Decision Proposal – Regulating the Operation of Generation Units at the

Alon Tavor Site following their Sale by the Israel Electric Corporation

By the power vested in it by the Electricity Market Law, 1996, and all its other legal powers, and

following Government Decision no. 3859 of 3 June 2018 regarding the reform and restructuring

of the energy market, the Electricity Authority (hereinafter, "the Authority") herby submits to

public comment the regulation to be applied to generation units sold at the Alon Tavor site.

1. Definitions

"Accumulated annual availability percentage" –

Actual net available capacity throughout the year

Maximum available capacity under ISO

conditions throughout the same year

"Alroi site" – the petroleum products storage terminal of Petroleum & Energy Infrastructures

Ltd. in Kiryat Tivon.

"Primary fuel" – one of the following:

A. Gas – for dual-fuel generation units;

B. Diesel fuel – for diesel fuel generation units.

"the Site" – the Alon Tavor site intended for sale by the Israel Electric Corporation.

"Actual net available capacity" – one of the following:

A. If an unplanned generation deviation involving generation reduction occurs in a given half-

hour – the maximum net capacity measures in that half-hour;

B. If no unplanned generation deviation occurs – the updated statement submitted by the

producer up to one hour before the relevant generation half-hour.

"Planned net available capacity" – the net capacity provided by a producer using a primary

fuel to the system operator in a given half-hour, in accordance with the statement of the producer

in the Daily Plan.

"Maximum net capacity under ISO conditions" – the net capacity of a generation unit under

ISO conditions according to the results of an examination by the system operator.

"Dispatching outside the day-ahead dispatching schedule" – a state where the system

operator dispatches a generation unit in accordance with a detailed dispatching plan, although

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the incremental price quote offered by the producer for energy generation is higher than the

ceiling limited day-ahead price.

"Dispatching outside the real-time dispatching schedule" – a state where the system operator

dispatches a generation unit after the publication of a detailed dispatching plan, although the

incremental price quote offered by the producer for energy generation is higher than the ceiling

limited real-time price.

"Incremental price quote for energy generation" – an offer to increase or reduce energy

generation within the range of a give capacity in a generation unit [NIS / MWh].

"Diesel fuel generation unit" – each of the two single-fuel industrial gas turbines installed at

the Site.

"Integrated cycle" – a generation unit combining a steam turbine fed by residual hear from the

gas turbines at the Site.

"Real time price" – the real time marginal price minus any system constraints, as defined in

Standard 93, and as updated from time to time.

"Ceiling limited real-time price" – the lower of either the real time price or the rate ceiling

specified for a producer in table 2 – XX of supplement C.

"Day-ahead price" – the planned marginal price minus any system constraints, as defined in

Standard 93, and as updated from time to time.

"Ceiling limited day-ahead price" – the lower of either the day-ahead price or the rate ceiling

specified in table 2 – XX of supplement C.

"Flexible open cycle generation unit" – an open cycle generation unit that meets the criteria

specified for a flexible facility in Standard 85, that the winner in the bid may decide to establish

at the Site.

"Unplanned generation deviation" – the energy difference between actual generation and the

planned load in an updated and detailed dispatching plan, as defined in section b of Standard 94.

"Planned generation deviation" – the energy difference between the planned load in an updated

and detailed dispatching plan, as defined in section b of Standard 94, and the planned load in a

day-ahead detailed dispatching plan," as defined in section a of Standard 94.

"Reserve" – the difference between the planned net available capacity and the planned partial

load in a detailed dispatching plan, intended for use in real time to balance the system in

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accordance with the instructions of the system operator, provided that the unit is planned to be

synchronized with the network according to a detailed dispatching plan.

"Rate ceiling" – the rate in reference to which a limit to payments in the energy market is

determined.

Any other term in this decision proposal shall have the meaning prescribed by law and/or the

Book of Standards.

2. The acquisition transaction

A. The system operator and the winner of the bid (hereinafter, "the Producer") shall sign an

acquisition agreement.

