Israel Electric Corporation

Rutenberg Concession controversy

After British forces conquered Palestine, they had to deal with conflicting demands rooted in Ottoman rule. For example, on 27 January 1914, the city of Jerusalem had granted a Greek citizen, Euripides Mavromatis, concessions for the supply of water, electricity, and the construction of a tramway system in the city. Work under these concessions had not begun and by the end of the war the British occupying forces refused to recognize their validity.

Under the British administration, concessions from the Mandatory government were given. On 12 September 1921, the British formally signed the "Auja (or Yarkon) Concession" which granted Pinhas Rutenberg's Jaffa Electric Company a 70-year concession granting it exclusive rights to generate, distribute, and sell electricity in the administrative District of Jaffa, and authorized Rutenberg to generate electricity by means of hydroelectric turbines that would exploit the water power of the Auja (Yarkon) river. Historian Sahar Huneidi, building on the scholarship of Barbara J. Smith, underscores the 1921 concession's significance by noting that “[t]he economic separatism of the Yishuv...was given a tremendous push by the monopoly rights granted in 1921 to Pinhas Rutenberg."

Huneidi characterized the Rutenberg concession as "the largest and most politically controversial Zionist scheme" during the tenure of High Commission Herbert Samuel (1921–1924). "Its significance for the Zionists was to provide employment for the thousands of Jewish settlers, which would in turn 'justify' the influx of Jewish immigration." Indigenous leadership contested it on these grounds as unduly giving power to Zionists. Arab opposition proliferated based on this perception. Furthermore, attacks in the British press focused on the fact that Rutenberg was a "foreigner...who had bought the machinery for his project in Germany."

Euripides Mavromatis challenged the concession, claiming he was being deprived of his legal rights. The Mavromatis concession, despite British attempts to abolish it, covered Jerusalem and other localities (e.g., Bethlehem) within a radius of 20 km (12 miles) around the Church of the Holy Sepulchre. The case was taken up by Greece in at the Permanent Court of International Justice, but the ruling there in favor of Mavromatis was effectively undermined by the British Colonial Office.

Founding of Palestine Electric Corporation

In the end, Rutenberg's concessions remained and the company built a power plant that produced electricity using diesel-fueled engines. By 1923 Jaffa Electric Company's grid covered Jaffa, Tel Aviv, neighboring (mainly Jewish) settlements, and the British military installations in Sarafand.

In 1923, Rutenberg founded the Palestine Electric Corporation, Limited which was granted the "Jordan Concession". Rutenberg merged Jaffa Electric Company into that company, which in 1961 was renamed the Israel Electric Corporation Ltd. Rutenberg built the First Jordan Hydro-Electric Power House at Naharayim on the Jordan River, which opened in 1932. Pursuant to the Concessions, the company was granted the exclusive right to generate, supply and distribute electricity and to sell it throughout the Mandate for Palestine, except in Jerusalem and its environs. The plant produced much of the energy consumed in Mandatory Palestine until the 1948 Palestine war. Other power plants were built in Tel Aviv, Haifa, and Tiberias.

Jerusalem was the only part of Mandatory Palestine not supplied by Rutenberg's plants. Mavromatis defended the concession for Jerusalem granted to him by Ottoman authorities, and resisted Rutenberg's attempts to build a power station that would serve Jerusalem. Only in 1942, when his British-Jerusalem Electric Corporation failed to supply the demands of the city, did the Mandatory government ask the Palestine Electric Company to take over the supply of electricity to Jerusalem.

The Concessions expired after 70 years, i.e., on 3 March 1996, and from that time Israel's Electricity Sector Law - 1996 has applied, replacing the Electricity Concessions Order of 1927 of the Mandatory authorities. (See Electricity Authority (Israel).)