Why Lebanon’s electricity crisis is so hard to fix

Lebanon’s woefully inefficient energy sector — as illustrated by the labyrinth of cables that stretch across the capital city Beirut — has long been an economic thorn in the country’s side. (AFP)
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Updated 15 June 2020

Why Lebanon’s electricity crisis is so hard to fix

  • An IMF official told Arab News “electricity reform is one of the key steps to re-equilibrate the economy”
  • The crisis gripping the sector is partly linked to smuggling of fuel oil and fuel products to war-torn Syria

BEIRUT: It is two in the afternoon and Verdun Street, one of Beirut’s upscale neighborhoods, is doubly lit up — by the midday sun and by street lights.

“Look at the street lamps shining brightly in the middle of the day while most areas suffer from power outages,” Fatima Hachem, 29, a local resident, told Arab News.

The incongruity of the scene — street lights kept unnecessarily on during daylight hours — is unmistakable in a country where residents get between three and 12 hours of electricity a day depending on the locality.

Such systemic inefficiencies are all the more glaring at a time when Lebanon is seeking a $10 billion loan from the International Monetary Fund (IMF).

Given its disproportionate contribution to Lebanon’s public debt, the urgency of an overhaul of the electricity sector cannot be overstated.

“Electricity reform is one of the key steps to re-equilibrate the economy,” an IMF official, speaking on condition of anonymity, told Arab News.

“We will see it as an emblematic and major improvement.”

 

The official added that, without reforms, “there would be no loan program.”

As a first step, the IMF has asked Lebanon to audit its national electricity company, known as Electricite du Liban (EDL). Loss estimates should note “not only the changes in price of fuel oil, but also the change in the exchange rate,” it said.

In recent months, the purchasing power of the Lebanese population has eroded, with the currency losing two-thirds of its value, dropping to LBP4,000 from LBP1,515 to the US dollar.

“At the moment, the Lebanese government links increasing tariffs on electricity to the increase in power generation, while the IMF believes that those two should not be tied. Also, eliminating electricity subsidies is the most significant potential expenditure saving,” the IMF official said.

To generate fiscal savings, it is imperative the Lebanese government increases tariffs as soon as possible, they said.

However, this would mean raising electricity charges for most of the population, who are already under economic pressure as a result of the COVID-19 pandemic.

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The power sector’s total bill comes to almost $2 billion annually, roughly 4.5 percent of the country’s gross domestic product.

Most of the losses can be attributed to a combination of fuel oil subsidies, tariff pricing on the basis of $20 per barrel since 1994, and theft from the power grid.

The problem is only set to worsen with an increasing population, including refugees (currently 1.5 million) whose numbers have grown through recent arrivals and whose electricity consumption has crossed the 400 MW mark.

Under the circumstances, Lebanon’s electricity shortfall is estimated at 1,600 MW.

Among the things the IMF wants to see are the creation of a regulatory authority for the electricity sector and the appointment of new board members for EDL, which after resignations has been left with only three members to oversee it.

INNUMBERS

44 per cent - EDL subsidies’ share of Lebanon’s entire debt

$1.5 billion - Yearly state transfers to EDL

$42 billion - Electricity sector’s debt

$94 billion - Estimated size of Lebanon’s public debt

2 - Power shortages’ rank as a business hindrance

Lebanon’s Energy Ministry, meanwhile, is pushing for an amendment to laws before the implementation of proposed reforms.

Electricity reforms already exist — but only on paper.

The law, 462/2002, permits the setting up of a regulatory authority, frees it from political interference, and disallows EDL’s monopoly over the electricity sector in terms of production, transportation and distribution of electricity.

The implementation, however, is easier said than done.

Christina Abi Haidar, a legal expert with 15 years’ experience in the energy sector, said: “Once we have a regulatory authority, the political authority would cease to exist.”

She told Arab News: “We only pass reform-related laws when we need to borrow from the international community, but we rarely implement them.”

Last month, Dr. Antoine Habchi, a Lebanese Forces MP, filed a lawsuit against the Energy Ministry for corruption and waste of public money.




Dr. Antoine Habchi, Lebanese Forces MP.  (Supplied)

“The electricity sector is a black box marred by corruption,” he told Arab News, “It is not in the interest of those planning on financially benefiting from it to implement laws or to fix the situation.”

Take Law 181 passed in 2011. It was enacted in support of a proposal by Gebran Bassil, the then energy and water minister, to enable the power sector to hire consultants, appoint a board of directors for EDL and establish a regulatory authority within three months.

The cost to the government was projected to be LBP1.772 trillion (equivalent to $1.175 billion at the time). The proposal was to be implemented within four years, resulting in most of Lebanon receiving power for up to 24 hours a day.

