Israel Electric And Supply Competition: When Does Customer Migration Become A Real Economic Problem?
This continuation shows that the economic problem starts well before it becomes obvious in the consolidated results. Because the supply fee is fixed and not consumption-based, a fast decline in customer count can deepen the segment loss even while the hit to kWh volumes and the group is still limited.
What This Continuation Is Isolating
The main article already made the broader point: supply competition is moving faster than the consolidated hit. This continuation isolates the economic mechanism behind that gap. The real question is why the supply segment has to be read first through the number of customers leaving, not just through electricity volumes, and why the pain is already real at the segment level even while the group still barely feels it.
The key unit here is not kWh, but the customer. The company collects supply revenue through a fixed supply payment that does not depend on consumption. That means migration to private suppliers hits the customer book of the supply segment first, and only then flows through fully into the consolidated picture.
The year-end 2025 and early-2026 disclosures already make the issue concrete. The market had 50 licensed virtual suppliers. Energy sold by private suppliers reached about 24,160 million kWh. The cumulative number of consumption points migrated to private suppliers reached about 342.7 thousand by the end of 2025. In a January 20, 2026 disclosure, the company already said that as of January 1, 2026 about 360 thousand customers had moved from the company to a private supplier. This is no longer marginal competition.
That leads to the continuation thesis:
- The economic hit in supply has to be measured first through migration pace, not only through the decline in kWh.
- The problem is already visible in the segment note, even if it is still small at group level.
- The January 2026 tariff update is a repair attempt for a pricing mismatch, not a new growth driver.
- Israel Electric is still far from the threshold that would let it truly compete in low voltage, so the regulatory asymmetry remains in place.
Here The Relevant KPI Is Customer Count, Not Just kWh
To see why the problem becomes economic early, you have to start with the structure itself. The supply charge is collected as a fixed payment that does not depend on consumption. That makes the customer book more important than the total consumption trend. It is a very different lens from a surface reading of the consolidated report, where it is much easier to focus on kWh, average tariff, and total profit.
The 2025 numbers show that clearly. Total customer count fell to about 2.852 million from about 2.987 million at the end of 2024, a decline of about 4.5%. In the same year total electricity consumption fell from about 48,692 million kWh to about 47,303 million kWh, a decline of only about 2.9%. In other words, the customer book deteriorated faster than total load.
That gap matters because it shows that migration to private suppliers does not translate one-for-one into an equal drop in total electricity volume. Put differently, the supply segment absorbs the pain earlier than the consolidated report suggests.
The consumption mix supports the same reading. Household share of electricity consumption fell to 44.8% in 2025 from 47.4% in 2024, while the shares of low-voltage business, high-voltage business, ultra-high-voltage business, and East Jerusalem Electric Company plus the Palestinian Authority all increased. That does not prove that every customer who left was a small household customer, but it does reinforce the idea that customer migration is outrunning the fall in the total energy picture.
| Metric | 2024 | 2025 | What it says |
|---|---|---|---|
| Total customer count | 2.987 million | 2.852 million | The customer book fell by about 135 thousand |
| Total electricity consumption | 48,692 million kWh | 47,303 million kWh | Volume fell, but more slowly than customer count |
| Household share of consumption | 47.4% | 44.8% | Down 2.6 percentage points |
| Low-voltage business share of consumption | 26.2% | 26.6% | Slight increase |
| High plus ultra-high voltage share of consumption | 13.3% | 14.8% | Shift toward heavier-load customers |
This is exactly where a superficial reading can go wrong. Someone looking only at the 2.9% decline in electricity consumption could conclude that private-supplier competition is still manageable. But in the supply segment, where the revenue charge is fixed per customer, the 4.5% decline in customer count is already a very different economic story.
The Pain Is Already Real In The Segment, Barely Visible At Group Level
The company itself says that the supply-revenue component now represents only about 2.4% of total revenue. That explains why supply competition can still look manageable at group level. But that is exactly why the segment note matters. That is where the pain already shows up.
