free to its thousands of
already overpaid employees, the IEC could always ensure that prices are
never high enough for it to be profitable.
Meanwhile,
Ha’aretz reports two pages
later on the same day of February 5, that
the government has apparently decided to “privatize” the Israel coal
company…by selling it to the state electricity monopoly, IEC. With
privatization like this, who needs Bolshevism?
For
the real story about how much you are paying for electricity in Israel and
why, see Policy
Studies
no. 38.
