Monday, March 10, 2008
Sunday, March 9, 2008
ELECTRICITY MACHKAL IN LEBANON. A message to the Shadow Electricity Minister in the Youth Shadow Cabinet
3/9/2008
Dear George,
I regret that I took a few days to send you the information on Electricity. Here it is. As I mentioned previously, the subject is extremely complicated and has many ramifications. I can summarize it in a few statements that will serve to introduce the subject:
To clear up the air and to be able to draw up a simple approach I recommend that we start with a summary cost statement of EDL.As you know, the latest audited Accounts of EDL cover the year 2001 and were only published a few months ago.
Based on these accounts, I have drawn up the estimated results at EDL for the years 2006, 2007 and 2008 (see statement attached). By the way the figures for 2008 are based on an average of $90 per barrel of oil, while the current oil barrel price has today reached $106. But that is another matter that we can deal with later.
A. The Current Situation in Lebanon
To give you a clear idea of the huge losses that are incurred by EDL I have attached two statements.
The conclusion is simple. To absorb these huge losses, the government must either triple the electricity rates to the consumers or it must find a way to reduce the losses at EDL.
Tripling the electricity rates will surely provoke a huge outcry among the population. It may even bring about a revolution in these charged times.
B. Proposed Remedies
To reduce the losses at EDL the government can adopt the following initiatives:
1) Short term initiatives
a. In our opinion the first initiative that the government should take is to “get the facts right”. By this statement we mean that EDL should publish (regularly and on a monthly basis) the exact statistics of fuel oil and mazout received during the month by the institution, the prices that are paid and the quantities that are consumed in the turbines during that period. The reason for that exercise is to reassure the citizens about the reliability of the records. The fact that EDL, an entity that is 100% owned by the Lebanese Government, has not had its accounts audited for the past six years is enough to create serious doubts in the minds of the citizens.
b. The second initiative should consist in convincing the citizens (all the citizens: those supporting the majority as well as those supporting the opposition) to pay their bills, but more importantly to refrain from illicitly branching to the current (in plain words “stealing” electricity in order to avoid paying their dues). The government intends to buy for $20 million one million reading meters to prevent fraud, but this measure can only work provided the citizens cooperate.
c. In our opinion, the two above initiatives are linked together. Most citizens who “steal” electricity or fail to pay their bills do so because they have the impression that the accounting system at EDL is not transparent. Once the transparency is restored it will be easier to convince the defaulters to become more responsible citizens.
2) Medium term initiatives
a. LNG from Egypt
An opportunity for cost reduction will arise when Lebanon receives liquid natural gas from Egypt around the month of July of this year. We do not have sufficient details but we have been told that LNG is cheaper than fuel oil and environmentally safer. We need to know the rate of consumption of LNG per kilowatt hour and the estimated cost per kilowatt hour. We also need to know the quantity of LNG that we expect to receive per month. We hope that EDL will be transparent this time and provide us with such information early on. Furthermore the monthly production results of the LNG operated plants should be made transparently available to the citizens.
b. Conversion of the turbines from fuel oil to LNG consumption
We understand that this conversion can take place fairly rapidly. Here again we need more information from EDL.
3) Long term initiatives
The following alternative energies are planned to be utilized in the long term in Lebanon. The citizens need to know when each of these initiatives will be started and to what extent each will contribute toward reducing energy costs.
a. Solar Energy
b. Bio Energy
c. Expansion of Hydraulic Energy
d. Atomic Energy
C. Conclusions
In view of the huge impact of energy costs on the results of the National Budget, we believe in the absolute necessity to draw up a five year Energy Plan at the earliest possible opportunity.
Such a Plan should allow for the implementation of the three types of initiatives and their respective effect on costs and revenues. One should also bear in mind that the implementation of the Energy Plan will have a strong bearing on many other sectors of the economy such as the industry, the agriculture, tourism etc. All of these sectors are adversely affected by the current huge energy costs. Any improvement in this domain will influence them positively. This also applies to the environment that is polluted by the use of fuel oil and mazout in the turbines.