B. The acquisition agreement shall include, inter alia, an availability and energy transaction,

under the following terms:

1) All actual net available capacity of the generation unit shall be provided to the

system operator.

2) The Producer shall be dispatched to the network by the system operator according

to the principles of central dispatching, as defined in Standard 93 and its updates,

and in accordance with a market mechanism that is liable to change from time to

time.

3) Availability payments shall be made only for the actual net available capacity for

which the Producer submitted a day-ahead energy generation quote.

3. Submitting daily plans

A. Each day by 10:00, the producer shall submit a plan for the next day to the system

operator (hereinafter, "the Daily Plan"). Every Thursday and every work day before a

holiday, the producer shall submit daily plans for Friday or the holiday and for every

other day until the next work day.

B. The Daily Plan shall be submitted for the integrated cycle unit, for each diesel fuel

generation unit and for the flexible open cycle generation unit separately.

C. The Daily Plan shall include an availability statement in accordance with form 1 of

supplement A and as follows:

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1) The producer shall specify the planned net available capacity with the primary fuel

regarding each generation unit at the Site at every half-hour.

2) The producer shall specify the planned net available capacity with a secondary fuel

regarding the integrated cycle and the open cycle flexible generation facility at every

half-hour.

3) The producer may submit an amendment to form 1 to the system operation in the

Daily Plan. The amended notice shall not be considered for the purpose of availability

payments, but only for payment for availability deviations, as specified below.

D. The Daily Plan for the integrated cycle and for each open cycle flexible generation unit

shall also include price quotes for energy generation as follows:

1) Price quotes for energy shall be submitted in accordance with form 2 of supplement

A. The quotes shall specify the cost of generation at minimum load, as well as

incremental quotes for energy generation within the range between minimum load

and planned net available capacity.

2) Price quotes for start-up shall be submitted in accordance with form 3 of supplement

A.

E. The price quotes submitted by the Producer shall be uncontrolled and unlimited by the

rate ceiling. Specifically, the price quotes shall reflect the opportunities of producers to

respond to economic incentives while gaining profits in accordance with the

mechanisms of a competitive market. Nevertheless, in cases where the Producer's quote

reflects an excessive cost or directly affects the price of energy paid to it in a way that

does not reflect a competitive equilibrium, the Authority may condition the payment

upon the implementation of cost control. In particular, in the following cases:

1) The incremental price quote for energy generation submitted by the Producer is

higher than the price ceiling.

2) The Producer is dispatched outside the day-ahead or real-time dispatching schedule.

3) The Producer is paid a rate for capacity provided for reserves and not utilized, as

specified in section 8 below.

4) The Producer is paid a supplementary rate, as specified in section 9 below.

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F. In addition to the aforementioned in section e above, in cases where the Authority and/or

the system operator suspect that the availability statement, the incremental price quotes

for energy generation, the start-up quote or the quote for minimum load were not given

in good faith or were intended to skew market prices, the Authority will consider cost

control or imposing additional sanctions on the Producer.

4. Detailed dispatching plans

A. The system operator shall submit a detailed dispatching plan for the next day to the

Producer regarding each of the generation units at the Site, and shall update such plan as

necessary, in accordance with Standard 94.

B. In the detailed dispatching plan, the system operator shall specify the capacity intended

for reserve in every half-hour of the next day.

5. Purchasing available capacity from the Producer

A. The system operator shall pay the Producer an availability rate for the planned net

available capacity of each generation unit at the Site as follows:

𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦_𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑡 = 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦_𝑡𝑎𝑟𝑖𝑓𝑓𝑡 ∗ (𝑝𝑙𝑎𝑛𝑛𝑒𝑑_𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦𝑡)

With:

𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚_𝒑𝒂𝒚𝒎𝒆𝒏𝒕𝒕 - the availability payment for a generation unit per half-hour

t;

𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚_𝒕𝒂𝒓𝒊𝒇𝒇𝐭 - the availability rate for available kWh per hour t as a constant

for a generation unit, in accordance with table 1-XX of supplement C;

𝒑𝒍𝒂𝒏𝒏𝒆𝒅_𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚𝒕 - the planned net available capacity with a primary fuel in

accordance with form 1 or the planned net available capacity for which a price quote

for energy for hour t as submitted in accordance with form 2, the lower of the two.

