End of Uncertainty: Electricity Authority’s Decision Sends Meshek and Shikun & Binui Energy Soaring

The Israeli Electricity Authority announced its decision to cap electricity prices charged by private power producers, who operate the power stations that were privatized from the state-owned Israel Electric Corporation.

However, the final restrictions are far more lenient than initially proposed, ending the prolonged uncertainty that has weighed on these companies—especially Meshek Energy, which holds a stake in the Eshkol power plant through Dalia Energy, and Shikun & Binui Energy, which operates the Ramat Hovav and Hagit Mizrah power stations.

Back in September, the Electricity Authority launched a public hearing on private electricity producers, accusing them of non-competitive behavior and charging significantly higher-than-market prices. As a corrective measure, the authority proposed setting a pricing ceiling, ensuring that the producers' bids more accurately reflect their actual costs rather than relying on limited competition in the sector.

The initial mechanism would have allowed producers to charge only 15% above the average cost of natural gas (depending on the power plant’s age) and up to 40% in cases where they were asked to generate additional electricity in real-time.

A Softer Approach Than Expected

Ultimately, the authority opted to relax these restrictions, allowing power producers to charge up to 40% above the gas price for next-day electricity generation bids and up to 60% for real-time bids.

According to market sources, this pricing structure essentially allows producers to charge rates similar to those before the regulatory intervention, without the initially proposed price cap. The Electricity Authority maintains that this policy change will result in annual savings of 400 million shekels.

Additionally, power plants will be allowed to increase the rates they charge—on the condition that they agree to retroactively apply the new regulations from the start of their operations. This clause is particularly relevant for Dalia Energy’s Eshkol power plant, which only began operations in mid-2023.

עוד תכניות

The other power plants, which were privatized between 2020 and 2022, are unlikely to opt into this retroactive adjustment, as doing so would require them to reimburse significant amounts.

Clearing the Cloud of Uncertainty

Despite the imposed pricing cap, the decision lifts a major cloud of uncertainty that had loomed over the companies operating privatized power stations. Speculation over the Electricity Authority’s regulatory intentions had weighed on Meshek Energy and Shikun & Binui Energy, causing their stocks to plummet by 18% in the week following the public hearing.

Since then, both stocks have rebounded, trading above pre-hearing levels in recent weeks, and they are continuing to climb today. However, investors remain cautious as they await the release of the full regulatory documents, which will provide further clarity on how the decision will impact these companies in the long run.