# Israel Eyes Electricity Reform Following Outages



## hkskyline (Sep 13, 2002)

*Israel eyes electricity reform as demand spikes *
By Steven Scheer 

TEL AVIV, June 14 (Reuters) - Israel's government on Wednesday proposed reforms to the country's electricity market after hot weather led to a spike in demand and caused widespread outages last week. 

There has been talk of reforming or privatising Israel Electric Corp. (IEC), the country's only electric company, since the late 1990s, but the utility's labour union blocked any efforts. 

The Finance and National Infrastructure Ministries, while differing on specifics, are determined to make structural changes to prevent further outages as demand continues to rise. By law, reforms must be put in place by March 2007. 

"We are going to transform the market to a market structure where there will be many competitors in electricity generation, distribution and retail," privatisation chief Eyal Gabbay told a news conference. 

Failure to act would lead to more outages and a deterioration of the electricity market, he said. 

IEC, which has 45 billion shekels ($10 billion) of debt, on Wednesday said its first-quarter net profit rose 42 percent to 94 million shekels, while revenues rose 7 percent to 4.1 billion shekels. 

Gabbay said the state has asked for a breakdown of its financials to no avail. 

"This is the biggest industrial company in Israel and they only report as a whole and not a breakdown of business units and power plants," he told Reuters after the news conference. "The financial statements are a big problem for us." 

The Finance Ministry hired KPMG Australia -- the architect of electricity reforms in the UK in the 1980s and later in Australia -- to prepare a reform for Israel. 

KPMG officials said that while the utility refused requests for financial data, they found using other sources that "IEC is a series of inefficiencies -- in labour and capital management." 

"The current position is unsustainable," Antony Cohen, head of KPMG Australia's corporate finance, told reporters. "They have too much debt ... Some time over the next couple of years, there could be a (supply) problem unless something is done." 

If the government went ahead with KPMG's proposals, it would take two-to-three years to before consumers would see prices drop and outages decline, he said. 

In both Australia and the UK, there were no layoffs, only voluntary retirement packages, he added. 

Cohen estimated the cost of implementing the plan could be as much as 2 billion shekels, but the reforms would reap 10 billion to 14 billion shekels in savings. 

KPMG presented the plan to Finance Minister Abraham Hirchson on Tuesday and were showing it to union leaders on Wednesday. 

In the past, the union and IEC management have rejected calls for changes. 

A spokesman for National Infrastructure Minister Benjamin Ben-Eliezer said the minister was in favour of reforms, but the state must retain at least 51 percent of IEC. 

Ben-Eliezer prefers to split up IEC's main power plants in and make them compete with each other, he said. 

($1 = 4.50 shekels)


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