Electricity theft resulted in a loss of $12 billion to the Iraqi government's revenue last year, as the country braces itself for a severe summer after planned power projects face delays following the impact of the coronavirus pandemic on the economy.
"The challenges that we’re referring [to]... we need to sort out the tariff reform. At the moment we have four million registered units, [of which] 50 per cent of them thrive on power piracy... and all of these are leading to a loss of $12bn to the government based on last year’s oil prices," Iraqi electricity minister Luay Al Khateeb told a virtual panel organised by the American University of Iraq, Sulaimani.
Rebuilding Iraq's power infrastructure, damaged by decades of war, is high on the government’s list of priorities. A crippled utility network has been a key factor behind protests across Iraqi provinces during summer months, when temperatures can easily reach 50°C, occasionally requiring government-mandated holidays to cope with the extreme weather.
The electricity ministry planned to raise overall power capacity in Iraq to 22GW by the summer of 2020, the Mr Al Khateeb told The National in an earlier interview. The country's power generation capacity had reached 19.2GW, he told the panel.
"With this capacity, if we implement tariff reforms and completely remove subsidies, this generation is enough to provide us electricity 24/7 but without tariff reforms, it is completely difficult," he added.
Iraq, Opec's second-largest producer is taking a big hit to its oil revenues, which comprise nearly 90 per cent of government income. Oil prices have fallen nearly 80 per cent since the beginning of the year, widening the fiscal deficit for many of the Middle East's oil exporters.
Iraq's electricity rehabilitation programme, which relies on multinational companies to rebuild damaged utilities, develop new schemes as well as tackle persistent gas flaring has dragged following geopolitical tensions earlier this year between the US and Iran, in which Baghdad was caught in the crossfire. A lack of government to sanction new deals has also complicated the situation in a country, which continues to rely on Iranian gas and electricity imports to meet its power needs.
The US extended a waiver granting continued imports of Iranian electricity last week, following an earlier extension by 30 days.
The waiver would allow for a "credible government" to be formed in Iraq, a US state department official told Reuters news agency. The latest waiver expires on May 26 and is shorter than the earlier grants of 90 or 120-day extensions.
Iraq, which is also looking to import electricity from neighbouring Jordan as well as from the regional grid, GCC Interconnection Authority, is likely to continue its reliance on Iranian gas for the foreseeable future.
"With Jordan, we negotiated a deal and it will only materialise in 24 months. The rate is very much on par with the Iranian electricity imports," said Mr Al Khateeb.
"The GCCIA deal is 15 per cent less than the Iranian price and it takes one year to be implemented. The Iranian rates are very competitive. It’s a free market," he added.