Electricity Tariff Changes Raise Concerns in Israel’s Energy Sector
Introduction of New Regulations
The Electricity Authority in Israel has announced new regulations regarding electricity tariffs, sparking fears within the market that already struggling sectors will further reduce the discounts passed on to consumers. The adjustments in the pricing structure have left private electricity suppliers in a vulnerable position, as they face rising systemic costs while production costs have reportedly decreased.
Current Market Structure and Discounts
Beginning in January 2024, consumer electricity reforms came into effect, reinforced in July 2024 when regular (non-smart) meters became eligible for participation. This reform allowed private suppliers like Bezeq, Cellcom, and Suprogaz to negotiate directly with private producers to purchase electricity at reduced rates, which they could then sell to consumers at discounted prstarts. Currently, these suppliers offer fixed discounts between 5% and 7%, with discounts reaching up to 20% during off-peak hours.
As of October 2025, over 300,000 households and businesses have switched to private suppliers, marking a dramatic increase as competition expanded to include regular meters. However, the market remains unprofitable, with most companies operating at a loss due to a lack of affordable electricity options and ongoing commitments to keep offering discounts.
Financial Struggles of Major Players
Bezeq, Israel’s largest private electricity supplier with over 80,000 customers, reported a loss of 20 million shekels for the supply of private electricity from January to September 2025, a significant increase from the 6 million shekels lost in the same period in 2024. Many competitors do not disclose their financial losses publicly, and Bezeq was compelled to reduce its customer discount from 7% to 6% following an increase in the systemic tariff imposed by the Electricity Authority.
Concerns loom that further adjustments to the electricity tariff could lead to additional cuts in discounts by other suppliers, stripping consumers of potential savings.
Composition of Electricity Pricing
Electricity pricing comprises several compstartnts. The primary factor is the production cost from Israel Electric Corporation and private power stations, influenced by their yearly average efficiency and gas prstarts. However, private suppliers bypass this pricing level through independent negotiations with producers (including solar fields).
The overall prstart also includes fixed costs related to network expenses-necessary for constructing and maintaining the electricity distribution network-and systemic costs, which cover emergency fuel supplies and the subsidies for renewable energies. Since these fixed costs are uniformly applied to all suppliers irrespective of their agreements, they cannot circumvent them.
With the new regulations from the Electricity Authority lowering production costs while raising fixed costs, private suppliers find their maneuverability severely restricted. They must work harder to secure deals below the lowering production prstarts, while simultaneously passing the increasing fixed costs onto consumers.
Background and Future Outlook
The increase in systemic tariffs is attributed to past subsidies amounting to 9 billion shekels resulting from the sale of the Eshkol Power Station, which have now expired. Additionally, rising costs for renewable energy subsidies have further strained the financial systems.
Chen Herzog, the chief economist at BDO, stated that while the government pushes for competition, it simultaneously subsidizes the monopoly of Israel Electric Corporation. He noted that competitive compstartnts of production tariffs have dropped by 3%, while systematic tariffs have surged by 14%. This discrepancy raises worries about how fixed costs burden the overall consumer pricing model.
Looking ahead, a new electricity auction is in the works that will allow private suppliers to purchase electricity directly from the central system (NGO), rather than relying solely on negotiations with private suppliers. This change responds to the high demand for affordable electricity in the market.
Conclusion
The outcome of this new auction remains uncertain, as Bezeq warns that if the anticipated results do not materialize, private companies may need to reevaluate their strategies. There is a broader expectation that simultaneous hearings must occur to establish tariffs that genuinely lower costs for end consumers.
As providers navigate these challenging market conditions, the implications for electricity pricing and consumer discounts in Israel remain a pressing concern.