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competition and to reorganize that each activity thereunder is governed by a license.
In the interim and until the reforms are fully implemented, IEC was provided with a
provisional authorization to continue to perform its various functions, which has been
extended several times.
The Ministry of National Infrastructures, Energy and Water Resources (the “Ministry”)
and the Public Utilities Authority – Electricity (the “PUA”) are the regulatory bodies
that oversee the electricity sector. The Minister of National Infrastructures, Energy
and Water Resources is vested with certain authority with respect to the issuance,
extension and revocation of licenses; approval of changes in control in license holders;
and approval of pledging or granting security interests of and over license assets.
In general, the Electricity Law and the regulations promulgated thereunder specify
the conditions for obtaining a provisional license to produce electricity, which after
fulfilling certain milestones, is replaced by a permanent license (usually for a period of
20 years), which is required in order to carry out the commercial operation of the IPP.
The PUA was established in 1996 as an administrative entity that determines tariffs,
as well as setting out, and supervising the fulfillment of, the criteria established for
the standard, nature and quality of the services provided in the electricity sector.
In general, tariffs in Israel are a function of the type/technology of the IPP and in
some instances also its capacity. Once published, the tariffs are in effect until a pre-
determined quota is attained or a certain time period has elapsed. Depending on the
type/technology of the IPP, the regulatory regime provides for a safety net, according
to which such IPP may sell all or a certain percentage of its output to the holder of a
system management license (currently the IEC).
The Electricity Law has laid down the legal framework which allowed the Ministry
of Finance and the Ministry to tackle electricity shortage and to elevate renewable
energy through private-public-partnerships (“PPP”). Although at this stage it is clear
that such goal is not feasible by 2020, the Israeli Government is keen to make sure the
goal is attained thereafter.
Oil & Gas
The oil and gas sector in Israel is governed by two primary laws: the Petroleum Law,
5712-1952 (the “Petroleum Law”) and the Natural Gas Sector Law, 5762-2002 (the
“Gas Law”). The Petroleum Law governs and regulates Israeli upstream activities
with respect to exploration and production of oil and gas. The Gas Law governs the
midstream and downstream activities and sets out a licensing regime for natural gas
infrastructure, which is regulated by the Natural Gas Authority.
The Petroleum Law grants vast powers to the petroleum commissioner (the
“Commissioner”) who is primary responsible for regulating all upstream oil and gas
activities, as well as reviewing and approving transfer or pledging of rights granted
under the Petroleum Law. There are three main rights that may be granted by the
Commissioner under the Petroleum Law: a preliminary permit, a license and a lease.
A preliminary permit confers the right to carry out preliminary testing investigations
(excluding test drilling). A license grants the right to explore for petroleum in the
license area and outside such area in certain circumstances; the exclusive right to
These initiatives along with several governmental decisions have facilitated
the development of large-scale projects with minimum immediate reliance on
allocations from the national budget.