By the end of the period, the money had been spent, but unsurprisingly, there was no improvement in the electricity supply.

“We have spent the money, appointed consultants and built two new power plants in Zouk and Jiyeh, and over $350 million was spent on the primary works of rehabilitating the old Zouk and Jiyeh power plants,” said Habchi.

“But to date, we do not have a regulatory authority or a new board of directors for EDL. We also do not have 24/7 electricity supply.”

 

The new Zouk and Jiyeh power plants are said to lack the fuel treatment systems and separators necessary for the burning of any type of fuel.

After many bureaucratic delays, separators reached Lebanon, only to be held up at the Beirut docks instead of being transported to the site and installed.

Now, Lebanon is planning to have four gas-fired plants, two of which were built in 1996. Use of gas could save up to a quarter of a billion dollars per power plant in imported fuel oil costs, according to experts.

But here, too, problems have arisen.

The Selaata power project is a case in point. Work on the new plant is scheduled to start by the end of 2020, around the time when Lebanon intends to shut down the old Zouk and Jiyeh power plants.

Selaata is linked to a plan involving the installation of Floating Storage Regasification Units, or FSRUs, across the country to serve both new and existing plants operating on gas.




Lebanon plans to install Floating Storage Regasification Units, or FSRUs, across the country to serve both new and existing plants operating on gas. (AN photo by Leila Hatoum)

The initial idea was to have one FSRU for all of Lebanon, located in the northern, Sunni-majority Beddawi area.

However, the issue has sparked political debate along sectarian lines, resulting in the plan expanding to include three FSRUs, tripling the cost.

The argument in favor of Selaata is that there is a need for such a large power plant and that it will be constructed in an industrial area.

However, a number of ministers within the Cabinet object to the Selaata project on the grounds that it involves costly land appropriation.

They say the project was conceived only to please the Christian constituency of the Free Patriotic Movement party and not on merit.

Other concerns are insufficient feasibility and its environmental impact, in light of the power plant’s location close to the sea.

“The whole of Egypt has one FSRU, yet the smart people here in Lebanon want to build three FSRUs and waste public money on a useless power plant and overpriced land appropriation,” said Habchi.

Raymond Ghajar, the energy and water minister, declined to comment on the Selaata project among other issues.

Lebanon’s power crisis is also linked to the smuggling of fuel oil and fuel products to neighboring Syria, according to experts.

This is not only problematic from the standpoint of electricity generation, says Habchi, but also poses a risk in light of Washington’s Caesar Act, which bans aiding the Syrian regime.

Within its borders, too, fuel oil transactions are a cause for concern.

An official document obtained by Arab News suggests that subsidized fuel oil has been finding its way from the EDL to the private sector.

A letter numbered 198 and dated June 4, 2018, sent by Sarkis Hleiss, director general of the petroleum facilities in Tripoli and Zahrani (ports), to Cesar Abi Khalil, Lebanon’s then energy minister, asked for permission for the purchase of 6,000 metric tons of fuel oil.

More worrying than the amount is the likelihood that the deal was only the tip of the iceberg.

The letter said: “Due to the shortage of fuel oil in our possession, and in order to supply of the local market, your Excellency is kindly requested to accept the request from EDL to hand us a quantity that is about 6000 metric tons of fuel oil from the first tanker loaded with an ISO 8217 fuel oil reaching the oil facilities in Zahrani, knowing that we are ready to pay for the price of this quantity in cash, after determining its cost by the General Directorate of Petroleum, as always.”

The request was approved on June 6, 2018.

It seems that Lebanese taxpayers are paying double to receive electricity: Once, during the importing of fuel oil, and again when buying power from the private sector during blackouts.

Against this backdrop of mismanagement, wastefulness, incompetence and corruption in the power sector, what is the realistic probability of the Lebanese government getting the IMF loan?

Not much, says Nazih Najm, head of the energy parliamentary committee, who doubts that international donors will lend any money to Lebanon.

Najm is not even sure Lebanon needs to go cap in hand to the IMF. His logic: “We still have about $18 billion in foreign reserves at the Central Bank as well as gold reserves.”

