The Israel electric company’s («Israel Power») acknowledged that when signing the contract to purchase natural gas at the consortium «Tamar» was a mistake, which will cost the company at 3.1 billion shekels.
Under the agreement, signed in 2012, «Israel Power» pledged to buy from «Tamar» certain minimum volumes of gas even if they are not needed. The new estimate showed that the volume of gas which the company undertook to buy, significantly exceed the requirements of the Israeli energy market.
Currently the company is negotiating with the consortium to reduce the minimum volume of purchases.
However, according to The Marker, the company applied to regulators to include unforeseen costs in the electricity tariff for the population in case the negotiations with the «Tamar» has no effect.
The newspaper notes that, by law, the Department of energy has no right to include in the tariffs costs not related to electricity production.
In total, the company has committed to purchase 90 billion cubic meters of gas.
At the moment, «Israel Power» has received permission to sell to competitors of excess purchased gas in the amount of 4 billion cubic meters provided that the price will not be below the purchase price at a premium of 12%.
In addition, the consortium is ready to deliver «Israel Power» of unused excess gas at the end of the contract (through 2028), provided that they will be paid in the contract period in accordance with the obligations.
The press service of the «Israel Power» told the publication that the company is taking steps to mitigate the damage, and that, most likely, the problem will be resolved. However, if the result will be a slight overrun, the company will ask the state to consider it when compiling the tariff.