In 2025 supply-segment revenue rose to NIS 567 million from NIS 517 million in 2024. At first glance that looks acceptable. But below that line, selling and marketing expense rose to NIS 504 million from NIS 433 million, general and administrative expense rose to NIS 93 million from NIS 84 million, and depreciation rose to NIS 67 million from NIS 55 million. The result was that the segment loss widened to NIS 84 million in 2025 from NIS 24 million in 2024.
| Supply segment item | 2024 | 2025 | Change |
|---|---|---|---|
| Segment revenue | 517 | 567 | Up NIS 50 million |
| Selling and marketing expense | 433 | 504 | Up NIS 71 million |
| General and administrative expense | 84 | 93 | Up NIS 9 million |
| Depreciation and amortization | 55 | 67 | Up NIS 12 million |
| Segment loss | -24 | -84 | Worse by NIS 60 million |
This is the core of the continuation thesis. Supply competition has already created a real economic problem, but it is still too small by itself to turn the direction of the whole company. In the same year total segment profit for the company rose to NIS 4,667 million from NIS 4,608 million. So anyone reading only the consolidated picture can miss how quickly the supply segment is already deteriorating.
The reason is straightforward. This is still a very small segment at group revenue scale, but it carries a customer-service, billing, collection, and support structure that does not disappear at the same speed that customers migrate away. That is why even a NIS 50 million increase in segment revenue did not prevent a sharp worsening in the segment loss.
The Problem Is Not That Competition Is Too Big, But That The Old Tariff Did Not Match The Cost Base
The sharpest point in the annual report is that the company no longer frames the move to private suppliers only as a competitive threat. It frames it as a pricing mismatch. The company states explicitly that the current supply-tariff structure does not reflect its cost structure, and that customer departures generate revenue losses in the supply segment. In other words, the problem is not only that competition exists. The problem is that the old tariff was built on a customer base that is no longer there.
The regulator has already responded to that. In the decision published on December 11, 2025 and effective from January 1, 2026, the real tariff for low-voltage consumer-services supply was set to increase automatically by 8% a year, against the background of ongoing customer migration and in order to adapt the cost of supply service to the decline in the company's customer count. That wording matters. This is not a broad tariff tailwind. It is an explicit repair attempt for a shrinking customer base.
But even after that repair, the company remains in an asymmetric position. Under the reform framework, it can compete in low voltage only if its customer share falls below 60% of the customers in that segment. At the end of 2025 about 89% of low-voltage customers were still buying electricity from IEC's supply arm. That means the company is already absorbing meaningful customer migration, while still remaining far from the threshold that would allow a fuller competitive response.
That is why the migration is already becoming a real economic issue now. The company is still the default supplier, still holds the large majority of low-voltage customers, and still carries the full service layer. But at the same time it is already losing customers in large numbers, and the migration rate was still rising after year-end. The move from about 342.7 thousand migrated consumption points at the end of 2025 to about 360 thousand customers as of January 1, 2026 shows that the trend did not stop at the year-end line.
It is also important to note what is feeding that trend. Alongside the opening of competition to basic meters in April 2024, the regulator advanced in 2025 with rules enabling bilateral transactions between producers and virtual suppliers, and in November 2025 even allowed virtual suppliers to buy availability directly from the system manager on a temporary basis through the end of 2029. In other words, the competitive environment is not only more open than before. It is getting more infrastructure support to keep expanding.
Conclusions
The title question now has a more precise answer. Customer migration becomes a real economic problem not when it breaks the consolidated report, but earlier, when it starts eroding the customer book of the supply segment faster than total electricity consumption declines, while the old tariff is still based on a cost structure and customer base that no longer exist in practice.
Current thesis in one line: in Israel Electric's supply segment, competition has already moved from a marketing story to an economic one because the customer is the main revenue unit, and customers are leaving faster than the company can remove costs or respond competitively.
What changes the read relative to the broader main article is that the damage mechanism is now visible in detail: 50 virtual suppliers, about 24,160 million kWh sold by private suppliers, about 342.7 thousand migrated consumption points by the end of 2025, and about 360 thousand customers already moved as of January 1, 2026. Against that stands a segment posting an NIS 84 million loss despite higher revenue, and a regulator that has effectively acknowledged that the old tariff no longer matched the cost base.
The strongest counter-thesis is that the issue is still contained because the supply-revenue component is very small relative to the group, about 89% of low-voltage customers still remain with the company, and the new 8% annual tariff update could ease part of the pressure. That is a serious counter-argument. But as long as migration stays fast and the company remains far from the 60% threshold that would let it fully compete in low voltage, the pressure point remains open.
What will determine the next read is not whether the group continues to report decent aggregate profitability, but whether the new tariff mechanism actually slows the widening loss in the supply segment, and whether customer count keeps shrinking faster than total volume. That is where the market will find out whether this is temporary regulatory noise, or the start of a deeper economic change in the default-supplier model.
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