Nearly 300,000 households have switched their electricity accounts away from the Israel Electricity Corporation (IEC) as of Monday, January 13, following the electricity reform, which was launched six months ago, Noga Electricity Systems Management, which manages the electricity structure, reported. Electricity in Israel. This number is three times higher than expected. According to Noga, 158,700 people who switched from IEC have smart meters and 141,100 have basic meters.
The high demand for switching electricity suppliers has also created uncertain challenges in this process. There is concern about the effects of a 3.5% rise in electricity prices on new electricity companies, and market sources believe it is only a matter of time before the number of existing players declines, following the closure and consolidation of operations.
The reform also allows customers who have basic electricity meters, rather than smart meters that allow remote reading, to switch electricity companies. The Israel Electric Corporation is responsible for accelerating the installation of smart meters, which have been installed in only 1.3 million households, out of 3.1 million households in Israel. Contracts with households are made on the basis of a discount on the Israeli Electricity Company’s household electricity tariff (NIS 0.64.02 including VAT), which includes production fees, infrastructure fees and system administration.
The only component that new suppliers are allowed to buy at a discount is the production component, while the infrastructure tariff is paid to IEC and Noga. Added to this challenge is the lack of production supplies. With 2.8 million households having not yet transferred their electricity accounts, suppliers are struggling to purchase electricity at worthwhile prices.
Only power plants that have had arrangements for more than a decade are allowed to sell electricity directly to new suppliers, and this does not include power plants sold by the Israel Electric Corporation after the electricity sector reform (Ramat Hovav, Hagit Mizrah, Alon Tavor and Eshkol). This energy is transferred to Nougat, creating a kind of energy exchange, in which the companies claim that unfavorable tariffs are created. The IEC has not adapted this regulation, although more direct contact between the production and supply sectors is encouraged around the world, and less use of the ‘cross-over’ method.
Increase consumer awareness of discount options
The rise in electricity prices at the beginning of this month increased consumer awareness of the current option to reduce the monthly electricity bill. From the consumer’s perspective, this option is more advantageous after a price increase, as the discount is now derived from an invoice with a higher initial price.
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High demand for switching electricity suppliers
On the other hand, this is worrying for new companies, because costs for them are rising. These are some of the reasons that prompted Bezeq and Bazgaz, after updating electricity prices, to decide to reduce the fixed discount amount offered to new customers from 7% to 6%.
Another issue is the Electricity Authority’s decision to hold a hearing on the significant rise in prices. A letter sent by HOT, Pazgas, Amisragas, Electra Power, Bezeq and Partner said that the Electricity Authority proposes, in addition to raising electricity prices, to raise by approximately 50% system management rate costs and electricity costs. Variable grid components average about 14% for low voltage needs.
“From a review of the hearing, it appears that the Authority did not take into account the impact of what is proposed on default suppliers in general and the electricity supply sector for domestic consumers in particular,” the companies said in the letter.
“Conventional power plants should also be opened.”
An industry leader tells Globes that the Electricity Authority does not need to change tariffs, but rather change the rules of the game retroactively and allow new companies to buy more electricity from power plants. “In the end, there are not enough solar fields, and we need to open conventional power plants as well. The Electricity Authority is moving forward with this slowly.”
Amit Pergament, CEO of Electra Power, explains that the significant increase in overall payments to network users and system administrators has affected some suppliers significantly. “For players who do not have production sources, this is a loss of between 300-400 shekels per year from each private customer. This is a huge event, regardless of whether it is a big or small player. As a result, we see the market bouncing back with reductions in discounts and discounts.” In marketing.
There are also problems with meter reading on basic meters, which is cumbersome and requires customers to send pictures of the reading two days before the end of each month.
As a result of all these challenges, industry figures told Globes that this year we will see some of the seven current new players leaving the sector. Some may merge with other companies while others may simply close their doors.
Published by Globes, Israel Business News – en.globes.co.il – on January 21, 2025.
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