B. If the Producer does not submit a daily plan for one or more half-hours, or if the Producer

submits a plan but does not specify an incremental price quote for energy generation for

one or more half-hours regarding part or all of the net available capacity specified in its

statemen, availability payments will not be paid to the Producer for the capacity for which

an incremental price quote for energy generation was not submitted.

C. If any of the events specified in Standards 128 or 130 occur, if the conditions specified in

these standards are fulfilled or if a constraint on gas supply to the market exists in

accordance with Standard 125, the Producer shall be considered available for the purpose

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of availability payments, in accordance with the planned net available capacity specified

in its statement given in form 1 of supplement A.

D. For every half-hour in which the actual net available capacity is lower than the planned

net available capacity (hereinafter, "availability deviation"), the Producer shall pay the

system operator in accordance with the following formula:

𝒅𝒆𝒗𝒊𝒂𝒕𝒊𝒐𝒏_𝒑𝒂𝒚𝒎𝒆𝒏𝒕𝒕 = 𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚_𝒕𝒂𝒓𝒊𝒇𝒇𝒕 ∙ 𝜸 ∙ (𝒑𝒍𝒂𝒏𝒏𝒆𝒅_𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚𝒕 − 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆_𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚𝒕)

With:

𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆_𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚𝒕 – the actual net available capacity;

𝜸 - late notice of unavailability coefficient, in accordance with supplement B.

E. Charges by the system operator for availability deviations shall not exceed the amount

specified below:

Deviation_payment_cap = ∑ 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦_𝑡𝑎𝑟𝑖𝑓𝑓𝑡 ∙ 𝐼𝑆𝑂𝑇𝑡=1

With:

Deviation_payment_cap = annual ceiling for payments for availability deviations;

ISO – the connected load of the generation unit.

F. If the Producer pays the maximum amount, as specified above, the system operator will

not charge the Producer for any additional availability deviations.

6. Rate payment for energy planned in the day-ahead detailed dispatching plan

A. The system operator shall pay the Producer a rate for energy planned to be

discharged into the network in the detailed dispatching plan, as follows:

1) Rate shall be paid by ceiling limited day-ahead price.

2) Not withstanding the above, in case of dispatching outside the day-ahead

dispatching schedule, the price will be determined by the price quote submitted

by the Producer.

B. The day-ahead price according to which the rate is determined shall be determined

by the system operator in accordance with the Standards, as updated from time to

time.

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7. Payment for generation deviations

The system operator shall pay the Producer or receive payment from the Producer for

generation deviations with the integrated cycle or the open cycle flexible generation units,

as follows:

A. For planned generation deviations involving a generation increase, the system

operator shall pay the Producer according to the ceiling limited real-time price.

Nevertheless, in case of dispatching outside the real-time dispatching schedule, the

rate shall be determined by the incremental price quote for energy generation

submitted by the Producer.

B. For planned deviations involving a generation reduction, the Producer shall pay the

system operator according to the lower of wither the price quote or the real-time

price.

C. For unplanned generation deviations involving a generation increase, the system

operator shall not pay the Producer any rate.

D. For unplanned deviations involving a generation reduction, the Producer shall pay

the system operator according to the real-time price.

