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06/03/17
 

Financial sanctions in the amount of 13 million NIS have been imposed on the Israel Electric Corporation for abusing its monopoly status by denying services to customers who contracted with independent power producers

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Date of Publication:
06/03/2017

8 Adar 5777

06/03/2017

- Press Release -

Financial sanctions in the amount of 13 million NIS have been imposed on the Israel Electric Corporation for abusing its monopoly status by denying services to customers who contracted with independent power producers

In addition, the Antitrust Authority has imposed personal sanctions in amounts ranging from of 110,000 to 165,000 NIS on senior officers in the Corporation.
The Authority further intends to impose personal sanctions in the amount of 180,000 NIS on an additional senior officer in the Corporation, subject to  a hearing.

 

The Antitrust Authority  announced today (Sunday) its decision, that the Israel Electric Corporation  abused its monopoly status by denying services to large business customers who purchased electricity from independent power producers. The Authority  imposed financial sanctions in the amount of 13 million NIS on the Corporation and personal sanctions in amounts ranging from 110,000 to 165,000 NIS on senior officers in the Corporation.

In addition, the Authority intends to impose an additional personal sanction on another senior officer of the Israel Electric Corporation, subject to a hearing. The Authority's announcement of its intention to impose personal sanctions on an additional officer was made following hearing procedures and other inquiries conducted by the Authority, in which the direct involvement of the aforementioned officer in the actions taken against customers who contracted independent power producers was revealed.

This is the first time that personal financial sanctions in such amounts have been imposed. The involvement of senior officers in the Corporation in actions that undermine competition justifies personal liability. Previous decisions by the Authority regarding sanctions have established its policy, that in cases where a violation of the law threatens to significantly undermine competition, personal sanctions against officers should be considered. The current decision is in line with such policy. During the investigation of the case, the Antitrust Authority became aware of the extent of the involvement of senior managers in the Israel Electric Corporation in the Corporation's customer preservation program. This program constitutes, in essence, an attempt to undermine competition by posing obstacles to the entry of independent power producers into the market.

The background of this affair is the entrance into the market of independent power producers, producing and supplying electricity, beginning in 2013. These producers created competition for the first time in the market of electricity production and its distribution to consumers, and presented an alternative to the Israel Electric Corporation. Following the entry of private power production plants into the market, industrial enterprises and other large electricity consumers had the option to purchase electricity from such private power plants, and some indeed acted accordingly. Nevertheless, in spite of the competition that developed in the area of electricity production, the Israel Electric Corporation has remained a monopoly in the areas of electricity transmission and distribution. Both independent power producers and consumers purchasing electricity from independent power producers are required to use the Israel Electric Corporation's transmission and distribution networks.

The Israel Electric Corporation provides an essential service to large business customers in the form of an available contact person (Customer File Manager – CFM), who accompanies such customers and handles their requirements vis-a-vis the Corporation. This service provides such essential assistance as coordinating rolling power cuts or providing accurate and current information regarding repair works.

The Antitrust Authority received complaints that large customers who switched to independent power producers no longer received the CFM service from the Israel Electric Company. Independent power producers are unable to provide a similar service since the transmission segment (the main line of power transmission from power plants) and the distribution segment (power transmission from the main line to consumers) are exclusively held by the Israel Electric Corporation.

The termination of CFM services may have a significant negative impact on competition, by discouraging customers from switching to independent power producers. Customers may fear that the potential damage they could sustain due to the lack of information regarding power supply would offset any potential advantages of purchasing electricity from independent power producers. This creates a negative incentive for consumers to switch to independent power producers, and may be seen as "punishment" by the Israel Electric Corporation of consumers who purchase electricity from the Corporation's competitors.

Beginning in mid-2013, as independent power producers began to operate, the Israel Electric Corporation took steps to terminate CFM services to customers who switched to independent power producers. Between February 2015 and June 2015, the Israel Electric Corporation partially restored the terminated CFM services. From June 2015, the Israel Electric Corporation offered customers who switched to independent power producers a dedicated call center that provided  inferior service in comparison with the CFM service. Finally, in December 2015, following a warning by the Antitrust Authority, the Israel Electric Company  restored the CFM service to customers who purchased electricity from independent power producers.