The new method of the Electricity Authority, and the impact on your monthly bill
The Electricity Authority and the Noga company are publishing a hearing for a new pricing method for private electricity producers. The tariff will rise, alongside a reduction in compensation and payments they currently receive. The rationale: increasing certainty that will allow for an increase in production capacity in the medium and long term. The implications in the short term: a possible price increase for customers of private electricity suppliers.
The Electricity Authority and the system management company Noga have published a draft decision for public hearing, under which the wholesale electricity market will transition to a new price calculation method called MCP starting in January 2027. This is a change that is supposed to, on one hand, increase the price received by electricity producers today, but on the other hand, reduce the additional payments they receive from the system manager and create long-term certainty.
The new model, built with the guidance of international experts, replaces the existing SMP pricing method and is intended to reflect all system constraints and network limitations, with the goal of reflecting true production costs and correcting existing distortions.
At the base of the move are two complementary actions. On one hand, the new method will lead to an increase in the wholesale market price, which is what private electricity suppliers pay to power plants. On the other hand, it will significantly reduce "additional payments" that have been paid to producers outside the market until now through regulatory protection mechanisms.
Furthermore, the Authority intends to impose restrictions on exceptional price offers through a monitoring system with a price ceiling. The decision to tighten supervision was made after checks revealed that private power plants continued to submit inflated price offers disconnected from production costs. From the Authority's perspective, implementing the new model without prior control over the offers would have led to an uncontrolled spike in the price charged by producers. The combination of the two steps is intended to hedge costs, reduce market volatility, and provide long-term regulatory and financial certainty, both for producers and entities financing the construction of new stations, and for private electricity suppliers exposed to market prices.
Regarding consumers, the move is expected to result in a relatively moderate aggregate increase of about 100 to 150 million shekels per year. According to estimates, this is an increase of only about 0.5% to the electricity tariff in the short term. The Authority believes this is a worthwhile price in exchange for stability, preventing extreme volatility, and creating an incentive to increase production capacity in the economy, which in the long term will help lower tariffs.
