Lebanese government tries to rein in billion-dollar 'generator mafias'

After decades of apathy, the Lebanese authorities have now decided to confront the country’s largely unregulated private generator providers, who have profited off the public by charging often exorbitant rates to cover the state’s inability to keep a consistent power supply.

With cuts of at least three hours a day in Beirut but often much longer at peak times of year or outside the capital, many who can afford it subscribe to a local generator – often a loud humming, polluting diesel monolith tucked away in their neighbourhood.

Unmetered, people pay based on the amperes they subscribe to but the bill is based on how many hours the generator owners say they ran their machine to fill in for power cuts. Although the Ministry of Economy sends out a monthly statement listing fuel prices with recommended cost per hour that generator owners should charge, there has been little enforcement.

Then the ministry gave generator providers until October 1 to install meters that would, in theory, enable them to bill clients on the basis of electricity consumption instead of the opaque flat fee.

Providers pushed-back. The owners claimed that the new system would lead to a loss in profit in an industry that Associate Professor of Economics at the American University of Beirut Jad Chaaban estimates totals over $1.2 billion (Dh 4.4 billion) a year. They threatened to protest, block roads and shut down generators to leave much of the country in darkness.

But in a somewhat rare show of resolve, Economy Minister Raed Khoury refused to back down and he recently sent investigators to ensure compliance after reports that the vast majority of generators still did not have installed meters. Mr Khoury estimated there was a 60 per cent non-compliance with his order.

He says their latest move is intended to reduce costs for residents who already pay the state-run national utility company, Electricité du Liban (EDL) despite the long daily power cuts.

Even though the activities of the private providers are technically illegal under Lebanese law as the state provider has a monopoly, authorities have turned a blind eye to the business the rise of private providers during the 15-year civil war that ended in 1990. The industry ballooned after the war when generators filled the supply gap left by the conflict shattered state provider.

On average, a family of four pays $300 a month for electricity between EDL and generator bills — a hefty sum in a country with a minimum wage of $450 a month — Mr Chaaban says.

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On Tuesday, many generator owners outside Beirut made good on their threat to cause blackouts when they shut down their systems between 5 and 7 pm. Lebanese media reported that areas of the eastern Bekaa Valley – where normal daily cuts can last 12 hours – were hardest hit.

In response to the authorities questioning and even detaining some generator owners who had not installed meters, a committee claiming to represent the industry accused the government of treating them like “drug dealers” and “thieves”.

After Tuesday’s protests, Mr Khoury upped the ante again by threatening to confiscate generators and to send offenders to court.

During a joint press conference with Mr Khoury, Justice Minister Salim Jreissati accused generator “mafia” of carrying out a “rebellion against public authority” and of “attacking citizens’ rights”.

He added that he had asked State Prosecutor Samir Hammoud to “take action” against owners who caused blackouts on Tuesday.

For the past month, Mr Khoury’s hundreds of inspectors from the ministry’s Consumer Protection Unit have been travelling the country to check meters on generators.

Fearing a backlash, the inspectors work in pairs and only under the protection State Security officers, an intelligence unit which reports directly to the President’s office. The officers carry M16s and handcuffs but say they have never had to use them against generator owners.

“We’re working under a lot of pressure”, says Nadine Hachouch, an employee of the Consumer Protection Unit at the Ministry of Economy, as she drives to inspect generators in the Beirut suburb of Furn El Shebbak with her colleague Nada Mahmoud.

The two women have been handed a list of 22 generator owners who operate in the area. Only two did not turn off their generators during the Tuesday strike. Mrs Mahmoud duly writes down the name of the protesters to be passed to the ministry.

However, a list of names and phone numbers is not always enough to track down the owners. The first generator owner on their list, who had not installed the required meters, was nowhere to be found and his employees said they did not know his whereabouts.

When he finally answered the phone, he said he was overseas and could not send a copy of his ID card, which is necessary for the inspectors to record the offence.

“Of course he’s not overseas”, muttered the State Security officer after a tense phone conversation. “He turned his generator off yesterday, he can’t be outside of Lebanon”.

The inspectors left after the owner promised he would bring his ID in person to the local municipality.

But the new system isn’t likely to change the generator business overnight. Once meters are installed, subscribers are free to decide if they want to move to the new system or remain on the same flat rate as before and some remain undecided.

“I’m going to wait and see what everybody else in my building does”, says Dalida Hanna, from Zouk Mosbeh, a town north of Beirut.

With the new meter system, she believes that her generator bill would be lower than the roughly $55 flat fee she currently pays every month. She says her metered state-electricity bills are less than many as her consumption is minimal during the day when she goes to work.

While she might pay less per month, the ministry’s new instructions require a one-time $115 deposit for households who subscribed less than two years ago in order to keep a monthly supply of 10 amperes, and $66 for a subscription of 5 amperes.

“We just have to keep paying and paying", she says.

While Mr Khoury is talking tough, Mr Chaaban says it’s unlikely the government will rein in or strictly regulate what local media regularly call the “generator mafias”.

“It’s not the first time the State tries to impose its will on generator owners”, Mr Chaaban says, adding that he thinks the latest initiative will fail again. “The generator owners are much more powerful than the government. At best, they will compromise by accepting the meters but increasing their prices”.