In the basement of a building in Beirut, in the Geitawi area, a middle-class neighborhood of the Lebanese capital, customers enter and leave Michel’s office with a worried air, immersed in the gloom. In February, the bill that the operator of private generators presented to the seven hundred families and businesses in the area, to which it supplies twelve hours of electricity a day, increased by 25 percent, reaching 7,782 Lebanese pounds (about forty cents per day). ‘euro) per kilowatt hour.
“Please, I can’t pay. I have to buy food, ”an elderly woman tells him, kissing him on her cheek. The resigned entrepreneur cannot imagine “pulling the plug” from the inhabitants of the neighborhood where he grew up. “More and more people cannot pay,” he says, “and I don’t get back into the costs. I was earning well before the crisis, but today I’m in trouble ”.
Dear, noisy and polluting, the eight thousand private generators covering the cedar country buildings with their spaghetti-like cables have taken over the national electricity company, the Electricité du Liban (EDL). The heavily subsidized electricity sector collapsed with the financial crisis, after decades of mismanagement and corruption costing the state – between 1993 and 2020 – $ 43 billion (€ 37.8 billion), or 46 percent of public debt.
Since the spring of 2021, the Bank of Lebanon can no longer finance the fuel imports that feed the country’s two power plants. A diesel donation from Iraq still allows the EDL to provide two hours of electricity a day, or about five hundred megawatts (Mw) compared to the previous 1,500, but the needs are estimated at around three thousand Mw. The Lebanese, accustomed to low EDL tariffs, unchanged since 1994, and irregular payment collection, have seen their electricity bills rise exponentially. Since the fuel subsidies were withdrawn in the fall of 2021, the tariffs of the generators have aligned with the price of diesel, which in mid-February reached eight hundred dollars a ton.
Organized competition
The savings of the Lebanese, consumed by the collapse of the national currency, which lost 90 percent of its value against the dollar, are dwindling. Afford a five-amp package – needed to turn on light bulbs, fridge and TV – at 1.5 million Lebanese pounds a month, or almost double the minimum wage, has become a luxury in a country where 84 percent of the population lives below the poverty line.
High tariffs, unannounced cuts, threats to deactivate the service: the Lebanese continue to rage against the “generator mafia”, the 3,500 operators who control this illegal activity but tolerated by the state. This informal sector has benefited from the collapse of the EDL and the inertia of political leaders. In 2018, according to the World Bank, it met 40 percent of electricity demand and had more than a million customers. “The competition within them is organized. They can cut the electricity whenever they want, ”he explains Marc Ayoubenergy expert at the American University of Beirut.
“Some operators agree to raise the price and force people to pay,” confirms an operator in the Achrafieh neighborhood, who prefers to remain anonymous. “In some villages the operator pays the mayor to act undisturbed. It cuts electricity to those who contest tariffs and prevents other operators from installing themselves ”. This sector is an untaxed boon that provides more than forty thousand people to live on. According to the World Bank, in 2018, renting a five hundred kilovoltampere (kVA) generator generated an average of $ 4,200 in profit per month – at the time four times the average income of a family – while a large operator (of five thousand kVA) he could earn between $ 160,000 and $ 211,000 a month.
Call to order
The state, under consumer pressure, tried to regulate trade. In 2011 the ministry of energy had imposed a tariff system. In 2018, the installation of meters became mandatory. This directive was little followed in Beirut, where power outages lasted just three hours a day before the crisis, compared to twelve in the rest of the country. After a call to order, at the end of 2021, the ministry of economy estimated that 75 per cent of customers in Lebanon have meters.
Some customers do not want them, knowing that their consumption exceeds the fixed fee. The operators refuse to install them at their own expense (around nine euros each). Some don’t just install them. “Many people use little electricity, it is cheaper to bill for it at a fixed price. Having many small consumers equipped with meters is not a good deal for us: the generator keeps running, whether people consume or not, “explains the Achrafieh operator, who claims to make” a thousand dollars in profit per month, compared to five thousand of before “. It has 350 customers, almost all with a fixed subscription.