* * * * * * * * * 

@Leila1H


Violence mounts against Iraqi doctors as COVID-19 cases spike

Updated 30 min 33 sec ago

Violence mounts against Iraqi doctors as COVID-19 cases spike

  • “All the doctors are scared,” said Sheibani, speaking at his home in Kufa a few weeks after the Aug. 28 attack
  • More than 8,000 people have died, a number that some doctors fear will rise sharply

NAJAF: Iraqi doctor Tariq Al-Sheibani remembers little else beyond cowering on the ground as a dozen relatives of a patient, who had just died of COVID-19, beat him unconscious.
About two hours later the 47-year-old director of Al-Amal Hospital in the southern city of Najaf woke up in a different clinic with bruises all over his body.
“All the doctors are scared,” said Sheibani, speaking at his home in Kufa a few weeks after the Aug. 28 attack. “Every time a patient dies, we all hold our breath.”
He is one of many doctors struggling to do their job as COVID-19 cases rise sharply in Iraq.
They are working within a health service that has been left to decay through years of civil conflict and underfunding, and now face the added threat of physical attack by grieving and desperate families.
Reuters spoke to seven doctors, including the head of Iraq’s Medical Association, who described a growing pattern of assaults on medical staff. Dozens have taken place since the COVID-19 pandemic began.
Meanwhile, the United Nations has warned that the pandemic could spiral out of control in Iraq.

Tarik Sheibani, 47, an Iraqi doctor and director of Al-Amal Hospital, wears a protective suit at a hospital where he treats coronavirus disease patients, in Najaf, Iraq September 13, 2020. (Reuters)


Authorities have lifted many lockdown measures, allowing restaurants and places of worship to reopen, but they have shut borders to pilgrims ahead of a large Shiite Muslim pilgrimage that normally draws millions to the south of the country.
Iraq has recorded several thousand new coronavirus infections every day, and the total now exceeds 300,000.
More than 8,000 people have died, a number that some doctors fear will rise sharply, putting frontline health care workers under huge pressure and in some cases in physical danger.
The health ministry did not immediately respond to a request for comment on the COVID situation in Iraq and medics’ complaints about the threat of violence.
Sheibani, whose beating went viral when CCTV footage circulated online, said the family of the deceased patient blamed his staff for the death. He said he did not know how the video reached the public domain.
The patient had arrived at hospital in critical condition.
“I hate myself and I hate the day I became a doctor in Iraq,” Sheibani told Reuters. “They brought the patient in his final stages and he died, and they want the health system to bear the responsibility.”
Enforcing health safety guidelines within the hospital is not always easy, especially when tensions between families of sick patients and hospital staff are running high.
During a recent visit to Sheibani’s hospital, which is a coronavirus isolation center, Reuters reporters saw relatives of COVID-19 patients coming in and out of the ward without wearing full protective gear as they are supposed to.
Some were only wearing surgical face masks.
Iraq is fighting the pandemic with a depleted force of doctors and nurses.
In 2018, it had just 2.1 nurses and midwives per thousand people, compared with Jordan’s 3.2 and Lebanon’s 3.7, according to official estimates. It had 0.83 doctors per thousand people, while neighboring Jordan, for example, had 2.3.
There are also significant shortages of drugs, oxygen, and vital medical equipment, the result of years of underspending.
Many young doctors say they are overworked, putting in 12-16 hour shifts every day meaning they are more likely to make mistakes in prescriptions and treatment. Some take kickbacks for handing over certain drugs, physicians told Reuters.
The Health Ministry did not immediately respond to a request for comment.
Government vows action
Prime Minister Mustafa Al-Kadhimi has condemned the attacks against medical staff and promised to hold perpetrators to account.
The attacks have increased in recent months, said Medical Association president Abdul Ameer Hussein. He said his association could not keep track of all of them, but they include verbal and physical abuse and even stabbings.
Sheibani filed a complaint with police, but he said he had received threats from the people who beat him up to drop the case.

Tarik Sheibani, 47, an Iraqi doctor and director of Al-Amal Hospital, wears a protective suit as he walks at a quarantine ward at Al-Amal Hospital in Najaf, Iraq September 13, 2020. (Reuters)


“They might attack me or my family,” Sheibani said, adding that he no longer left his house alone.
Doctors say the government has not taken tough enough action to protect them from violence, which they have faced for years even before the pandemic.
The health ministry said in a statement on Saturday that it would assign its legal division to file lawsuits against those who attacked health workers, as well as those medics who fell short in treating patients.
According to the Medical Association, at least 320 doctors have been killed since 2003, when US-led forces toppled President Saddam Hussein, ushering in years of sectarian violence and extremist insurgencies.
Thousands more have been kidnapped or threatened.
Doctors and human rights activists say the state is so weak that it cannot bring doctor’s assailants to justice, especially if they come from a powerful tribe or belong to a militia.
“The government can’t protect doctors from tribes. Doctors end up dropping the cases because they receive threats,” said Hussein, adding that he often asks tribal leaders to mediate when a doctor is being threatened.
Doctors have gone on strike and protested in recent months over what they say is government inaction over the attacks.
Abbas Alaulddin, 27, a doctor in Baghdad who was assaulted last week by the family of a patient who died of COVID-19, said he was considering seeking asylum.
“The situation here is unbearable.”