8. Payment for capacity provided for reserve and not utilized for energy generation

A. If the system operator instructs the Producer to allocate part of the capacity for

reserve and does not dispatch such capacity in real time, the system operator shall

pay the Producer for the capacity allocated to reserve, as follows:

𝑆𝑝𝑖𝑛𝑖𝑛𝑔 𝑟𝑒𝑠𝑒𝑟𝑣𝑒_𝑐𝑜𝑠𝑡𝑡 = 𝑅𝑡 ∙ 𝑆𝑀𝑃𝑅. 𝑇𝑡 − ⌈𝑇𝐶(𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒)𝑡 − 𝑇𝐶(𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 − 𝑅)𝑡⌉

Provided that < 0 (𝑆𝑀𝑃𝑅. 𝑇𝑡 − 𝐵𝑖𝑑(𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 − 𝑅)𝑡)

With:

𝑅𝑡 - the capacity provided for reserve;

𝑆𝑀𝑃𝑅. 𝑇𝑡 – the ceiling limited real-time price;

𝑇𝐶(𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒)𝑡 – the Producer's accumulated cost of generation at full load according

to form 2;

𝑇𝐶(𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 − 𝑅)𝑡 – the Producer’s accumulated cost of generation at full load

minus capacity R, according to form 2;

𝐵𝑖𝑑(𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 − 𝑅)𝑡 – the generation cost offered by the Producer for energy

generation at the planned available load minus capacity R for hour t.

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9. Supplementary rate

A. The system operator shall pay the Producer for the integrated cycle or for each of

the open cycle flexible generation units a supplementary rate, if the following is true

for any such unit over a period of 24 hours:

0 < [𝑠𝑡𝑎𝑟𝑡𝑠_𝑐𝑜𝑠𝑡 + {∑ 𝑇𝐶(𝐿𝑜𝑎𝑑 𝑅. 𝑇) − 𝐿𝑜𝑎𝑑 𝐷. 𝐴 ∗ 𝑆𝑀𝑃𝐷𝐴𝑡 − (𝐿𝑜𝑎𝑑 𝑅. 𝑇 − 𝐿𝑜𝑎𝑑 𝐷. 𝐴)

48

𝑡=1

∗ (SMP𝑅𝑇𝑡) −𝑆𝑝𝑖𝑛𝑖𝑛𝑔 𝑟𝑒𝑠𝑒𝑟𝑣𝑒_𝐶𝑜𝑠𝑡𝑡]

B. The supplementary rate shall be paid as follows:

UP_lift = 𝑠𝑡𝑎𝑟𝑡𝑠_𝑐𝑜𝑠𝑡

+ {∑ 𝑇𝐶(𝐿𝑜𝑎𝑑 𝑅. 𝑇) − 𝐿𝑜𝑎𝑑 𝐷. 𝐴 ∗ 𝑆𝑀𝑃𝐷𝐴𝑡 − (𝐿𝑜𝑎𝑑 𝑅. 𝑇 − 𝐿𝑜𝑎𝑑 𝐷. 𝐴)

48

𝑡=1

∗ (𝑆𝑀𝑃𝑅𝑇𝑡) −𝑆𝑝𝑖𝑛𝑖𝑛𝑔 𝑟𝑒𝑠𝑒𝑟𝑣𝑒𝐶𝑜𝑠𝑡𝑡

}

With:

𝑈𝑃_𝐿𝑖𝑓𝑡 – the supplementary rate for 24 hours;

𝑆𝑡𝑎𝑟𝑡𝑠_𝑐𝑜𝑠𝑡 - the start-up cost in the examined 24 hours according to the

Producer's quote in form 2;

𝑇𝐶(𝐿𝑜𝑎𝑑 𝑅. 𝑇) – the accumulated cost of generation at the load point instructed by

the system operator in the updated detailed plan, as reported by the Producer in form

2;

𝐿𝑜𝑎𝑑 𝐷. 𝐴 – the Producer's planned load in the detailed dispatching plan;

𝐿𝑜𝑎𝑑 𝑅. 𝑇 – the Producer's load in the updated detailed dispatching plan;

SMP𝐷𝐴𝑡– the payment by the system operator to the Producer for energy according

to the detailed dispatching plan;

SMP𝑅𝑇𝑡 – the payment for generation deviations pursuant to section 7;

𝑆𝑝𝑖𝑛𝑖𝑛𝑔 𝑟𝑒𝑠𝑒𝑟𝑣𝑒_𝐶𝑜𝑠𝑡𝑡 – payments to the Producer for provide reserve.