“In Lebanon, you cannot ask a corrupt state to account, so we are the ones who are accused. But the tariff system imposed by the state does not allow us to recover the expenses ”, replies another operator in Beirut, who asks to remain anonymous. To limit his losses, he left a hundred customers who were no longer paying, out of two thousand families with meters. The bill for diesel and spare parts, in dollars, has soared. Money remittances, in Lebanese pounds, suffer from the fluctuation of exchange rates. “They no longer have the same profit margins as before, but they still make money. It depends on how they deal with customers. Some have started billing in dollars, ”says Marc Ayoub instead.
The shortage of diesel fuel raises the bills. The operators are dependent on thirteen private importers who control, under license from the state, 70 percent of imports of petroleum products into the country. They form a cartel that shares the market. They are the ones who benefit most of all from the generator market, according to the World Bank, which in a report stresses the “contiguity between the shareholders of these companies and the country’s political establishment”. Druze leader Walid Jumblatt and his son Taymur, for example, hold 40 percent of the shares in the Cogico company, while brothers Teddy and Raymond Rahmé, known for their closeness to the head of parliament Nabih Berri and the Christian leader Sleiman Frangié, I am the head of the company ZR Energy.
Importers of petroleum products made significant profits at the time the fuels were subsidized. Some are accused of fueling, with their distributors, the black market and smuggling to Syria, where diesel is sold at a higher price.
In the hands of the parties
“During the shortages of summer 2021, if you really needed diesel fuel, our supplier suggested we look for it on the black market, at a much higher price. That diesel is almost entirely destined for the Syrian market. It still happens today, ”explains an operator from Sin el Fil, in Beirut. Many still obtain almost all of their supplies on this market. “I bought diesel on the black market in Baalbek (near the Syrian border), I even installed a tanker. It is forbidden, we take risks ”, says Abed Hamid, a small operator in the Tarik Jdidé neighborhood, who says he pays 10 percent more than the official market.
In the past, the area had benefited from the generosity of political parties that use diesel fuel for patronage purposes. Saad Hariri’s Movement for the Future party, which dictated the law in this Sunni-majority neighborhood, in September 2021 had given him “some vouchers to buy between three and four tons on the official market”. We only had one and a half and we had to pay for transportation, says Hamid, which would need eight tons a month. “Then there was the Iranian diesel: the Amana company, controlled by Hezbollah, came to visit us and gave us six tons for a month. A political gesture ”, he continues. In defiance of the state, the Shiite Islamist party announced in August the import of Iranian diesel, which was sent via Syria.
Anticipating the new increases in the price of diesel, operators say they will have to further ration the hours of operation of the generators, especially in the summer. “To reduce electricity bills, the EDL must provide at least fifteen hours a day and the state must stop billing us for diesel in dollars,” says Abdo Saadé, representative of the generator suppliers union. “We cannot continue to depend on these very polluting sources”, replies Marc Ayoub, who calls for a reform of the electricity sector and a transition to renewable energies. Dusted off by every government, under pressure from international donors, this reform has never been put into practice.
“The solutions have always been clear and simple, both technically and operationally, but they get complicated as soon as the policy intervenes. I don’t know if the politicians have become aware of the fact that this cannot go on, ”says Energy Minister Walid Fayyad. The reform plan he presented in February aims for 24-hour electric coverage by the EDL within five years. The import of Egyptian gas and electricity from Jordan via Syria also depends on its implementation, thanks to a loan from the World Bank, which could quickly provide six to eight additional hours.
“All this alms to guarantee, at most, ten hours a day. Who will take care of the rest? We generator suppliers ”, says Abdo Saadé, certain that the sector still has a bright future ahead of it. “We are the institution and they are the alternative. Not the other way around, as they claim “.
(Translation by Federico Ferrone)