December 8, 2008 / 2:11 AM / 9 years ago

Lebanon losing battle to keep the lights on

<p>A woman inspects a generator for sale in Beirut in this December 6, 2008 picture.Mohamed Azakir</p>

BEIRUT (Reuters) - A candle flickering in her darkened home, Fouada Hawi rails against the daily 10-hour power cuts that Lebanon's ailing electricity utility inflicts on her.

"It's unbearable," said the headscarved mother. "No one has money to buy fuel for generators, so you have to live by candle light. You have to put up with everything in this country, you work and you are patient, but nothing changes."

Many developing countries have power problems, but Lebanon's go beyond mere technical issues, a World Bank report issued this year suggests, pointing to corruption and vested interests.

It says the electricity sector's woes are typical of countries where "there are multiple beneficiaries of the dysfunctional status quo ... ranging from corruption in payments flows or procurement, to buying of voters through free electricity, to profiteering from energy shortages."

Hawi, 33, lives with her husband and child in Ouzai, just south of Beirut -- where luckier residents have still had to endure three hours without power a day for the last two years.

Anger over the blackouts turned violent in January when army troops shot dead eight protesters in the mainly Shi'ite southern suburbs, fuelling wider political turmoil.

Tensions have calmed since rival factions reached a deal on a national unity government in May, but the chronic malaise gripping the electricity sector is not so readily cured.

Nor can the drain on the public purse be easily plugged. Subsidies cost the equivalent of 4 percent of Lebanon's Gross Domestic Product last year, the World Bank estimates.

Lebanon built two gas-fired power plants in 1996, but they still lack a gas supply and run on expensive diesel instead. Older turbines use the costliest grade of fuel oil.

State-owned Electricity du Liban (EdL) can meet only two-thirds of peak demand. More than a third of the power it does generate gets lost in distribution or is not paid for.

How to overhaul a utility whose 2,000 staff have an average age of 58, whose tariffs were fixed in 1996 when oil cost $21 a barrel, and whose last audited accounts were issued in 2004?

TOO MANY COOKS?

Lebanon's fiendishly intricate sectarian power-sharing system makes consensus on reform elusive, and dozens of reports proposing solutions for the problems are gathering dust.

The latest energy minister to try his hand acknowledges the scale of the task.

"Today we are able to generate about 1,500 megawatts and our peak requirement is estimated at 2,200, so we have a deficit of around 700," Alain Tabourian told Reuters. "That's why we see a lot of power cuts, especially in summer."

Back-up generators used by shops, homes and factories hammer in the streets of Beirut during outages -- which cost business around $400 million last year, according to the World Bank.

Tangled overhead cables reveal illicit links to unmetered supplies. Public sector consumers like ministries, the army, police and hospitals are all supposed to get billed. Few pay.

Subsidising EdL cost the government $1.2 billion in the first 10 months of 2008, or more than 15 percent of its spending and a fifth of its revenue, Finance Ministry figures show.

The bill for imported fuel surged mainly because world oil prices spiked to nearly $150 a barrel in July before collapsing.

But Lebanon, with a $44.5 billion public debt -- among the world's biggest at 170 percent of GDP -- can ill afford such costs, let alone the investments to expand capacity.

<p>A general view of Zouk power station is seen in Zouk area, north of Beirut in this December 6, 2008 picture.Mohamed Azakir</p>

Existing power stations are obsolete, poorly maintained or unsuited to the fuel available, Tabourian said.

Initially Syria was to supply natural gas for the two modern combined-cycle gas turbine units, but now has a shortfall itself, so Lebanon turned to Egypt. After successive delays, the Egyptians are promising the first deliveries in January.

"Unfortunately they cut the amount in half compared to what we originally agreed," Tabourian said. "That means only one of the two turbines in one plant will be able to run on gas."

"REAL WORD IS THEFT"

Tabourian put technical losses in the distribution system at about 15 percent, or double those typical of a well-run network.

"Non-technical losses -- the real word is theft -- have gone up to around 22 percent," he said, blaming Lebanon's political upheavals for the reversal of a trend which had curbed these to 17 percent from a crippling 40 percent in 2000-2002.

<p>Cables and circuit- breakers are seen at a provider that distributes electricity to residents in Beirut suburbs in this December 6, 2008 picture.Mohamed Azakir</p>

The ministry is considering how to restructure the outdated electricity tariff, without too much pain for poorer consumers -- although even they might pay up if EdL's service improved.

"Let them ration or raise the bills a bit, but give us electricity," pleaded Hawi at her home in Ouzai. "People can't live a normal life. School-kids can't study by candle light."

Albert Khoury, deputy general manager of a private power distribution concession in Aley, east of Beirut, blamed EdL's management. "Every area in Lebanon would pay if we had clean power and reliable billing and collection."

Computerization at EdL is incomplete. Anyone trying to do business at its Beirut headquarters must navigate a maze of desks where clerks shuffle records in dusty ledgers and files.

EdL's chairman, Kamal Hayek, declined to be interviewed.

Tabourian said the widely discussed option of privatizing EdL was out of reach for now: "First it needs to be corporatized so it can operate on commercial rules, so it can hire and fire."

He saw private-public partnerships as the way to combine the public sector's ability to raise affordable financing with the private sector's skills at building and operating projects.

Tabourian aims to put in place a strategic power plan for the next 25 years -- a tall order since the government will only last until a parliamentary election next May or June.

Such a master plan would set policy on the future energy mix -- coal, natural gas, liquefied natural gas and renewables all have their advocates alongside the fuel oil and diesel now used.

But long-term investments need consistent political support.

"Unfortunately what we have seen is successive governments often re-examining issues and taking a different tack," said Simon Stolp, a World Bank expert. "What they really need to do is set in train a course of action and pursue it to the end."

Khoury champions a bigger private sector role and more emphasis on renewables like solar and wind power.

"I hope the government will listen to us," he said. "But they need to listen more to the people who get six-hour power cuts a day, who cannot warm their water or light their homes.

"Unfortunately because of the lack of good services in Lebanon, we tend to consider that 24-hour electricity is a luxury. This is quite sad. It is our right."

Editing by Sara Ledwith

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