The upcoming price hike joins two additional hikes approved since August – 10% in August and 4.7% in October – bringing the total rate increase to 25%.
The Finance Ministry held an emergency meeting Tuesday to discuss IEC's fuel crisis due to the lack of Egyptian gas and the depletion of the Yam Tethys reserves.
Steinitz, who was asked to allow IEC to raise tariffs by 35% starting February 1, expressed his objection to such a sudden price hike and instructed Treasury officials to come up with a solution that would allow for a hike of less than 10%.
Following the meeting, the Finance Ministry approved two plans aimed at easing IEC's financial distress and allowing the company to raise electricity prices by 9% in 2012.
Firstly, the Treasury granted IEC a 90% tax reduction on diesel oil. Second, the company will receive a state loan for three years in order to pay off actuarial debts of some NIS 60 billion (about $15 billion).
The Finance Ministry hopes that in 2013 the company will begin receiving gas from the Tamar field, which will lead to a cancelation of the benefits and to an electricity price reduction starting in 2014.
The upcoming price hike stems from the interruptions in the flow of gas used to produce electricity since the downfall of former Egyptian President Hosni Mubarak.
The gas used by IEC comes from the Sinai peninsula and the Yam Tethys reserves off the Mediterranean coast. The Sinai pipeline has been bombed several times in the past few months, and the Yam Tethys gas is running out.
In 2013 IEC will begin receiving gas from the Tamar field, but in the meantime it has been suffering from a serious shortage and is forced to use diesel oil, which is much more expensive.