Lebanon is a country ridden with cultural diversity and religious miscellany. It gives verve and vigor to its people’s everyday life and allows them to grow up surrounded by different cultures and therefore able to gain an open-mindedness that is hard to find in other Arab countries. Even though there are good points that come out of this cultural and religious diversity, it also acts to divide its people politically and adds a certain complexity to the Lebanese government. This complexity is propagated to many parts of Lebanon’s industries, causing unavoidable problems that would usually be easier to solve. One such sector that is negatively affected by the divided government is the electricity sector, Electricity de Liban (EDL). Reliable
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The reason for this is the inability of EDL to meet demand effectively due to insufficient generation capacity, high levels of lost electricity (i.e., electricity that never reaches the consumer) and poor load management. Since the demand met by EDL is constrained by its generation, distribution capacity and transmission, it does not represent the full demand for electricity in Lebanon. However, there are no statistics available for the self-generated and un-served demand in Lebanon, as they are not recorded systematically. Therefore, the only statistics available for the demand of electricity only cover that met by EDL. In a background report to the Hydrocarbon Strategy Study, prepared by the World Bank in 2004, Chubu Electric analyzed the demand for electricity in Lebanon and estimated that around 33% of total electricity demand was met by private generation. A more recent household study brings the number up to 38%. The private sector is already active in Lebanon in the management and operations of several aspects of the power sector, from operation and maintenance (O&M) contracts to major power plants to concessions in the distribution of electricity, to billing and …show more content…
If these subsidies were at least reliable and followed a sound strategy justifying them, such as targeted assistance to the poor, then some subsidization may be warranted. The subsidies in Lebanon, however, are required to cover insufficient revenue due to a tariff set far bellow cost recovery, an inefficient cost structure, as well as billings and collections. The current tariff structure is based upon an oil price of US$25 per barrel and has not been adjusted since 1996 (when the oil price was US$21/barrel) to take into account the hugely increasing prices of international oil in recent years. This is partially due to the continued un-reliability of the electricity service, which would result in any increase in tariffs being met with protests by the consumers and a decrease in billings and collections. Adjusting the tariffs directly before consumer confidence and reliability has been restored will result in the deterioration of collection of billings and therefore an increase in the fiscal burden. This lack of tariff adjustments has become a large problem that is closely linked to being able to address the fiscal drain on the sector. Moreover, very high production costs have been a result of the continued use of the diesel fuel in the two major power plants which were designed to use natural gas, high O&M cost of all power plants due to lack
The reason for this is the inability of EDL to meet demand effectively due to insufficient generation capacity, high levels of lost electricity (i.e., electricity that never reaches the consumer) and poor load management. Since the demand met by EDL is constrained by its generation, distribution capacity and transmission, it does not represent the full demand for electricity in Lebanon. However, there are no statistics available for the self-generated and un-served demand in Lebanon, as they are not recorded systematically. Therefore, the only statistics available for the demand of electricity only cover that met by EDL. In a background report to the Hydrocarbon Strategy Study, prepared by the World Bank in 2004, Chubu Electric analyzed the demand for electricity in Lebanon and estimated that around 33% of total electricity demand was met by private generation. A more recent household study brings the number up to 38%. The private sector is already active in Lebanon in the management and operations of several aspects of the power sector, from operation and maintenance (O&M) contracts to major power plants to concessions in the distribution of electricity, to billing and …show more content…
If these subsidies were at least reliable and followed a sound strategy justifying them, such as targeted assistance to the poor, then some subsidization may be warranted. The subsidies in Lebanon, however, are required to cover insufficient revenue due to a tariff set far bellow cost recovery, an inefficient cost structure, as well as billings and collections. The current tariff structure is based upon an oil price of US$25 per barrel and has not been adjusted since 1996 (when the oil price was US$21/barrel) to take into account the hugely increasing prices of international oil in recent years. This is partially due to the continued un-reliability of the electricity service, which would result in any increase in tariffs being met with protests by the consumers and a decrease in billings and collections. Adjusting the tariffs directly before consumer confidence and reliability has been restored will result in the deterioration of collection of billings and therefore an increase in the fiscal burden. This lack of tariff adjustments has become a large problem that is closely linked to being able to address the fiscal drain on the sector. Moreover, very high production costs have been a result of the continued use of the diesel fuel in the two major power plants which were designed to use natural gas, high O&M cost of all power plants due to lack