Electricity rationing hits Lebanese economy hard

Published July 22nd, 2012 - 07:42 GMT
Power supply has deteriorated across the country over recent months
Power supply has deteriorated across the country over recent months

Dwindling electricity supply presents a major setback to economic growth, economists said as local businesses in and around the capital complained that the power crisis had become “unbearable.”

Pointing to the soaring economic cost of energy bills and work disruptions, Nassib Ghobril, chief economist at Byblos Bank, said the deteriorating power supply had taken a heavy toll on the economy. “In 2008, a World Bank survey said 61 percent of Lebanese businesses identified electricity rationing as a major obstacle,” he told The Daily Star.

The same survey, Ghobril said, predicted Lebanon could gain at least 1 percent of GDP growth annually if it managed to overcome power rationing. Both percentages have probably grown much higher since the report was authored in 2008, he added. But Louis Hobeika, an economist at Notre Dame University, estimated that gross domestic product would grow by no less than 30 percent if Lebanon was to offer 24-hour electricity. Hobeika explained that rationing was dealing crippling blows to the economy on multiple fronts.

“On one hand the level of economic output is highly affected by the scarcity of the indispensable resource,” he said. “On the other hand, power rationing severely damages consumer confidence as it signals a collapse of the state and economy.

“The same goes for tourism as power cuts damage Lebanon’s reputation as a destination and causes inconveniences to tourists as well as significant losses to businesses,” he said. In addition to the impact of power rationing on growth, both Ghobril and Hobeika said subsidies to state-run Electricite du Liban have reached an alarming level and have increasingly become the major contributor to Lebanon’s growing debt burden.

The Finance Ministry issued a report Friday that put transfers to EDL between January and April 2012 at LL1.076 trillion, a massive LL324 billion higher than the same period in 2011.

In 2011, Lebanon spent around $1.2 billion on subsidizing fuel purchases for EDL. According to Energy Ministry estimates, the Lebanese spent an equivalent amount on private generator subscriptions.

Power supply has deteriorated across the country over recent months. Since last week, Beirut, which used to see no more than three hours of cuts per day, is now seeing frequent arbitrary power cuts with residents in some areas reported up to nine hours of rationing. The three-month-long strike by EDL part-timers has left the company unable to conduct repairs on distribution networks.

In a statement Thursday, EDL said malfunctions on several cables feeding Ashrafieh, and a major cable for Tallet al-Khayyat and Verdun were behind the random power cuts.

Raymond Nahhas, owner of a stationary shop in Verdun, said the area was receiving up to nine hours of rationing, six hours more than weeks before. “What a pity! This is a major commercial street,” he said.

Nahhas said his electricity bill had doubled over the past weeks. Subscribing to a building-operated private generator is now costing him no less than $200 per month – a significant amount if the shop’s current slow sales are taken into consideration.

Sitting outside of his Tallet al-Khayyat sewing shop, Mahmoud Fodda told The Daily Star that he was spending up to $350 a month to run a gasoline-powered private generator. “We have sewing machines that need electricity and you need an air conditioner to work in this kind of weather,” he said. But a 20-minute drive away, in Beirut’s southern suburbs of Shiyah and Ain al-Rummaneh, business owners were even more furious at the state of electricity in their area.

“Before we used to see cuts on a fixed schedule but for the past few weeks we barely get any electricity,” Shiyah shop vendor Hasan Awad said. “We have barely received two or three hours of electricity over the past three days ... I don’t know what to tell you, it’s a miserable situation.”

The regular 5-Ampere private generator subscription has soared to LL180,000. For hairdresser Awad, he was forced to shell out more than LL360,000 for a 10-Ampere subscription in the last few months. He is certain rates will go higher this month.

Elie, a beverages vendor in Ain al-Rummaneh who asked to be identified only by his first name, echoed Awad’s views. “The private generator bill keeps getting higher and rationing is becoming more severe,” he said. “The situation is unbearable but no one wants to do anything about it.” Meanwhile, Energy and Water Minister Gebran Bassil told a news conference Friday that the electricity crisis would become more acute if his ambitious plan was not implemented soon. He revealed that the government was seeking 125 megawatts of electricity from Iran in addition to the 270 MW that would be generated from the barges which he leased three days ago.

The minister stressed that if the government approved the construction of another 700 MW power plant, in 24 to 36 months this could generate 24 hours of electricity. He again blamed the part-time workers of EDL for most of the electricity problems because of their occupation of the company’s headquarters.

The minister added that he would seek to persuade Egypt to resupply Lebanon with natural gas to run the power plant in Tripoli. He insisted that one of the reasons behind the sharp electricity rationing this summer was the growing theft of electricity and power cables. “I was informed today that 33 electricity cables were stolen in the south,” Bassil said.

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