Photo Credit: Flash 90
View from inside a control room at the Israeli Electricity Company power station.

( Against the background of prolonged power outages and conflicts between the Israeli Electric Company management and employees, Israel’s state auditor, Justice Joseph H. Shapira, determined in an exceptionally harsh report issued Wednesday that the state and the IEC have been failing for 18 years to reach agreements to increase competition in energy. This failure has caused Israeli citizens billions of dollars.

The auditor’s report examines the application of the 1996 Electricity Market Act, which sought to create conditions for competition in the electricity market and reduce cost. The auditor found that the Ministry of National Infrastructures, Energy and Water Resources and the Ministry of Finance, including the Government Companies Authority, did not execute the structural changes that were required by law in the electricity market, and did not even realize the goals that they themselves have formulated. Although there is no official state estimate of the extent of the damage to the economy due to the continued dependence on the electric company and non-implementation of the restructuring plans, the auditor believes that the damage reached between $2.5 and $3.2 billion, in 2008-2013 alone.


Another point made by the audit revealed that the IEC management and its board of directors were aware even before 2008 of the existence of between 1700 and 2500 surplus workers, with the cost of their continued employment standing at upwards of $250 million each year. Between December 2007 and December 2012, the board approved three efficiency programs, but, according to the IEC, they were not implemented because they never received the approval of the relevant government agencies or the workers’ union. The Company estimates that the cost of employing surplus workers (not including consequent severance packages) came to about $1.2 billion between 2008-2013.

The IEC, seemingly oblivious to its own stunning failures, responded to the Auditor’s report saying “we should welcome the determination of the State Comptroller that it is impossible to continue without a comprehensive reform of the electricity sector. For several years now, the company has demanded the promotion of reform to be able to handle the outdated infrastructure, and significantly streamline the number of employees. The company is committed to investing in the power infrastructure, but to our chagrin this investment was delayed by the Electricity Authority which prevented it in ways that themselves deserve a special inspection, and the state comptroller did well when he exposed the incompetence of the Electricity Authority.”

Meaning it was all government’s fault.


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