10. Payment for operating a generation unit for load frequency control (LFC)

Prior to the transfer of possession of the Site, the Authority shall establish a mechanism

for compensating the Producer for frequent changes in the generation load due to

operation under an LFC regime.

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11. Participation in future market mechanisms in the electricity market

This decision shall not limit the participation of generation units at the Site in any future

market mechanism, if established, subject to the consideration of the Authority and the

needs of the market.

12. Payment for energy and start-ups for the diesel fuel generation units at the Site

A. The Authority shall recognize the system operator's payment for energy generation

using diesel fuel at the Site, in accordance with rate table 3-XX, in accordance with

actual generation, up to the required generation load according to the detailed

dispatching plan. A rate for generation using diesel fuel shall not be paid beyond the

detailed dispatching plan.

B. The Authority shall recognize the system operator's payment for start-ups of diesel

fuel generation units at the Site. the rate shall be determined in accordance to the

start-up rate specified in table 4-XX, provided that the start-up is made at the request

of the system operator.

13. Diesel fuel stock and availability for operation using diesel fuel

A. The Producer shall keep a stock of diesel fuel and maintain the operational

availability of diesel fuel generation units, as specified in Standard 125, the updated

version published for public hearing.

B. The Producer shall keep a stock sufficient for 100 hours of diesel fuel generation for

the integrated cycle and the diesel fuel generation units. The Producer may sign an

agreement to keep some of the required diesel fuel stock at the Alroi site, provided

that the agreement is presented to the Authority and that existing tanks at the Site

are filled according to the schedule specified in Standard 125.

14. Licensing and preserving capacity in the network

A. Each generation unit at the Site shall be issued a separate generation license, as

follows:

(1) The integrated cycle unit shall be issued a generation license for 15 years from

the date of transferring possession.

(2) Each of the diesel fuel generation units shall be issued a license for 15 years

from the date of transferring possession.

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(3) Each of the open cycle flexible Generation units Shall be issued a license

according to the number off generation units established, for a period of 20

years from the date of commercial operation, provided that the commercial

operation of the unit begins not later than 31 December 2024 and that the

accumulated connected capacity of generation units of this type does not

exceed 230 megawatts.

B. The authority may extend the license periods beyond the periods specified in

subsection a above, at the request of the producer, and all at its sole discretion,

subject to the needs of the market and any arrangements effective at the time.

C. The licenses issued to the producer shall specify a requirement of a cumulative

annual availability, As specified below:

(1) For integrated cycle – 65%;

(2) For diesel fuel generation units – 80%;

(3) For open cycle flexible generation units – 78%.

Producers that meet a higher availability than the availability required in any give

year shall be entitled to accumulate the percentage of excess availability and to

offset them against years in which its availability is lower the required availability,

provided that the percentage of offsetting does not exceed 5% and that the offsetting

related to an availability percentage within 5 years. Offsetting availability shall only

be used to meet the terms of a license. Payment for availability shall be made in

accordance with the actual availability for that year.

B. The equity requirements for integrated cycle and diesel fuel generation units licenses

shall be determined in accordance with the value of such generation units in the

books of the Israel Electric Corporation.

C. For the purpose of establishing the open cycle flexible generation units, the Producer

shall have a capacity of 230 MW reserved for it in the network, provided that the

Producer can demonstrate the financial closing of a generation units that meets the

technical requirements for open cycle flexible generation units before 31 December

2021.

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15. The application of standards

A. The following standards shall not apply to the Producer: 83, 90, 91, 92, 95, 98, 99,

100-106.

B. Standards 84 and 85 shall be updated in accordance with the technical parameters

of the integrated cycle and the diesel fuel generation units and the data of the system

operator and shall be published for a supplementary hearing prior to the submission

of tender bids.

C. Standard 83b shall apply to the Producer in accordance with the version publish for

public hearing.

