The Electricity Plan and Iraqi Fuel

The latest electricity plan is faltering at a time when Lebanon remains mired in an economic crisis that the World Bank previously described in a 2020 report as the worst globally since the mid-19th century, its complications compounded by coinciding with the coronavirus pandemic, which widened its repercussions to reach most sectors, causing a contraction in productive activities and a drop in domestic output to unprecedented levels. World Bank estimates indicate a decline in real gross domestic product of 2.6% in 2022, bringing the total economic contraction since 2018 to 39.9% of gross domestic product. The inability of state institutions, particularly service-providing ones, to perform their duties has constituted one of the gravest repercussions of the economic crisis, following a steady deterioration in state revenues from fees and taxes, collection of which fell to its lowest levels. The collapse in the value of the national currency accelerated the erosion in value of public-sector employees' salaries, as was also the case with state revenues, obstructing the functioning of public administrations and reducing their productivity. Declining revenues, the drop in their value, and the scarcity of foreign currencies prevented the availability of the financing needed to keep state service utilities running, particularly continuing to purchase fuel for electric power plants on one hand and paying the dues owed to the Turkish power barges on the other, plunging the country into near-total darkness that coincided with private generator owners cutting supply hours due to rising diesel prices and smuggling to Syria. Yet the floundering in the electric power sector predated the financial and economic crisis, and indeed formed one of its causes; after the ambition of those in charge of this sector had been to reach 24 hours of supply, the matter ended with settling for leasing the Turkish power barges to maintain a bare minimum of supply hours until those barges ceased production and departed at the end of 2021. Despite the abundance of plans and flashy headlines, the operation of thermal plants on natural gas lasted only a few months in 2009, and hydroelectric plants were neglected until their output dropped to less than half while others stopped operating altogether (the Hrash and Rechmaya plants, for example, while the output of others dropped to less than half), hindering the achievement of sustainable electric power solutions. Instead of implementing the 2010 National Energy Efficiency Action Plan in terms of increasing the share of renewable energy in total energy production to 12% by 2020 and 30% in 2030, that share did not exceed 7.8% on the eve of the outbreak of the crisis in 2019. Meanwhile, political bickering and the insistence on keeping the kilowatt-hour tariff unchanged until production increased thwarted successive plans, which were dominated by political and personal objectives. Adjusting the kilowatt-hour price to a level commensurate with its actual cost could have achieved financial balance for Electricité du Liban on one hand, and curbed the growth of the public debt caused by the utility's deficit on the other. Pricing the kilowatt-hour according to actual cost could also have incentivized consumers to shift toward renewable and clean energy, yet the absence of good governance in the electric power sector made thermal plants the sole solution to the problem in the eyes of those running the sector. Political exploitation of the electricity sector's achievements, and portraying them as the accomplishment of one particular political party, turned the sector into a platform for settling political scores, obstructed the administration's work, and prevented the establishment of good governance. This is especially true given that the lack of good governance played the primary role in the stumbling of the electric power sector, the failure to address the problems confronting it, and the refusal to tackle operational inefficiency and confront rampant corruption in the sector, from the tainted fuel deals to the power barges deal and others. Conversely, reduced supply hours and rising private generator bills drove consumers to turn to solar energy, from which the pace of electricity generation rose by an average of 100 megawatts between 2020 and 2021, equivalent to the volume invested over the preceding ten years, specifically between 2010 and 2020. Nearly 250 megawatts, and perhaps more, were likely added in 2022 to previous capacity, particularly after the tariff hike and the new fees of Electricité du Liban. The electricity plan recently drawn up by the Ministry of Energy, which it has begun implementing, faces challenges that threaten the viability of sustaining it and moving to its subsequent stages in terms of increasing supply hours. These challenges begin with bill collection and its difficulties, run through consumption bills and their link to the Sayrafa dollar rate after adding 20% to that rate, and do not end with Banque du Liban's delay in converting the sums collected by the utility in Lebanese pounds into US dollars and the discrepancy in its exchange rate between the billing date and the collection date. At the same time, citizens' complaints are mounting over the fixed charges included in Electricité du Liban's bill with respect to meter rental and especially the rehabilitation fee, the grounds for collecting which no longer exist, as well as the wide gap between consumption tiers, where the second-tier rate jumps by more than one and a half times (27 cents) above the first-tier rate (10 cents), among other factors, bringing its cost close to that of private generator subscriptions. That is despite the fact that the success of the aforementioned plan is vital not only for consumers unable to secure alternative sources to state electricity, but for every consumer of electric power, whether individuals or institutions, and factories in particular. All the more so as renewable energy is intermittent energy and additional permanent sources must be provided to support uninterrupted consumption, especially since electric power plants remain capable of generating power for the foreseeable future and it is hoped that they will be supplied with oil and gas extracted from beneath Lebanese waters in the not-too-distant future. The effort by the Ministry of Energy, and behind it the caretaker government, to reconsider the adopted tariffs reflects a positive, indeed progressive, gesture, foremost in the administration reviewing decisions it had previously taken so as to align with the new reality, particularly falling oil prices, as well as responding to consumers' demands to reconsider, if not abolish, fixed charges, notably the rehabilitation fee, which is viewed as compensating for sums owed to Electricité du Liban by those who refuse to pay. Since fairness requires that a subscriber not be charged more than what is due from them, just as it requires that no subscriber benefit from a service whose cost they refuse to pay, the new plan must avoid all measures that lead to saddling subscribers with financial burdens beyond their capacity to bear. If the plan must be made to succeed and its continuity secured, let it be through adopting fairness in pricing and distribution and through transparency in management and accountability. The Ministry of Energy's current plan must mark a new beginning in how public administrations secure the continuity of their services, away from burdening the public treasury with financial liabilities it cannot meet. The electricity plan coincides with the Iraqi government's initiative approving the provision of all of Lebanon's petroleum-derivative needs to operate power plants with the aim of securing additional supply at the start of the summer season, by providing the remaining quantities under a previous agreement, doubling monthly quantities, and renewing that agreement after increasing its volume by 50% to reach one and a half million tons of fuel oil. The plan also coincides with the Iraqi government's approval to conclude a new state-to-state contract on commercial terms to supply 2 million tons per year of crude oil, to be swapped for fuel matching the specifications of Lebanese plants. In view of the foregoing facts, it is crucial that Iraqi supplies not be used to offset delays, indeed shortfalls, in bill collection and other losses that may befall the plan, because doing so would mask the effectiveness of the Ministry of Energy's plan and the extent of its success in achieving its desired objectives. This requires counting the value of Iraqi oil within total production costs, adopting what is known as a profit-and-loss account showing the plan's net profits/losses, and verifying its economic viability and the necessity of continuing its implementation, especially as the state of collapse suffered by public-sector service institutions makes it imperative to manage these institutions according to commercial rules, such that financial balance constitutes a primary objective for their management alongside the continuity and quality of service provision. Sustainable solutions must be activated and priority given to clean and renewable alternative energy sources, and every achievement in this arena, however modest, makes reaching the goal of sustainability easier. Waiting until a new president of the republic is elected and political conditions stabilize may take a long time, hence the importance for the relevant administrations (Electricité du Liban, Ogero, public hospitals, and others) to adopt good governance that ensures the sustainability of public utilities and preserves their capacity to provide appropriate services.

Translated from Arabic with AI. Read it in Arabic