In a surprise move today, the Natural Gas Authority, a small and anonymous regulator, has taken measures that even the large and strong Ministry of Finance has only threatened to do but would not dare to implement. It has only issued a draft document that will be subject to a hearing but the incendiary pair of words "pro-rata" have exploded for the first time from a government authority.
The arrangement being proposed by the Natural Gas Authority is problematic. In the name of parity, the Israeli consumer will pay more for his electricity bill. It is not yet clear if the Public Utilities Authority (Electricity) will allow this while consumers may petition the Supreme Court against the decision.
The private electricity producers that have already signed agreements for Tamar gas are also likely to be hurt. Whether Dalia Power Energies Ltd, which has already survived seven rounds of decisions by regulators, can close financing is highly questionable. Above and beyond reducing the amount of gas they need, Israel Electric Corporation (IEC) (TASE: ELEC.B22) and the energy producers will be subsidizing the small users and medium-sized enterprises.
More uncertainty in the economy
Equality in allocations for the gas means more uncertainty in the economy, and another painful bite by the regulators out of the principle of respecting agreements. And this time from the office of the minister who raises these principles in every speech he makes.
Israel Corporation (TASE: ILCO) is the main winner in this new dispute over Tamar's gas. The company, which gambled on the losing Egyptian horse, is now back in the race through the rear door. It almost seems to indicate that Idan Ofer and Nir Gilad forced the regulator to do their bidding. But the person who really pushed the Natural Gas Authority to make this decision was not Israel Corp. but medium sized factories.
Converting industrial plants to natural gas can save the sector NIS 1.2 billion annually thus improving the factories' competitiveness and creating more jobs. The Natural Gas Authority has made every effort to persuade these factories to convert to natural gas use but industrialists remain skeptical. They are convinced that the natural gas revolution is a false mantra that won't be realized.
Shaniv Paper Industries Ltd. owner Pesach Barnet is one of the only industrialists convinced that his factory's fate is tied up with natural gas. For three years he unsuccessfully attempted to obtain natural gas for his factory in Ofakim. Every time he tried one bureaucratic obstacle or another was put in his way to the embarrassment of the Natural Gas Authority.
Consqequently, when the Natural Gas Authority chairman Shuki Stern decided on the principle of equality, he was thinking of Barnet. With all due respect to the IEC, Stern is more concerned with the response of Barnet and his fellow industrialists.
Published by Globes [online], Israel business news - www.globes-online.com - on July 8, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012