Israel Electric Corporation Fails to Pass $70 Million in Project Delays to Consumers

Israel's Electricity Authority has ruled that the Israel Electric Corporation, known locally as "Chevrat Hashmal," cannot pass on 230 million shekels (approximately $70 million) in damages to consumers. These costs stemmed from significant delays in the construction of two new power units at the "Orot Rabin" complex in Hadera.

The total cost for the two units reached approximately 5.3 billion shekels. The Electricity Authority approved 5.1 billion shekels to be recovered from consumers through electricity tariffs, but the remaining 230 million shekels must be absorbed by the company itself. While the Israel Electric Corporation is state-owned and its profits ultimately derive from the public, this decision marks a departure from the usual practice where all company expenses are passed on to consumers.

The construction delays, which extended over two years, resulted in a total economic damage of 4.6 billion shekels. This includes 1 billion shekels for generating electricity from older, less efficient stations, 2.8 billion shekels in environmental costs, about 500 million shekels for increased project expenses, and roughly 280 million shekels in financing interest.

The Authority acknowledged that a portion of the delays were justifiable, citing the COVID-19 pandemic and the ongoing war. However, the regulator also attributed delays to "internal company failures, problems with suppliers, and schedule management issues for which the company is responsible."

The two delayed units, PGU-70 and PGU-80, are combined-cycle power units recently brought online. Their construction was part of the 2018 electricity market reform, which opened the sector to private competition. The Israel Electric Corporation sold some of its power stations and ceased building new ones, with these two units being the exception. The units were delivered approximately two and a half years and two years and ten months behind schedule, respectively.