30 August 2011

BEIRUT: Political wrangling and discord among Lebanon’s Cabinet members has again delayed efforts to rehabilitate the country’s electricity infrastructure in order to tackle a crippling decades-long electricity crisis.

All Lebanese politicians acknowledge that Lebanon has a serious energy problem. They also agree that a solution must be hammered out to end 20 years of suffering caused by the crisis. But most of them differ on the methods to reach a solution.

Energy and Water Minister Gibran Bassil, who submitted an ambitious plan to boost electricity production by 700 MW at a cost of $1.2 billion, is still facing an uphill struggle to persuade half of the 30-member Cabinet to put their seal of approval on his program.

Bassil argues that this plan has received the approval of the former Cabinet of then Prime Minister Saad Hariri, warning that any delay in implementing the bold project will cost the treasury $15 million in losses every day.

The plan calls for the construction of gas-run power plants over the next three years and to upgrade and modernize some of the aging electricity stations.

However, Mikati and critics are not keen to hand over $1.2 billion to one minister, and prefer instead to authorize the entire Cabinet to handle this sensitive file, to ensure that the selection process determining which companies will construct the power plants is done in transparent manner.

Critics also point out that Bassil failed to answer many questions about his plan, such as the alternative for natural gas in case the commodity is not available in the coming three years.

Some March 8 MPs fear that there is no guarantee that the cash allocated for the electricity project will not be mishandled by the minister and some even went as far as accusing the minister of planning a broad daylight robbery.

MP Mohammad Qabbani reiterated his demand for the quick formation of a regulatory body which will personally negotiate and award the contracts for the construction of electricity plants.

Qabbani told The Daily Star that article 462 of the Energy Law stipulates clearly that a regulatory authority must be formed to handle all issues related to the electricity sector.

“Why should Bassil or any other minister be given the full power to negotiate and award contracts for companies? This has never happened before and it should not happen in the future,” the MP said.

He added that the regulatory authority can be formed in two days if those tasked with forming such a council are sincere about doing so.

“Bassil is breaching the law. The law demands that any minister must fully abide by rules and procedures. The former Cabinet approved the plan but it did not authorize Bassil or any other minster to take full charge of the money,” the MP said.

Bassil Cesar Abu Khalil, adviser to Bassil, brushed off the criticism of the minister’s plan, reminding critics that the proposal was approved by the former Cabinet headed by Hariri.

“There is an item in the Lebanese Constitution which gives the minister certain powers and we have no intention to abandon these prerogatives. If some ministers in the past agreed to abandon their rights, we have no intention to do so,” Abu Khalil explained.

He also said that the process of awarding contracts will be directly supervised by the Accounting Department and the tender will be handled by the Tender Department.

Abu Khalil rejected the proposal by former Prime Minister Fouad Siniora to seek soft loans from Arab countries to finance the project.

“This is a complete waste of time because this method will take 18 months to secure the funds and in the meantime the losses of the electricity sector will exceed $3 billion,” he said.

Abu Khalil said that Siniora’s proposal has no proper mechanism and can’t ensure that the Accounting Department will monitor the process of financing from the Arab funds.

But Abu Khalil did not rule out some sort of a compromise on the issue of electricity in the near future.

“This plan will either go through Bassil or the Cabinet. The most important thing is to set this bill in motion,” he said.

Finance Minister Mohammed Safadi also had some reservations about Bassil’s plan, expressing fear that the high cost would have a negative impact on the budget deficit.

Safadi, who met Bassil to sort out the electricity crisis, has projected that the electricity deficit will far exceed the $1.8 billion threshold in 2011.

Public transfers to Electricite du Liban absorb an excessive amount of the government budget, amounting to $1.5 billion in 2009, 4.3 percent of GDP, or 20.4 percent of total expenditures, and are expected to reach $2 billion at the end of this year.

These expenses are a huge drain on government finances, crowding out more adequate services in other areas – such as education, infrastructure and health care – and put the macroeconomic stability at risk due to the high debt accumulated by the sector.

Experts have pushed the government to seek cheaper sources of energy to cut the deficit, arguing that Lebanon cannot afford to be at the mercy of the volatile oil markets.

Others doubt the ability of EDL, which is plagued with enormous problems, to handle a huge task such as modernizing the existing power plants or restructuring the energy sector.

Copyright The Daily Star 2011.