Electricity Sector in Lebanon
Under a 2100 MW
Spotlight
The case of Electricité du Liban (EDL) has once again sparked much
controversy regarding public administration management in Lebanon. EDL faces
two major challenges:
1. The Lebanese public needs electricity 24 hours a day, 7 days a
week. This is a fundamental element of modern 21st century infrastructure that
is still lacking in Lebanon 20 years after the end of the civil war.
2. The social condition of a great portion of the public workers,
namely the daily paid workers hired by private companies on behalf of EDL,
launched an unprecedented strike to demand full time employment within the
cadre of public administration in EDL.
Because of poor decisions made in the past, EDL is struggling today on
its path towards modernizing the electricity sector. Meeting both challenges
currently requires many compromises that will generate mixed results amongst
all key stakeholders.
The deteriorating situation of EDL
It is nothing new that EDL, a company with a crucial role, has not
been able to meet minimal operational standards. EDL has a nominal installed
power supply capacity of 2100 MW. Available net thermal capacity however has
varied from as low as 1600MW (and sometimes lower) to a maximum of 2000 MW due
to shortcomings such as restoration requirements, plant failures, fuel supply
problems, and external hostilities. This highly falls short of peak demand for
electricity that was at least 2600 MW in 2006 (including electricity
demand used for generation itself), and is expected to grow between 4% and 6%
annually over the period 2008–2015 (ElFadel, Hammond, Harajli, Jones, Kabakian,
& Winnett, 2009).
Hence, blackouts have become standard procedure and reach 13 hours per
day in some areas(Dagher & Ruble, 2011).
Blackouts led to an increase in dependency on off-grid distributed
generators with consumers paying a huge bill to cover both the utility bill and
standby generators, the latter costing twice the price of public electricity
(Dagher & Ruble, 2011). Self-generation supplies 33 to 38% of electricity
consumption (Hamdan, Ghajar, & Chedid, 2012) causing a high import bill
given that 93% of fuel and diesel oil used is imported (Dagher & Ruble,
2011).
In addition to the costs incurred by the Lebanese consumers, transfers
to EDL cripple the public treasury. In 2011, transfers totaled more than $1.75
billion, a 46% increase from 2010 and equivalent to more than 20% of national
revenue or 4% of national GDP (Ministry of Finance, 2012). Today, EDL’s
financial deficit amounts to a total of $11 billion before interest, and $13billion
after interest (National News Agency, 2012). Despite these financial
investments, system
losses are equivalent to 40% worth of electricity produced by EDL, at
approximately $310 million every year (Bassil, 2010).
The inefficiency of the electricity sector has reduced GDP growth
since 1993 by an annual 1.5% (Bassil, 2010). With 100% electrification in
Lebanon and a forecasted increase in annual electricity demand, Lebanon will
need to both optimize the current electricity system and build up to 8 new 600
MW power plants by 2030. This amounts to 1 power plant every 2.25 years if Lebanon
adopts centralized supply-side solutions only. Many experts have deemed this unfeasible
with the current status of the Lebanese economy (El-Fadel, Hammond, Harajli,
Jones, Kabakian, & Winnett, 2009).
Plans for reform
In light of this situation, Electricity Law 462 of 2002 paved way for
private sector participation by allowing up to 40% of the shares in generation
plant and distribution networks to be privatized (Bassil, 2010). But the
National Electricity Regulatory Authority that would have the sole right to
license independent power producers is yet to be established (Hamdan, Ghajar,
& Chedid, 2012).
In 2010, the Ministry of Energy and Water (MoEW), under Minister
Gebran Bassil, published a four-year plan to implement supply-side reform
(introducing additional conventional energy sources) and demand-side reform
(reducing demand for electricity to curb load growth). These reforms were
intended to reduce total losses from $4.4 billion in 2010 to $0 in 2014, with potential
for profit after. It was expected that by 2014, a solid power sector would have
at least
4000 MW in generation capacity. This would cost a total $4.87 billion
($1.55 billion financed by the Lebanese government, $2.32 billion by private
sector, $1 billion by international donors). With an additional investment of
$1.65 billion, generation capacity may increase to 5000 MW by 2015 (Bassil,
2010).
