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Diesel Price Cut to Minimize Electricity Rate Climb

Finance Ministry lowers taxes on diesel fuel, makes it possible for Electric Company to make price hike less steep.
By Gil Ronen
First Publish: 8/7/2011, 9:29 PM

Power station, Haifa
Power station, Haifa
Flash 90

Finance Minister Yuval Steinitz has signed a temporary order lowering taxes on diesel fuel that is used to make electricity. As a result, an upcoming hike in electricity costs will not be as steep as it was planned to be.

Electricity prices will jump by 12%, instead of the planned 20%.

Israel has had to use diesel for creating electricity since February, when supply of Egyptian natural gas to Israel was cut off due to sabotage to the pipeline. Diesel fuel makes production of electricity significantly more expensive, hence forcing a rise in customer prices.

Steinitz decided to lower the excise tax and purchase tax on the diesel fuel by 69%. The order is in force from February 1 to December 31, 2011.

The step makes it possible to lower electricity rates by 8% – thus making it possible to minimize the upcoming price hike.  

Additional savings could be drawn from temporary use of 'Mazut,' a different kind of fuel oil that is not as clean as diesel, subject to the approval of the Environmental Protection Ministry.