D. Standards 130-136 shall apply to the diesel fuel generation units, the integrated cycle

and the open cycle flexible generation units. 60% of the senior debt shall be related

to the integrated cycle and 20% of it to each diesel fuel generation units.

16. Updating the standards

The standards and the Book of Rates shall be updated in accordance with a decision to be made

following these hearing documents.

17. Application

The decision shall apply to the integrated cycle, the diesel fuel generation units and the open

cycle flexible generation units, as defined in the decision.

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Supplement A – Forms

Form 1 – daily availability statement for generation unit _______________

Date .......................

Producer's name ...............................................................................

Generation unit ............................................................................

A B C

Hour Planned net

capacity(1) with

natural gas(2) [MW]

Planned net available

capacity with diesel

fuel(2) [MW]

-00:00

00:30

...

(1) The planned net capacity shall be reported in terms of net capacity and shall not include self-

consumption and losses.

(2 ) The planned available capacity shall not exceed the connection size of the unit. The declared

capacity shall reflect the generation capability of the generation unit independent of actual fuel

availability.

Form 2 – half-hour energy quotes for the integrated cycle and open cycle flexible generation

units at the Alon Tavor site

Date ..............

The half-hour referred by the form

Generation units ..............

A B C

Range of capacities from

minimum load to planned

available capacity [MW]

Price quote(1)(3)

[MWh / NIS]

Cumulative generation cost(2)

[MWh / NIS]

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Capacity at minimum load - Generation cost at minimum load

Planned net available capacity Generation cost with planned net

available capacity

(1) Quotes shall refer to all the entire range of capacities of the generation unit, from the

minimum load to planned net available capacity, in accordance with the statement of the

Producer in form 1. The range shall be divided into 10 brackets at most. Quotes shall be

submitted in ascending order, so that the any quote for energy generation at a given range

is higher, the higher the load for that range is.

(2) The cumulative generation cost for each load range (C) is equal to the cumulative

generation cost for the previous load range plus the energy generation quote for that

capacity load multiplied by the capacity range. The column shall be presented for control

purposes only.

(3) The quotes shall be used by the system operator to decide about reducing load after the

submission of the detailed dispatching plan.

Form 3 – daily quote for start-up

Date ..............

Generation unit ..............

Start-up type(1) Very cold

start-up

Cold start-up Warm start-up Hot start-up

Start-up quote in

NIS

(1) Start-up type, as defines in Standard 85.

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Supplement B – Late report of unavailability coefficient

Date of notification

to the system

operator about

change in

availability

(hours prior to

dispatching)

(1)Late report of unavailability coefficient (γ)

Availability deviations up

to 1%

Availability deviations over 1%

Integrated

cycle

Open cycle

generation

diesel fuel

unit

Integrated

cycle

Open cycle

generation

diesel fuel unit

Up to 12 hours

before dispatching

5 10 30

80

12 to 6 hours before

dispatching

6 11 35

90

6 to 1 hours before

dispatching

7 12 40

100

1 hour or less before

dispatching

10 20 100

200

(1) Notwithstanding the aforementioned in the table above, if the deviation from the planned

available capacity is the result of a forced power cut, the number of forced power cuts does

not exceed the allowed number specified in Standard 84, as it may be updated from time to

time, and the duration of the forced power cut does not exceed 24 hours, the system operator

will charge the Producer for an vailability deviation in that 24 hours according to γ = 1.

