The power cut took place in the northern city of Nablus as well as in Jenin, local Palestinian officials told AFP saying thousands of homes were affected by the cut which Israel had warned of in advance.
Speaking to public radio, Yiftach Ron-Tal, chief executive of the Israel Electric Corporation confirmed the move saying it was "due to an accumulated Palestinian Authority debt of around 2.0 billion shekels" ($510 million/450 million euros).
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But a local official in Nablus denied the claim, saying the only unpaid bill was one which "only arrived two days ago, which was for 49 million shekels," ($12.5 million/11 million euros).
"We will pay this in the coming days," the official said, accusing Israel of looking "to put pressure on the Palestinian Authority."
In early January, the Palestinians moved to become party to the International Criminal Court where they could potentially file suit against Israel for alleged war crimes in a move which has infuriated the Jewish state, prompting it to freeze millions of dollars in tax monies it transfers every month to the Authority.