Cash and fuel shortages hit Lebanon's electricity providers

Many Lebanese may soon have to cope with daily hours-long power cuts amid worsening economic crisis

epa08574803 Lebanese private Electricity distributor checks  his generator in Beirut, Lebanon 30 July 2020. The electricity crisis continues in Lebanon, where citizens depend on private participation with the owners of generators to cover the rationing hours, and now demand an increase in prices because they buy fuel in the black market despite its presence in the markets, but the black market game continues even with the exchange rates of the dollar and the state is unable to find solutions to that.  EPA-EFE/NABIL MOUNZER

Lebanon continues to grapple with daily power outages blamed on decades of corruption and mismanagement of its ailing state-owned power infrastructure.

But unlike in recent years, when residents and businesses across the country could rely on costly private diesel generators for electricity, as soon as the national grid goes offline, many Lebanese may soon have to cope with daily power cuts lasting hours at a time.

The owner of a private generator business told The National that the growing scarcity of diesel will soon force private electricity providers to follow the example of state-owned power company Electricite du Liban (EDL), which has increasingly been rationing its power supply in recent months.

“The state is only providing one to four hours of electricity a day,” said Nicholas Zouein, whose generator business has been helping to make up for the reduced supply.

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EDL has blamed the sharp rise in power outages on delayed payments for oil shipments.

The government is struggling to secure the necessary foreign currency to maintain vital fuel imports, amid a debilitating financial crisis in which the Lebanese pound has lost over 85 per cent of its value against the dollar.

Earlier this month, caretaker prime minister Hassan Diab warned that subsidies for fuel imports were running out, with $16 billion dollars left in foreign currencies held by the Central Bank.

The Central Bank has been drawing on its foreign reserves to subsidise the bulk of vital wheat, fuel and medical imports at the official exchange rate of 1,515 Lebanese pounds to the dollar.

Its dwindling foreign currency reserves have prompted the government to begin rationing subsidies, forcing private generator operators to pay for part of their diesel purchases at the much higher market rate of 12,500 Lebanese pounds to the dollar.

This currency crisis, coupled with a significant drop in EDL's power supply, is raising energy costs for households and businesses alike, which are increasingly relying on private generators for their electricity supply.

But Mr Zouein warned that private generator businesses are increasingly struggling to secure diesel purchases.

“We cannot meet the country’s energy needs, we should only be a backup to state-supplied electricity,” he said.

The capital city of Beirut remains in darkness during a power outage as the sun sets, Lebanon, Monday, March 29, 2021. Lebanon has had electricity cuts for decades but in recent weeks the small nation suffered severe power cuts over lack of fuel. On Sunday, one of Lebanon's main power stations was shut down after it ran out of gas. (AP Photo/Hassan Ammar)

In an effort to prevent the country from plunging into a nationwide power cut, Lebanon's parliament earlier this week approved $200 million in financing for EDL's fuel purchases.

This was despite opposition from a number of politicians, who argued against maintaining fuel subsidies.

The funds, which should last up to two and a half months, represent a fraction the $1.5bn in annual losses that the state-owned company has incurred in recent years by selling electricity on subsidised tariffs at half the production cost.

EDL supplies around 60 per cent of the country's total energy needs, while private generators now cover the remaining 40 per cent – almost double what they supplied a decade ago.

The expanding private electricity sector has driven up costs for households, with private generators charging customers almost triple the tariffs charged by EDL.

One resident in the capital Beirut told The National that her monthly generator bill has increased by 20 percent over the past three months.

"I'm not sure how we will afford to pay for future price hikes," said Amal, a teacher.

epa08574803 Lebanese private Electricity distributor checks  his generator in Beirut, Lebanon 30 July 2020. The electricity crisis continues in Lebanon, where citizens depend on private participation with the owners of generators to cover the rationing hours, and now demand an increase in prices because they buy fuel in the black market despite its presence in the markets, but the black market game continues even with the exchange rates of the dollar and the state is unable to find solutions to that.  EPA-EFE/NABIL MOUNZER

The country's energy woes have been not only been a source of concern for low-income households, but also for affluent Lebanese who can afford the increased charges.

Jad, an engineer living in Metn district, on the outskirts of the capital, said his neighbours are now contemplating installing their own diesel generator in anticipation of power rationing by private electricity providers.

"That said, we're not even sure we would be able to secure our diesel needs, even if we have the necessary dollars to pay, in light of recent concerns over disruptions in fuel imports," he told The National.

The cost for businesses is often much higher, said Toufic Badran, a site manager supervising construction work in Gemmayze, one of the Beirut neighbourhoods worst hit neighbourhoods by the massive port blast that killed more than 200 people last August.

Mr Badran said power outages were not only hampering reconstruction efforts but also costing contractors up to seven times more  than power from the state grid.

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