Electricity Authority Rejects $65 Million in Costs for Power Station Delays

Israel's Electricity Authority has refused to recognize approximately NIS 230 million (about $65 million) in costs incurred by the Israel Electric Corporation (IEC) due to delays in constructing two new production units at the Orot Rabin power station in Hadera. The decision stems from a hearing initiated by the authority after completing a cost audit of the project, which was delayed for over two and a half years.

The two combined cycle gas turbine (CCGT) units, numbers 70 and 80, were intended to facilitate the shutdown of the older, coal-fired units at the station as part of a reform in the electricity sector. Unit 70 was slated for operation in June 2022 and Unit 80 in March 2023, but they are now expected to enter commercial operation only in January 2025 and January 2026, respectively.

The authority's audit found that the IEC exceeded real construction costs by approximately NIS 300 million. While acknowledging that some delays were due to external factors like the COVID-19 pandemic and the October 7th war, the authority determined that other delays resulted from the IEC's management of its suppliers and project timelines. The authority proposes not recognizing about NIS 120 million in interest during the construction period and an additional NIS 100 million in investment overruns. The recognized cost for the project will be around NIS 5.1 billion, including interest and linkage, down from the IEC's requested sum of over NIS 5.3 billion.

The authority estimated the indirect damage from the delays to be much larger, potentially in the billions of shekels, partly due to the continued reliance on expensive and polluting coal power. Private electricity producers used the authority's findings to renew their demand for the IEC's complete exit from electricity generation, arguing that the project's failures demonstrate why the IEC should focus solely on transmission and distribution networks, leaving generation to the private market.

The IEC rejected the authority's claims, stating that planning and licensing were completed within a year and that most delays stemmed from circumstances beyond its control, including issues with the turbine supplier, against whom the company is preparing a lawsuit. The IEC noted that the new units provided electricity during the war before their commercial launch and that private companies received extensions for less complex projects. The IEC announced it is considering its next steps following the authority's hearing.