The Energy and Water Ministry together with the Finance Ministry have published a legislative proposal to amend the Water Law and to realize the Government's decision concerning the water sector in Israel. Currently, rates collected from private water producers are transferred to the State Treasury. The central aim of the proposal is to switch to a closed self-sustaining funded water sector, and thereby reduce water rates. In addition, it is the intention of the reform to amend the distortions and inefficient consumption and management of the water sector which lead to the current rates' structure.
To this end, several actions are proposed. Firstly, it is suggested to divide between production and supply, and to move from the existing situation where unified licenses are issued for production and supply. It is proposed to issue a separate license to suppliers, which will receive a supply license with quantities of water approved for various uses and to issue a separate license to producers, which will receive a license stating the quantity of water allowed to be produced from any water source.
Secondly, it is proposed to disconnect the purposes of the production from the cost of the production of water. Thus, the producers will produce according to the quantities set forth in the license without reference to the purposes of the supply. The cost of production will be costed in accordance with the costs involved therein and in accordance with the alternative costs for the water, taking into account the economic benefit resulting from the production. Accordingly, the Water Authority will set forth, in guidelines, the normative production costs of the water.
Thirdly, it is proposed to sell the water to suppliers via a clearing system which would pay the producers and collect from the suppliers at a normative price which will be set by the Water Council.
The drafters of the legislative proposal mention that the plan suggested would create a more effective checking system on the amount of production, since it would resolve conflicts of interest of the producers who are also suppliers. In addition, it is mentioned that would be a complementary measure consistent with the regulation and management by the Water Authority of all aspects of the water sector.