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Supplement C – Rates tables

Table 1-XX – Availability payments for the generation units at the Alon Tavor

site in Agorot per available kWh

Serial

no. Facility

Unified availability rate

𝐜𝐚𝐩𝐚𝐜𝐢𝐭𝐲_𝐭𝐚𝐫𝐢𝐟𝐟𝐥

Availability rate

multiplication

coefficient per hour

of limited

availability (Ah)

1 Integrated cycle Alon

Tavor

{(5.53 + 0.16 ∗ 100 ∗ (BRFC − BR0)}

∗CPIt

CPI0∗ Z

Ah=2

2

Open cycle flexible

generation unit Alon

Tavor

PA3,0,𝑚 ∗ 91%

Ah=2

3 Diesel fuel generation

unit Alon Tavor

{(3.22 + 0.13 ∗ 100 ∗ (BRFC − BR0)}

∗CPIt

CPI0∗ Z

Ah=2

With

𝐂𝐏𝐈𝐭 – the known consumer price index at the date of issuing the bill to the Producer in 2016

terms;

𝐂𝐏𝐈 𝟎 – the known consumer price index for August 2018 in 2016 terms – 101.4;

Z – currency linkage factor for the availability rate, determined as follows:

Up to the date of transferring possession of the Site to the winner:

Z = 1

After this date:

Z = ω ∗ED,t

E𝐷,0+ φ ∗

E€,𝑡

E€,0+ (1 − ω − φ)

S.T

0 ≤ ω ≤ 1, 0 ≤ φ ≤ 1, ω + φ ≤ 1

With:

16

𝛚 – Dollar linkage coefficient of the rate availability, as determined by the Producer until the

transfer of possession of the Site and subject to the Producer's inputs;

𝐄𝐃,𝐭 – the average Dollar – NIS exchange rate for the month preceding the calculation the

availability rate;

𝐄𝑫,𝟎 – the average Dollar – NIS exchange rate for the month preceding the transfer of possession

of the Site;

𝛗 – Euro linkage coefficient of the rate availability, as determined by the Producer until the

transfer of possession of the Site and subject to the Producer's inputs;

𝐄€,𝒕 – the average Euro – NIS exchange rate for the month preceding the calculation the

availability rate;

𝐄€,𝟎 – the average Euro – NIS exchange rate for the month preceding the transfer of possession

of the Site;

𝐁𝐑0 – the rate (in percentage) of risk-free yield1 for an average duration of 8.5 years. Calculated

by the average of the last three days of commerce in the calendar month preceding the date for

submitting offers for the acquisition of the Alon Tavor site, as published by the Israel Electric

Corporation.

𝐁𝐑𝐅𝐂 – the rate (in percentage) of risk-free yield for an average duration of 8.5 years. Calculated

by the average of the last three days of commerce in the calendar month preceding the date of

transferring possession.

𝐏𝐀𝟑,𝟎,𝐦 – the rate of availability established for an open cycle flexible generation facility

according to Authority Decision 1155 "Amendment of Decision no.1 of meeting 914 of

10/12/2014: Rate arrangement for conventional producers over 16 MW and amendment to

relevant standards" (hereinafter," Decision 914"), with the following parameters:

Temperature coefficient b – 0.94;

Rate of obsolescence β – 1

As of October 2018 – 6.61 Ag. Per available kW.

Ah – hourly availability multiplication coefficient for high availability demand hours, as defined

in Standard 83b.

1 Risk-free yield: weighted average of the yields of the three series of index linked state bonds nearer an average

duration of 8.5 years, with at least one series with an average duration higher than 8.5 years, and at lead one series

with an average duration lower than 8.5 years. The weight of the series with the second highest average duration

will be 0.5. the weight of each of the other two series will be positive and their sum will be 0.5, so that the average

of all three series is near 8.5 years.

17

TABLE 2-XX – RATE CEILING ( IN AGOROT PER KWH) FOR NATURAL GAS

GENERATION UNITS AT THE ALON TAVOR SITE

Calculation formula Generation

facility

Serial

no.

23 ∗ Max {SMPt

SMP0|

CPIt

CPI0}

Integrated

cycle 1

30 ∗ Max {SMPt

SMP0|

CPIt

CPI0}

Open cycle

flexible

generation

units

2

With:

𝐒𝐌𝐏𝐭 – before 1/2/2021, a parameter that equals 1. Afterwards, an average of the day-ahead

half-hourly price minus constraints in the 30 days preceding the examination;

𝐒𝐌𝐏𝟎 – before 1/2/2021, a parameter that equals 1. Afterwards, an average of the day-ahead half-

hourly price minus constraints for 2020;

𝐂𝐏𝐈𝐭 – the known consumer price index at the date of issuing the bill to the Producer, with base

2016 = 100;

𝐂𝐏𝐈 𝟎 – the know consumer price index at the date of issuing the license.

