Payment for Water Use

While all water resources in Israel are publicly owned, the government itself does not produce or supply water. Such is done by public or private infrastructure owners and operators, including by the National Water Company “Mekorot” which is Israel’s bulk water supplier and operates the national water carrier. The price for water purchased from private producers is determined in agreement between supplier and consumer, unless a tariff has been proclaimed for the supply. If supplier and consumer cannot arrive at an agreed price the Director of the Authority may, upon application of either party, determine a binding price for the water between the supplier and consumer.

Pursuant to Article 112 of the Water Law the Council of the Governmental Authority for Water and Sewerage¹ may publish binding tariffs for water supply and once a tariff is proclaimed for a particular supply it may not be supplied at a different price. The tariffs may be differential taking inter alia into account areas of supply, purpose of water use, season as well as social considerations. The latter consideration is the basis for banded tariffs for domestic supply in urban areas.

Tariffs have been proclaimed for bulk water supply by Israel’s National Water Company Mekorot to urban centers and for supply for agricultural uses, including for treated wastewater. In addition water tariffs have been approved for urban uses. Prior to the determination of a tariff both suppliers and consumers have the right to present comments to the Council.

Since water preservation is a major objective in the management of Israel’s water sector, The Water Law stipulates that water use that exceeds the quota allocation to the user will subject the user to a Special Payment. The amount of the Special Payment is such that it offsets the benefit derived from the excessive water use.

In addition to the water price (or tariffs), the Water Law provides the Authority with an economic tool for water resources management, the Variable Extraction Levy (the “VAL”). The purpose of the VAL is to encourage uses of certain water resources rather than other ones. The VAL is not a tariff and does not reflect the costs of water extraction but is a levy imposed in addition to the tariff (or the agreed price in the absence of a tariff). The VAL is paid by the producer and will necessarily affect the price or tariff. The VAL is imposed by the Council of the Authority and requires the approval of the Finance Committee of the Knesset for its imposition. The VAL is not at a flat rate but imposed at a variable rate depending upon the source from which the water is extracted, thereby encouraging the producers to prefer using a water resource that is hydrological more beneficial for the preservation of Israel’s water resources.