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EDL proposes gradual tariff increase to boost production

EDL says that Lebanon will “stop importing electricity from Syria except in cases of necessity.” (The Daily Star/Mahmoud Kheir)

BEIRUT: State-owned Electricite du Liban has proposed an increase in tariffs to boost power supply by two hours across Lebanon without increasing an annual deficit hovering around $2 billion, showed a study filed by the company to both the Energy and Finance ministries. According to a copy of the study obtained by The Daily Star, the tariffs for households and commercial institutions would see at least a two- to three-fold increase, depending on monthly power consumption.

For example, the price per kilowatt-hour would increase by around 185 percent from LL35 ($0.023) to LL100 ($0.066) for households that consume up to 100 kWh per month. For households that consume between 101 and 300 kWh per month, the cost would increase by some 85 percent from LL55 ($0.036) per kWh to LL100 ($0.066) per kWh.

Accounting for the proposed increase in the fixed monthly subscription fees from LL1,200 ($0.8) per 5 amps to LL3,000 ($2) per 5 amps, households that consume up to a 100 kWh and 300 kWh each month would see their electricity bills increase by almost 100 and 200 percent, respectively.

The study, however, proposes the abolition of monthly rehabilitation fees of LL5,000 ($3.3) per 45 amps or lower and LL10,000 ($6.67) per 45 amps and higher.

According to the EDL study, the projected additional revenues owing to the increase in tariffs would amount to $450 million but the actual forecast proceeds would only reach $350 million. The remaining $100 million would consist of uncollected revenues.

Electricity theft, technical losses and uncollected bills account for almost 15 percent of EDL’s deficit, according to experts ,while tariffs as low as LL35 per kWh compared to an average production cost of LL255 per kWh in line with international oil prices, accounts for the remaining 85 percent of the annual deficit of around $2 billion.

An industry source told The Daily Star that the average cost per kWh incurred by EDL reaches LL255 ($0.17), while it is charged at LL35 ($0.023) for households that consume less than 100 kWh each month.

The proposed increase in tariffs would lead to a two-hour increase in electricity supply across Lebanon, provided that the government channels the same amount of funds to EDL as in 2013, according to the study. According to EDL, the state-owned company was instructed by the Finance Ministry not to exceed an annual deficit of $1.8 billion.

Under the proposed increase in tariffs, areas outside the capital would receive up to 13 hours of electricity during seasons that see a peak in demand, such as winter and summer, while power supply could increase up to 14-15 hours on average during autumn and spring, the source said.

The above estimates, however, don’t take into consideration any potential power rationing due to technical failures at Lebanon’s aging power plants, the source added.

Power supply should reach an average of 10 to 11 hours outside the capital this July, according to the source, who said that EDL was supplying between 12 to 13 hours of electricity every day during June. Beirut, which is considered the administrative center, will continue to receive 21 hours of electricity each day.

The projected increase of two hours in power supply should cut the monthly 10 amp household subscription fee to private generators by LL31,638 ($21), the study said.

The study stressed that the revision of electricity tariffs should take place gradually in line with the production cost on the one hand and the reduction of the government’s contribution in the cost of purchasing oil on the other.

EDL argued that it isn’t possible to raise the tariffs to fully cover the deficit before ensuring 24 hours of daily electricity supply.

To become effective, the proposed hike in tariffs would require the approval of the Cabinet.

According to the EDL proposal, the Finance Ministry said in a memo that it doesn’t object to an increase in tariffs based on a decision by the EDL board.

“The Finance Ministry sees no reason to object to an increase in electricity tariffs in light of a decision to be taken by the board of directors of the institution [EDL] that represents the concerned party involved in securing its own resources and proposing it to both the Finance and Energy and Water ministries,” the EDL proposal read, citing a memo sent by the Finance Ministry to EDL on Dec. 7, 2013.

 
A version of this article appeared in the print edition of The Daily Star on July 17, 2014, on page 5.

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Summary

State-owned Electricite du Liban has proposed an increase in tariffs to boost power supply by two hours across Lebanon without increasing an annual deficit hovering around $2 billion, showed a study filed by the company to both the Energy and Finance ministries.

The proposed increase in tariffs would lead to a two-hour increase in electricity supply across Lebanon, provided that the government channels the same amount of funds to EDL as in 2013, according to the study. According to EDL, the state-owned company was instructed by the Finance Ministry not to exceed an annual deficit of $1.8 billion.

EDL argued that it isn't possible to raise the tariffs to fully cover the deficit before ensuring 24 hours of daily electricity supply.

According to the EDL proposal, the Finance Ministry said in a memo that it doesn't object to an increase in tariffs based on a decision by the EDL board.


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