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.
Saturday, June 30, 2007
THIS IS WHY WE BELIEVE THAT FIVE HUNDRED BILLION LEBANESE POUNDS CAN BE SAVED NEXT YEAR AT EDL
The audited accounts of EDL for 2001 have FINALLY been published. They revealed a net loss of 724 billion Lebanese pounds, or $0.4 billion US dollars.
With the skyrocketing prices of fuel, we have extrapolated the losses for 2007 and we estimate that they will reach during this year three and a half time that amount or nearly $1.46 billion US dollars.If the price of the barrel of oil remains at its present level of $90, the anticipated losses in 2008, if nothing is done to reduce them, are expected to reach $1.77 billion US dollars at least.
But what can we do about this, will you ask?
Many solutions have been suggested by the experts. Most of them require substantial investments. On the other hand if the government could, by magic, obtain the cooperation of the entire population in order to reduce the theft of current and the full collection of bills, the anticipated savings could well reach 250 billion Lebanese pounds. This amount has been confirmed in the Paris III report as well in the report presented by Minister Fneich in 2006.
One other way to reduce losses that has been inexplicably overlooked by mostly everyone, with the possible exception of the auditors, is the thorough control of the purchase, receipt, storage and consumption of fuel. This item represents in 2007 three times the amount of the sales of current. A fifteen per cent decrease in waste in the accounting for it would result in a saving of 250 billion Lebanese pounds.
This is what we have proposed recently in our comments on the Paris III Resolutions:
" In the process of introducing reform measures in the Administration some simple and relatively low cost initiatives can sometimes be more effective than the complicated management systems that are proposed. The case of the reform at Electricite du Liban is a good example in point. Huge sums of research money have been spent during the past ten years to find a solution to the skyrocketing losses of that institution without any significant results. Has anyone thought of looking for one of the major source of these losses? With the phenomenal rise in the price of the barrel of oil, fuel costs at EDL represent now more than three times the amount of the sales of current. If one intends to reduce costs at EDL this is the area one would have to look at. An accurate records keeping procedure, coupled with the installation of an imaginative software system, should normally be sufficient to accurately measure and performance-evaluate the usage of fuel in each turbine in the power plants, and the overall monthly consumption and costs. The question is why such an initiative has not been considered earlier?"
In conclusion we can safely say that 500 billion Lebanese pounds can be saved in 2008 in the following way:
1)Securing a full collection of electricity bills: 100 billion Lebanese pounds.
2) Eliminating theft of current by the installation of power meters and the cooperation of the population: 150 billion Lebanese pounds.
3) Monitoring and controlling the purchase, the storage and the consumption of fuel: 250 billion Lebanese pounds
Total savings anticipated: 500 billion Lebanese pounds.
With the skyrocketing prices of fuel, we have extrapolated the losses for 2007 and we estimate that they will reach during this year three and a half time that amount or nearly $1.46 billion US dollars.If the price of the barrel of oil remains at its present level of $90, the anticipated losses in 2008, if nothing is done to reduce them, are expected to reach $1.77 billion US dollars at least.
But what can we do about this, will you ask?
Many solutions have been suggested by the experts. Most of them require substantial investments. On the other hand if the government could, by magic, obtain the cooperation of the entire population in order to reduce the theft of current and the full collection of bills, the anticipated savings could well reach 250 billion Lebanese pounds. This amount has been confirmed in the Paris III report as well in the report presented by Minister Fneich in 2006.
One other way to reduce losses that has been inexplicably overlooked by mostly everyone, with the possible exception of the auditors, is the thorough control of the purchase, receipt, storage and consumption of fuel. This item represents in 2007 three times the amount of the sales of current. A fifteen per cent decrease in waste in the accounting for it would result in a saving of 250 billion Lebanese pounds.
This is what we have proposed recently in our comments on the Paris III Resolutions:
" In the process of introducing reform measures in the Administration some simple and relatively low cost initiatives can sometimes be more effective than the complicated management systems that are proposed. The case of the reform at Electricite du Liban is a good example in point. Huge sums of research money have been spent during the past ten years to find a solution to the skyrocketing losses of that institution without any significant results. Has anyone thought of looking for one of the major source of these losses? With the phenomenal rise in the price of the barrel of oil, fuel costs at EDL represent now more than three times the amount of the sales of current. If one intends to reduce costs at EDL this is the area one would have to look at. An accurate records keeping procedure, coupled with the installation of an imaginative software system, should normally be sufficient to accurately measure and performance-evaluate the usage of fuel in each turbine in the power plants, and the overall monthly consumption and costs. The question is why such an initiative has not been considered earlier?"
In conclusion we can safely say that 500 billion Lebanese pounds can be saved in 2008 in the following way:
1)Securing a full collection of electricity bills: 100 billion Lebanese pounds.
2) Eliminating theft of current by the installation of power meters and the cooperation of the population: 150 billion Lebanese pounds.
3) Monitoring and controlling the purchase, the storage and the consumption of fuel: 250 billion Lebanese pounds
Total savings anticipated: 500 billion Lebanese pounds.
Thursday, June 28, 2007
Tuesday, June 12, 2007
The information that the Lebanese citizens need to have
Once all the above information becomes available, it will be possible to pinpoint the different causes of the deficit at the EDL and their separate impact on the total resulting loss.
Appropriate corrective action can be subsequently taken to reduce the losses.
Monday, June 11, 2007
E18 ELECTRICITE DU LIBAN (EDL)
1) THE LOSSES OF EDL - WHAT, IN YOUR OPINION, SHOULD BE DONE ABOUT IT?
The losses incurred by the EDL during the period 2004 to 2006 were as follows:
2007: 2,184 billion Lebanese pounds
The losses incurred by the EDL during the period 2004 to 2006 were as follows:
- Year 2004: 492 billion Lebanese pounds
- Year 2005: 833 billion Lebanese pounds
- Year 2006: 1,370 billion Lebanese pounds
2007: 2,184 billion Lebanese pounds
2) These results are frightening and the citizens are entitled to ask: "what is being done to stop the hemorraege?"
3) But first, the citizens are entitled to know why these losses are incurred and what is causing them:
- Is it because the turbines are inefficient?
- Is it because the price of fuel is going up?
- Is it because the citizens are not paying their bills?
- And, if all these causes exist, what is the proportion of each in this rising deficit?
5) We ask the government (the Ministry of Finance and the General Director of EDL) to give us the necessary information. Some of it was made public in 1997 and in 1998, then suddenly ceased to be published. Why?
6) We publish above a statement that should be filled in by the responsible officials in the government (Ministry of Finance and EDL). If it cannot be done, we would like to know Why?
7) Over the years, a number of foreign and local experts undertook expensive research and studies of the energy sector in Lebanon and proposed a great number of solutions to solve the problem of the high cost and inefficient supply of electricity. What has been done about this? Why the Ministry of Energy and the EDL do not publish, at regular intervals, say monthly, an update to inform the citizens about these projects?
7) Over the past fifteen years, many local and international experts have proposed different solutions to the problem of the electricity in Lebanon. Has anything been done so far? Why the Ministry of Energy and hydraulic resources does not publish, at regular periods, say monthly, an update on what our government is doing to "stop the financial hemorraege" and improve the electricity services to the citizens? We know that the country is currently going through an unparalalled crisis, but this should not prevent the Authorities from keeping the citizens informed.
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