|161-250|0.4938|
|---|---|
|251- 400|0.5695|
|401-600|0.6089|
|More than 600|0.6731|

Source: Prime Minister’s Office (2017).

**The electricity tariffs are low relative to the cost-of-service provision, leading to subsidies (explicit and**

**implicit) in the sector.** The subsidy to domestic consumers is mainly provided in the form of a Tariff Differential Subsidy (TDS). The regulatory authority, PERC, has set a uniform tariff of NIS 0.53– 0.56 (US$0.14–0.15) per kWh for the Palestinian DISCOs for purchase of electricity. However, financial analysis of the sector suggests that the full cost of service provision—given current inefficiencies—ranges from about NIS 0.66 to NIS 1.42 (US$0.18–0.39) per kWh, depending on the DISCO. The mechanism currently used to safeguard affordability for some consumers is a “Rising Block Tariff or Incremental Block Tariff”, whereby the tariff of the previous slab is granted to all the units consumed up to the lower bound of the slab in which their consumption falls. In the West Bank and Gaza, with the first block of 160 kWh per month currently set at NIS 0.43 (US$0.11) per kWh, matching the lowest income decile’s ability to pay. However, given that average residential electricity consumption in the West Bank and Gaza is only 200– 300 kWh per month, this means that those wealthier Palestinian consuming most of the electricity benefit the most from this subsidized rate.

# **Fuel**

**As for electricity, the Palestinian population relies on fuel imports.** Under the Paris Economic Protocol (PEP), the West Bank and Gaza is allowed to import petroleum from sources other than the Israeli supplier provided that the final consumer price in the Palestinian Territories is less than 15 percent lower than in Israel. The clause further prescribes that Israel shall collect taxes and customs at crossing points.

**The General Directorate of Petroleum (GDoP) is charged with the responsibility of regulating imports of oil and petrochemicals.** The GDoP purchases an average of 80 million liters of fuel a month, including 25 million liters of gasoline, 55 million liters of diesel, and 14,000 tons of cooking gas and other byproducts like kerosene and gas. It is also the monitoring and licensing agency that sets petroleum and petrochemical prices.

**Fuel prices in Israel depend on the world oil price index.** Average prices are calculated monthly based on the last five workdays of the previous month. The GDoP is provided with the Israeli refineries’ costs, profit margin, and the logistic expenses. A deduction is applied for the global gasoline evaporation rate (0.005), and addition of the Blu Tax and VAT taxes.

**Fuel prices in the Palestinian Territories do not fully reflect fluctuations in global oil prices due to the addition of taxes and subsidies, and exchange rate fluctuations with the dollar.** In general, taxes represent an average of 68 percent of total purchase price. Government fuel subsidies on the consumption of petrol, gas, and other fuel products help alleviate price increases for Palestinian consumers. The GDoP calculates fuel prices at the beginning of every month after consultation with the Minister of Finance to determine the size of financial subsidies, which depends on the financial position of the government, liquidity available in the Treasury, and fluctuations in global oil prices.  Retail prices in the West Bank and Gaza are lower than the global price due to the subsidies, on top of which the retailer

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