By Ori Lewis
The move was the latest in a series of Israeli steps that increases pressure on Gaza, ruled by the Islamist Hamas since last June and the source of repeated rocket attacks into the Jewish state.
"We are trying to reduce the Gaza Strip's dependence on Israel in many fields ... the High Court ruled that we are acting in a correct and appropriate manner," deputy Defence Minister Matan Vilnai said.
"This is not punishment ... we have disengaged from them by pulling out our troops and settlers and now we want them to start looking after themselves, they have their own power station, they get power from Egypt, we want them to ... stop relying on Israel," spokesman Eitan Ginsburg said.
Ginsburg said that apart from Israel's 124 megawatts, a local power station in Gaza City produced 64 megawatts and Egypt supplied 17 megawatts.
The U.N. Human Rights Council said last month it deplored the "grave violations" being committed by Israel in Gaza and demanded it lift its blockade. The European Union has condemned the cordon as "collective punishment" on Gazans.
Israel has stepped up military action against Hamas since it claimed responsibility for a Palestinian suicide bombing on Monday, the first such attack by the Islamist faction inside the Jewish state since 2004.
Palestinian militants blasted open the territory's border with Egypt last month in defiance of an Israeli blockade. Egypt re-sealed the border on Sunday.
Israel declared Gaza an "enemy entity" last September, three months after Hamas routed the rival Fatah faction for control of the coastal enclave, whose eastern and southern borders, sea access and airspace are controlled by Israel.
Hamas has described militant attacks on Israel, which have also been condemned internationally, as responses to Israeli military operations in Gaza and the occupied West Bank.
On Thursday the Israeli army said troops had uncovered underground rocket silos in the northern Gaza Strip. Israel has threatened a major ground offensive into Gaza to try to end the rocket salvoes.