חברת החשמל

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IPP's

Independent power producers

During 2010 and 2011, the Company purchased about 300 and 344 million kWh from private producers, respectively. The electricity purchased from these producers in 2010 and 2011 represented about 0.3% and 0.7%, respectively, of the electricity supplied by the Company each year.
 
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In accordance with what has been set forth above, as of the date of the Report, the Company generates, transmits, distributes and supplies almost all of the electricity consumption in the State of Israel and it was declared in January 1999 by the Antitrust Commissioner as a monopoly in the Electricity Sector, inter alia, in the following fields: supply of electricity – generation of electricity and its sale, transmission and distribution of electricity and provision of backup services for electricity consumers and producers. See Section 22.10 for further information on
the declaration of the Company as a monopoly and the consequences of this declaration.
 
Since the enactment of the Electricity Sector Law, it has been the declared policy of the Government of Israel to encourage competition in the Electricity Sector while increasing the electricity generation capacity by private electricity producers.
 
In accordance with that which has been set forth below, as of the date of the Report, the objective for increasing the generation capacity of private electricity producers is 20%of the installed generation capacity in the State of Israel by 2020 (today, the total installed generation capacity of private electricity producers stands at approximately 4 percent), in later resolutions a guiding objective for generation of electricity from renewable energy was set at 10%of the electric energy needs of the State for 2020. In accordance with the Government resolution on this subject, this objective is expected to be achieved by generating electricity to an installed output of approximately 2,760 megawatts. In addition, there is a guiding intermediate objective of generation of 5%of electricity in Israel at the end of 2014 by renewable energies. That this objective may be achieved by generation of electricity by generation units of an installed output of approximately 1,550 megawatts. The Government further decided to regulate the encouragement of the construction of facilities for energy production from renewable sources, in accordance with the objectives of the Government. With the intent of realizing the said policy, it has been decided to direct the Electricity Authority to act within the framework of its authority in accordance with the Law, including by completing the update of charge rates and criteria to the extent required, by division into quotas in accordance with that which has been set forth in the decision.
 
Accordingly, the Government of Israel and the Electricity Authority have been taking steps, including legislative changes, promulgation of resolutions, adoption of resolutions and other arrangements (including published tenders) whose aim is to encourage the entry of private electricity producers into the Electricity Sector, thus encouraging competition in the generation segment essential service provider.
 
As part of the steps described above, the Electricity Authority added in 2005 Chapters E and F to the Book of Criteria (that is updated from time to time), which regulate, inter alia, the provision of infrastructure services by which private electricity producers may sell energy either to the system administrator or to suppliers, in order to supply electricity to end users through the transmission network of the Company, the manner of operation of private electricity producers in the Electricity Sector and the charge rate that the Company will charge for transmission of electricity in accordance with the charge rate that will be determined from time to time by the Electricity Authority (“criteria”).
 
In accordance with the provisions and regulations of the Electricity Sector Law, a private electricity producer may sell electricity to an essential service provider license holder, in accordance with the terms of its license (and in accordance with the restrictions prescribed in the Electricity Sector Law and in the regulations promulgated there under).
 
Pursuant to these arrangements, the Company is required, as a single essential service provider and as a transmission license holder, as follows:
 
(A) To purchase electricity from the private electricity producers, at charge rates and in proceedings that are regulated in the legislative arrangement, i.e. in the regulations that have been promulgated pursuant to the Electricity Sector Law and the criteria prescribed by the Electricity Authority and applying to the Company and to the private electricity producers.
 
(B) To connect the private electricity producers to its distribution and transmission network, and provide the infrastructure services, in order to allow the private electricity producers, inter alia, to transact with suppliers.
 
(C) To serve as a backup for the supply of electricity to the consumers of the private electricity producers (“backup services”).
 
The private electricity producers operate pursuant to generation licenses that they have received as part of the undertaking of the State of Israel further to tenders for the generation of electricity that have been published by the State of Israel or pursuant to generation licenses or provisional generation licenses that have been given to them in accordance with the Electricity Sector Law and the regulations promulgated thereunder. The tender winners are governed by the conditions prescribed within the framework of the tenders, while private electricity producers operating under generation licenses are governed by the provisions of the Electricity Sector Law and its regulations and by the criteria.
 
The Electricity Authority has prescribed for each private electricity producer type, in accordance with the classification provided below, a different charge rate arrangement as stipulated below.
 
In addition, as part of the policy to encourage the entry of private electricity producers, in July 2009, the Electricity Authority published an update to its decision on the issue of the charge rate arrangements supporting financing for the private electricity producers. The decision was intended to provide a safety net to private electricity producers and serves as an additional link in the governmental operation to create conditions to promote private entrepreneurship in the Electricity Sector. Within the framework of this decision, the Electricity Authority has established
as follows:
 
(A) An essential service provider shall deposit, for each private electricity producer, an amount of money in a special purpose account, which will be administered by a trustee constituting a third party, equivalent to the amount of the bi‐monthly payments for the electricity that the private electricity producer is expected to sell to the essential service provider. These amounts of money will be used as collateral for the payments to the essential service provider
 
B) The responsibility for any act or default of an essential service provider, the gas conduction company or a third party that impairs the generation ability of the private electricity producer will be assumed by the essential service provider, i.e., as of the time of this Report, the Company.
 
(C) Upon the occurrence of a force majeure event that impairs the competency of the private electricity producer generation facility, the essential service provider must pay the senior debt (the primary source of financing) for the private electricity producer in the period of the event. Upon the restoration of operation of the private electricity producer, it will be required to return to the Company only 40%of the amount that was paid by the Company for it, and the Electricity Authority will consider compensation for the Company for the remaining 60 percent. In the case of such an event that will cause the conclusion of the agreement with the private electricity producer, the Company will be responsible for the balance of the senior debt of the private electricity producer, while transferring the ownership of the generation facility of that private electricity producer to the Company. The Electricity Authority will consider recognition of the costs that the Company will sustain due to that which has been set forth above, based on criteria that have been established on this matter.
 
The Electricity Authority has clarified within the framework of the decision that its decision applies to producers that complete financial closure by no later than January 1, 2012.
 
In March 2012, the Electricity Authority published for public comments the issue of examination of continuing the form of application of the resolution of the Electricity Authority with respect to financing supportive protections for private electricity producers.