18

Table 3-XX – Controlled price quote in Agorot per kWh for diesel fuel

operation of generation units at the Alon Tavor site

Calculation formula Markin Fuel

type Generation unit Serial no.

LFO_Per_KWhm = HRLFOj ∗RPSm

106∗ 100 + VCm 𝐨𝐟𝐟𝐞𝐫_𝐋𝐅𝐎𝐭

Diesel

fuel

Diesel fuel

generation unit /

integrated cycle /

open cycle flexible

generation unit

1

With:

𝐇𝐑𝐋𝐅𝐎𝐣 – the heat rate required to generate a kWh under net terms and site conditions as specified

below:

Generation unit

Load (% full

capacity under ISO)

Integrated

cycle

Diesel fuel

generation unit

%50-%60 7,455 13,721

%60-%70 7,168 12,782

%70-%80 6,966 12,147

%80-%90 6,806 11,710

%90-%100 6,687 11,411

The heat rate for diesel fuel operation of the open cycle flexible generation unit shall be

determined in accordance with the acceptance examinations.

𝐑𝐏𝐒𝐦 – diesel fuel price in NIS for MMBTU in month m, in accordance with Authority Decision

1078 of 12/9/2016;

𝐕𝐂𝒎 – variable cost of generation using diesel fuel by type of generation unit:

A. Integrated cycle – in accordance with table 5 in Decision 914;

B. Open cycle flexible generation unit – in accordance with table 6 in Decision 914;

C. Diesel fuel generation unit – in accordance with table 6 in Decision 914.

19

TABLE 4-XX CONTROLLED PRICE QUOTE FOR START-UP OF GENERATION UNITS AT

THE ALON TAVON SITE USING DIES EL FUEL IN NIS

Calculation formula Generation facility Serial

no.

(F𝑢𝑒𝑙_𝑝𝑒𝑟_𝑠𝑡𝑎𝑟𝑡𝑗,𝑠 ∗ RPSm

+ addiontalcosts𝑗,𝑠∗

CPIt

CPI0)

∗ 𝑐𝑎𝑐𝑝𝑎𝑐𝑖𝑡𝑦𝑗

Diesel generation unit

Integrated cycle

Open cycle flexible

generation unit

1

With:

𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚𝒋 – the net capacity of the generation unit in MW under ISO conditions, as determined

by the system operator.

𝐅𝒖𝒆𝒍_𝒑𝒆𝒓_𝒔𝒕𝒂𝒓𝒕𝒋,𝒔 – the fuel consumption in MMBTU/MW of generation unit j with start-up

type s, as specified in the following table:

Generation unit (j) Start-up (s)

Fuel

consumption

(MMBTU/MW)

Integrated cycle

Very cold 6.6

Cold 6.0

Warm 4.2

Hot 3.3

Open cycle flexible

generation unit - 1.3

Diesel fuel generation unit - 3.9

𝐑𝐏𝐒𝐦 – diesel fuel price in NIS for MMBTU in month m, in accordance with Authority Decision

1078 of 12/9/2016;

𝐚𝐝𝐝𝐢𝐨𝐧𝐭𝐚𝐥_𝐜𝐨𝐬𝐭𝐬𝒋,𝒔 – additional cost involved in the start-up of generation unit j with start-up

type s, excluding the cost of fuels in NIS per MW, as specified below:

20

Generation (j) and start-up

type (s)

Cost involved in start-up

excluding fuel cost in NIS

per MW

Integrated cycle (very cold / cold

/ warm) 8.8

Integrated cycle (hot) 4.4

Open cycle flexible generation

unit 5.9

Diesel fuel generation unit 5.9