Currently, it seems these targets are far fetched. However, EDL has
taken some steps to begin the implementation of this plan by hiring 3 private
companies (Butec Utility Services, Debbas, Khatib & Alami) in a $780
million, four-year contract. These companies are providing services that
include electronic billing and tracking, introducing easy payment plans,
offering discounted rates during certain hours, and instituting a solid
inspection and monitoring scheme. This is expected to increase EDL revenue by
more than $300 million per year and assets by $380 million by the end of the
project (National News Agency, 2012)
Daily paid employees at EDL
Human capital within EDL is one of the key points of reform.
Currently, EDL has an organizational chart incorporating positions) with an
average age of 53 and yearly attrition rate of 8%. With an ongoing freeze in public
sector hiring since 1990, EDL compensates for the understaffing by employing approximately
2,000 persons on short-term contracts(Bassil, 2010).The performance of these
employees, under EDL and private sector administration, has been poor to say
the least. In 2000, labor productivity in Lebanon’s electricity sector reached
2.3 GWh per employee, well below theinternational benchmark of 8.23 GWh per
employee (El-Fadel, Hammond, Harajli, Jones, Kabakian, & Winnett, 2009).
Moreover, annual waste due to uncollected bills reached 5% worth of the total
electricity generated (Bassil, 2010), or $310 million per year (As-Safir,
2012).
That said, private firms hired by EDL are restructuring the
administration by offering a portion of the 2,000 daily paid employees
full-time jobs with a starting salary of $700 and NSSF overage after a 3-month
probation period. This, however, does not meet the expectations of daily paid
workers under the auspices that the company signed a four-year contract and, therefore,
their job security is not permanent and salary increases are not guaranteed
(Darwiche & Abeer, 2012).
The daily paid workers at EDL protested for 96 days against the administrative
reform that does not guarantee them employment security. Despite terminating
the strike as of 3 August 2012 as the private firm claims that 450 workers
already signed full time contracts, promises by Minister Bassil fall short of
meeting the workers’ demands of full time employment at EDL. Minister Bassil’s
promises include the following (Zaki, 2012):
1. EDL will pay all outstanding salaries until July 2012 starting
August 6, 2012
2. EDL daily paid workers will maintain their right to compensation
for all their years of work
3. EDL daily paid workers will maintain the right to take examination
(despite the deadline being July 1)
4. EDL daily paid workers will be offered a limited number of full
time jobs based on the need at EDL with benefits as per the labor law
5. EDL will conduct examinations to determine those who will be
offered full time positions
6. A committee comprising of the Minister of Labor, a representative
from the Labor Union, and representative from the Amal and Hizbullah parties,
will work on making adjustments to the labor law and ensure its proper
execution
The electrifying trade-off
On the one hand, a low daily pay rate of approximately LBP 28,000 with
no benefits (Kbeissy, 2012), many employees succumbed to the temptation for
corruption and theft causing many losses to the national budget. Moreover, the
relatively old age of the vast majority makes difficult the modernization of
the sector, in addition to the prospects of retirement that will cause an
operational gap.
Therefore, when considering the introduction of sustainable reform to
the system, EDL may need a solution other than offering the daily paid workers
with full-time jobs. On the other hand, the Lebanese government made no effort
to increase awareness amongst the employees on the long-term impact of their
current work status. While serving public interest, the administration must
have made it clear that lack of social security would have put the employees at
risk of poverty after retirement. Moreover, the category of daily paid workers,
mentioned only once in all labor laws, became a tool for cheap labor adopted
by, not only the EDL, but also many\ other public institutions, private firms,
and non-governmental organizations.
This continues to generate corruption as near zero incentive exists
for adhering to the law.This controversy highlights the importance of proper
governance when dealing with public administration. Serving public interest
involves a long-term vision that must ensure civil servants’ job security and
dignified post-retirement livelihood in order to avert temptation for corruption.
Moreover, computerized systems must be adopted in order to minimize possibility
for corruption, by management and employees alike. It is essential
that national revenue be not misused so that the allocation of funds towards
social security and job creation in many other missing sectors in Lebanon is
made possible.
References
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Youth Economic Forum
Policy Position Paper6 August 2012 Contributors: Nermine Chatila, Meer
Ako, Iskandar Boustany