Dear George,
I regret that I took a few days to send you the information on Electricity. Here it is. As I mentioned previously, the subject is extremely complicated and has many ramifications. I can summarize it in a few statements that will serve to introduce the subject:
To clear up the air and to be able to draw up a simple approach I recommend that we start with a summary cost statement of EDL.As you know, the latest audited Accounts of EDL cover the year 2001 and were only published a few months ago.
Based on these accounts, I have drawn up the estimated results at EDL for the years 2006, 2007 and 2008 (see statement attached). By the way the figures for 2008 are based on an average of $90 per barrel of oil, while the current oil barrel price has today reached $106. But that is another matter that we can deal with later.
A. The Current Situation in Lebanon
To give you a clear idea of the huge losses that are incurred by EDL I have attached two statements.
The conclusion is simple. To absorb these huge losses, the government must either triple the electricity rates to the consumers or it must find a way to reduce the losses at EDL.
Tripling the electricity rates will surely provoke a huge outcry among the population. It may even bring about a revolution in these charged times.
B. Proposed Remedies
To reduce the losses at EDL the government can adopt the following initiatives:
1) Short term initiatives
a. In our opinion the first initiative that the government should take is to “get the facts right”. By this statement we mean that EDL should publish (regularly and on a monthly basis) the exact statistics of fuel oil and mazout received during the month by the institution, the prices that are paid and the quantities that are consumed in the turbines during that period. The reason for that exercise is to reassure the citizens about the reliability of the records. The fact that EDL, an entity that is 100% owned by the Lebanese Government, has not had its accounts audited for the past six years is enough to create serious doubts in the minds of the citizens.
b. The second initiative should consist in convincing the citizens (all the citizens: those supporting the majority as well as those supporting the opposition) to pay their bills, but more importantly to refrain from illicitly branching to the current (in plain words “stealing” electricity in order to avoid paying their dues). The government intends to buy for $20 million one million reading meters to prevent fraud, but this measure can only work provided the citizens cooperate.
c. In our opinion, the two above initiatives are linked together. Most citizens who “steal” electricity or fail to pay their bills do so because they have the impression that the accounting system at EDL is not transparent. Once the transparency is restored it will be easier to convince the defaulters to become more responsible citizens.
2) Medium term initiatives
a. LNG from Egypt
An opportunity for cost reduction will arise when Lebanon receives liquid natural gas from Egypt around the month of July of this year. We do not have sufficient details but we have been told that LNG is cheaper than fuel oil and environmentally safer. We need to know the rate of consumption of LNG per kilowatt hour and the estimated cost per kilowatt hour. We also need to know the quantity of LNG that we expect to receive per month. We hope that EDL will be transparent this time and provide us with such information early on. Furthermore the monthly production results of the LNG operated plants should be made transparently available to the citizens.
b. Conversion of the turbines from fuel oil to LNG consumption
We understand that this conversion can take place fairly rapidly. Here again we need more information from EDL.
3) Long term initiatives
The following alternative energies are planned to be utilized in the long term in Lebanon. The citizens need to know when each of these initiatives will be started and to what extent each will contribute toward reducing energy costs.
a. Solar Energy
b. Bio Energy
c. Expansion of Hydraulic Energy
d. Atomic Energy
C. Conclusions
In view of the huge impact of energy costs on the results of the National Budget, we believe in the absolute necessity to draw up a five year Energy Plan at the earliest possible opportunity.
Such a Plan should allow for the implementation of the three types of initiatives and their respective effect on costs and revenues. One should also bear in mind that the implementation of the Energy Plan will have a strong bearing on many other sectors of the economy such as the industry, the agriculture, tourism etc. All of these sectors are adversely affected by the current huge energy costs. Any improvement in this domain will influence them positively. This also applies to the environment that is polluted by the use of fuel oil and mazout in the turbines.
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