Israel electricity prices rise over Egypt gas disruptions

JERUSALEM: Israel's finance ministry on Monday announced a 9.3 percent rise in the electricity price, citing disruptions in the gas supply from Egypt, even as Israelis protest nationwide over the cost of living.

The treasury stressed that it had kept the increase as small as possible, cutting in half the 20 percent rise that had been expected.

"Electricity will rise 9.3 percent primarily because of interruptions in the supply of Egyptian gas to electricity stations," finance ministry spokesman Boaz Stembler told AFP.

Israel's supply of gas from Egypt has been regularly disrupted since an uprising overthrew former Egyptian president Hosni Mubarak in February.

A pipeline that carries gas through the Sinai and on to Jordan and Israel has been blown up at least four times in recent months by unknown attackers.

The disruptions in gas supply have forced electrical stations to use coal and diesel fuel, both of which are more expensive, and prompted the government to consider raising electricity prices by a full 20 percent.

The full increase was avoided, Israeli media reported, when the finance ministry agreed to decrease the import tax on diesel fuel.

The price rise comes as the Israeli government seeks to placate demonstrators angry at the cost of living in the Jewish state.

On Saturday night, more than 250,000 people took to the streets in cities across Israel to demand cuts in the cost of everything from housing and taxes to health care and education.

Israeli Prime Minister Benjamin Netanyahu has said he sympathises with the protesters but has also warned against the costly, sweeping reforms they are seeking, saying they could throw Israel into an economic crisis.

Egypt supplies about 40 percent of Israel's natural gas, which is used to produce electricity.

But the country's deal to supply Israel is controversial among Egyptians and has repeatedly been challenged in Egyptian courts over its secretive clauses and claims that Israel has been paying below-market prices.

In April, Egypt's Prime Minister Essam Sharaf asked for the revision of all contracts to supply gas abroad, including to Israel.

Israel has said little publicly about the possible renegotiation of its gas contract with Egypt, but ministers have urged the speedy exploitation of recently discovered gas fields off Israel's northern coast.

Israeli officials believe that exploitation of two major natural gas fields could compensate for the loss of Egyptian gas.

Israel has already moved to begin exploiting the fields, signing a deal with Cyprus to mark out maritime borders, but it faces challenges from Lebanon, which claims that the gas fields lie in its territorial waters.

Copyright AFP (Agence France-Presse), 2010