JERUSALEM, April 8, 2015 (WAFA) – Israeli restrictions have prevented construction of power network in large parts of West Bank (Area C, 60% of the West Bank), and the absence of peace and stability continues to discourage private investment in the sector, Wednesday announced the World Bank in a press statement on the electricity and taxes situation in Palestine.
Though the Palestinian Authority is currently improving the electricity sector’s efficiency, the accumulation of debt for non-payment of electricity bills to its largest supplier, the Israel Electric Corporation (IEC), remains a key challenge.
In a press release that WAFA received a copy of, the World Bank said that the aforementioned issue “has a direct impact on the overall fiscal situation in the Palestinian territories.”
According to a recent World Bank report that examined the factors that deter the systematic payments, the main issues included “the lack of institutionalized and transparent invoicing by the IEC, as well as the high interest rates for late payments set unilaterally by the Israeli regulator.”
Steen Lau Jorgensen, World Bank Country Director for West Bank and Gaza said, “The outstanding payments owed to the IEC took a heavy toll on a struggling Palestinian fiscal situation.”
He added, “Non payments have led to arbitrary cuts in power supply, the deduction of arrears from tax revenues (owed to the Palestinian Authority by Israel) and to the accumulation of debt. The challenge is how to manage this trend by placing the provision of electricity services on a financially sustainable basis.”
Considering that the Palestinian energy market is small with limited options to develop indigenous sources of electricity so far, the Palestinian territories are highly dependent on electricity provided by the IEC for around 88% of its total consumption.
The lack of a power energy sector is putting high pressure on the Palestinian economy, as in a healthy one, the power sector is expected to generate revenues, and contribute to economic development.
The non-payment by Palestinian distribution companies and municipalities for purchased electricity has put further constraints on the Palestinian Authority’s budget and has hindered economic stability.
According to the World Bank, the two largest non-payer electricity distributors account for 70% of the total non-payments during 2010-2013 (the Gaza Electricity Distribution Company accounts for 42% and the Jerusalem District Electricity Company for 26%).
Israel has deducted from clearance revenues, that it collects on behalf of the PA, an estimated $280 million in 2012, representing 14% of the PA’s total revenues (a mechanism commonly referred to as ‘net lending’).
The remaining balance accumulated over the years brought the debt to $330 million as of February 2014. This has increased the fiscal burden on an already deteriorating Palestinian economy, said the World Bank report.
The report reveals high network losses arising from poor infrastructure and electricity theft, which cause significant revenue loss to Palestinian distributors.
Overall electricity bill collection rates from the citizens decreased in the West Bank from 90% to 81% between 2011 and 2013, and increased in Gaza from 65% to 71% during the same period following the installation of a pre-paid meter pilot project.
While the Palestinian Energy and Natural Resources Authority initiated several measures specially targeted at reducing electricity non-payment, a cohesive strategy is required to successfully deal with this problem.
Roger Coma Cunill, World Bank Energy Specialist said, “The non-payment of electricity bills by the Palestinian electricity distributors has reached unprecedented levels and calls for decisive action by the distribution companies and relevant municipalities.’
‘On the other hand, the IEC should coordinate with its Palestinian counterparts the establishment of web-database for timely and transparent transfer of invoicing and payments data,” he explained.