Israel’s private electricity suppliers offer significant discounts to consumers, and as of July, 294,000 customers had chosen to switch to them from state-owned Israel Electric Corp. (IEC). Yet beneath the strong figures, there is one huge problem. The suppliers’ business model is unprofitable, because there is not enough cheap electricity from producers. To solve the problem, the Israel Electricity Authority the regulator controlling IEC, aims to expand supply. But the seven private suppliers warn that this will not be close to enough to continue rolling out discounts to consumers.
One of the major reforms in Israel’s electricity sector has been in supply, which allows private electricity producers to sell at a discount through private suppliers. Almost 300,000 consumers are connected to private suppliers instead of the electricity company, and purchase electricity at a discount of 5-7%, and up to 20% during off-peak hours.
Minister of Energy and Infrastructure Eli Cohen today called the reform, “The biggest in Israel’s economy since the mobile phone reform, which saves every family hundreds, and even thousands of shekels a year.”
But most of the electricity is sold to the suppliers from the central grid, and only a small portion is actually offered at a discount by the producers. Thus, suppliers have difficulty buying cheap electricity, and all the companies in the field (Partner, Bezeq, Electra Power, Amisragas, Pazgas, Cellcom and Hot) have a loss-making model in supplying electricity to consumers, and only some of them are currently actively working to increase the number of their customers.
The suppliers don’t have enough cheap electricity
The reason for the suppliers’ losses is that the amount of electricity they can obtain is very limited. Many of the power stations, including those privatized from IEC, cannot sell cheaper electricity to suppliers. Instead, the suppliers buy expensive electricity from the grid, and sell it at a discount to consumers. In other words, they are loss-making almost by definition.
A source in the energy market explains that only some of the companies currently have a sustainable model of cheap electricity that they can pass on to consumers, while the rest rely too heavily on buying from the grid, and are therefore loss-making. According to the same source, this could lead to consolidation with some suppliers forced to exit the market.
According to the announcement by Cohen, the biggest private electricity supplier is Bezeq with 100,000 customers. According to the source, other strong companies are Electra and Cellcom.
Even so, Rami Levy recently announced that it will soon enter the market as another competitor. It remains unclear how the company will bring cheap electricity from the producers?
The solution: “Not keeping up with the increase in electricity demand”
In order to solve the supply problem, the Electricity Authority will publish a tender in December. Part of the production capacity of the power plants that win the tender will be deducted from the central grid in favor of private suppliers, but this is an extremely small tender, of only 350 MW, and such a small tender, with so many competitors, will probably not allow a large enough margin for suppliers.
The private electricity suppliers have signed a joint letter in response, “The quota that the Authority proposes to allocate in the first competitive process is not in line with the increase in demand for private electricity.” They continue, “This quantity is not sufficient to produce a real competitive effect in the supply market, especially after an increase in the number of private consumers switching to suppliers, and a noticeable increase in demand for electricity.”
The private suppliers are seeking to increase the quantity already in the first competitive process, and to set the tenders that will follow on subsequently, in order to provide certainty that it will be possible to offer more production volume to suppliers.
The private suppliers also have a number of additional reservations, for example on linkage to the Consumer Price Index and the minimum price that producers will pay for the right to supply electricity to private suppliers and not to the central grid. In general, they stress that this is a step in the right direction: “This is a major step and is necessary to continue opening the market to competition.” But in order for the market to be opened to competition, the number of tenders needs to be increased significantly.
Published by Globes, Israel business news – en.globes.co.il – on August 19, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
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