Lebanon considers increasing electricity fares to curb deficit

24 July 2008

BEIRUT: The Lebanese government appears to be giving serious thought to revising the electricity tariff structure in a bid to alleviate the mounting deficit of Electricite du Liban (EDL).

This was the impression given during a news conference by Energy and Water Minister Alan Tabourian and Finance Minister Mohammad Shatah Wednesday.

The ministers, who had a long meeting to discuss a new mechanism for the purchase of fuel oil for the power plants, said that any revision in the structure of electricity tariffs would not affect limited-income families.

Although no details emerged on the new electricity fares, independent sources believe EDL will probably raise the price of kilowatts of electricity which is considered by many as very low.

No government dared raise the issue of reducing the heavy state subsidies on the prices of kilowatts consumed by the subscribers although most officials were aware of the problem.

"The limited income families are not benefiting at all from the heavy subsidy on electricity consumption. The only ones who are reaping benefits are those who consume above the average levels," Tabourian said.

He estimated that the limited-income families represent 70 percent of Lebanon's population and this means that those with higher income will be affected by any future revision in the electricity fares.

"The prices of fuel oil have risen eight times but the government did not alter the prices of electricity despite the financial difficulties facing EDL," the minister said.

For his part, Shatah stressed that EDL's deficit used to cost each Lebanese family about $100 a month. But since the rise in the prices of fuel oil in the international market the cost has risen to $200 a month and this is unacceptable.

The Finance Ministry said earlier that EDL's deficit in the first five months of this year reached $666 million and officials fear that the losses would exceed $1.5 billion by the end of 2008.

Both Tabourian and Shatah emphasized that the ministerial statement will talk about finding new alternative energy to reduce the country's dependence on fuel oil.

"We want to encourage the citizens to use solar panels to save the cost of energy," Tabourian said.

However, the minister said that the government would continue for the time being to subsidize the cost of electricity "because we don't have any choice right now."

Responding to a question, Shatah denied reports that Qatar had offered to supply Lebanon with free fuel oil.

"It is not the habit of oil producing countries to offer free fuel oil to other countries. The Lebanese government will probably seek more financial assistance from some of the countries to make up for the high cost of energy," Shatah said.

The ministers also discussed during the meeting the possibility of building more power stations to meet the growing demand, especially during the summer seasons.

Experts say that Lebanon needs more than $2 billion of investments in the next five years to build more power stations. - The Daily Star