"This is a signal to the Palestinians that we see their conduct in Gaza and that we want to continue the disengagement process. I hope they will focus their effort on getting new sources of energy instead of developing...rockets," Dror said.
Israel was accused of imposing a blockade on Gaza that amounted to "collective punishment" of the population after fuel cuts last month led to blackouts in Gaza.
Israel is "trying to reduce the Gaza Strip's dependence on Israel in many fields," said Matan Vilnai, Israel's deputy defence minister.
Apart from Israel's 124 megawatts, a local power station in Gaza City produces 64 megawatts and Egypt supplies 17 megawatts, Israel's defence ministry said.
Tom Casey, a spokesman for the US state department, said he was not aware of the move.
"We understand Israel's right to defend itself, but we do not think that actions should be taken that would infringe upon or worsen the humanitarian situation for the civilian population in Gaza," Casey said.
Israel has stepped up military action against Hamas since the group claimed responsibility for a Palestinian suicide bombing in Israel on Monday.