The contradiction in the energy sector has reached its peak. Years of waste, corruption, theft, and dubious dealings have led to the cost of electricity produced by generators exceeding, in theory, 104 times the average tariff of Electricité du Liban, and actually more than 130 times, if noncompliance with pricing is taken into account. The average price of a kilowatt-hour produced by Electricité du Liban is 120 Lebanese pounds, or less than half a US cent, while the Ministry of Energy considers the fair price for generators for the last month to be 12,568 pounds, which effectively equals half a dollar at an exchange rate of 27,500 pounds. Nevertheless, the collection rate among generator owners exceeds 90 percent, with a technical waste rate of no more than 5 percent, while technical and non-technical distribution losses at Electricité du Liban stand at 40 percent according to the government’s economic plan "Memorandum on Economic and Financial Policies," and are expected to exceed 50 percent.
The Lost Balance
The huge gap between the official pricing of Electricité du Liban and private generator prices should be a "real wake-up call for all politicians who resist correcting the tariff and restoring balance to Electricité du Liban for populist reasons," according to energy project financing expert Karol Ayat. "Citizens forced to bear this exorbitant gap cannot live without electricity; their suffering can be alleviated by raising the tariff by much lower rates than generator tariffs in exchange for increased supply hours." In her opinion, "The danger of a complete collapse of Electricité du Liban does not only lie in imposing exorbitant costs on citizens, forcing them to sacrifice basic living standards to maintain a minimum level of electricity but also negatively affects private sector institutions that have seen their energy costs rise to over 90 percent. Moreover, the near-exclusive reliance on generators threatens to choke the economy and raise environmental pollution rates, with accompanying social and health risks."
Ayat believes that "raising the tariff by 15 to 20 times to secure fuel, increase supply hours, and reduce generator bills has become a necessity that far surpasses its financial utility if the situation remains as it is." She emphasizes that "raising the tariff alone is not enough to achieve financial balance; it must be accompanied by modernizing collection methods, which could be electronic, reducing waste rates, and controlling violations on the network." Therefore, the choice today is between two options: either we pay 100 times or more for generators, a percentage likely to increase with the rise in global oil prices and the collapse of the local currency, or ensure the financial balance of Electricité du Liban in parallel with achieving fundamental reforms. The difference is that the second option, from Ayat's perspective, "costs no more than 20 to 30 times, and provides electricity for many families to forego private generators and rely solely on state electricity at a reasonable price."
Abandoning Generators
In reality, increasing the official electricity tariff is an unavoidable necessity. The pricing was established in 1994 based on a $20 per barrel oil price and has not changed despite numerous increases over the years. As a result, the electricity sector has accumulated, due to corruption and other factors, deficits exceeding $50 billion. Today, with the price of a barrel of oil reaching $120 and the impossibility of continuing subsidies after the depletion of depositors' funds, it is essential to raise the tariff. The government’s recovery plan has specified that the first step will be to raise the average base tariff to 12 US cents per kilowatt-hour within no more than two months after importing gas from Egypt or electricity from Jordan. After that, it will increase to 18 US cents per kilowatt-hour as soon as electricity supplies increase. In principle, the maximum price in pounds that is intended to be adopted is 5,000 pounds based on the current parallel market exchange rate. This increase, conditional on securing between 16 to 18 hours of electricity daily, does not only ensure financial balance in electricity; it’s also less than a third of what consumers pay for private generators, allowing for a complete abandonment of generators that no longer cover more than 8 hours of supply daily. So why does this seemingly straightforward scenario appear impossible to implement?
Correcting the Tariff First
Due to "populism opposing price corrections on one hand and the lack of intent to reform the sector on the other," energy law expert Kristina Abi Haidar responds, "As long as correcting the tariff is tied to increasing production based on importing Egyptian gas and Jordanian electricity, we will not make any progress in the electricity file. Especially in light of the obvious difficulties faced in this regard." Abi Haidar believes that "correcting the electricity tariff alongside a set of core reforms, such as reducing waste, eliminating the monopoly represented by the Ministry of Energy, and appointing a regulatory authority for the sector as per Law 462/2002, is necessary for gradually increasing supply and not the opposite. It no longer makes sense to await production increases in order to correct the tariff. Furthermore, correcting the tariff guarantees the independence of fuel imports for the plants from more than one source, without relying on a single entity which could jeopardize energy security at any juncture. The experience of relying solely on Iraqi oil as a source of production is a clear example of the risks posed by not diversifying energy sources."
Given the huge rise in private generator prices and the tendency of their owners to ration supplies to ensure all subscribers can pay their bills, securing electricity for 12 hours at a price under a third of current costs has become essential and vital. Moreover, the official tariff is fairer and more equitable as it calculates costs according to consumption brackets, thus reducing tariffs for low consumption among low-income individuals (those consuming less than 300 kilowatt-hours monthly) while gradually increasing according to consumption," Abi Haidar states, and "this is why we advocate for the importance of a partnership between the public and private sectors, rather than privatizing production."
