Transparency in the Private Sector

Accountability in the Private Power Market

Residents of Lebanon are dependent on private power generators to meet their daily energy needs, and in the continued absence of government oversight or regulation of the market, as well as the absence of affordable alternative power sources, residents are often unable to hold corrupt private generator owners accountable.

LTA has selected the municipality of Bramieh for a pilot project designed in cooperation with Lebanese citizens from a variety of professional fields, which will raise public awareness of existing pricing guidelines that the Ministry of Energy and Water releases every month and aim to form a joint committee to address complaints and disputes that includes representatives from the municipality, the community, and the private generator owners.

Background on the problem:
In 2011, the Lebanese Ministry of Interior released a statement that Lebanese paid an estimated $1700 million for private generator services, despite the fact that Lebanese law gives the national power company Electricité du Liban the sole right of power production. Around 85% of the Lebanese population depends on the private power market to meet their daily energy needs due to frequent electricity outages. Since private generator owners are operating in a legal grey area that makes regulation difficult, they are able to charge citizens arbitrary and exploitative prices for subscription to their services. With no affordable alternatives, many of the private generator operators exercise monopoly over the local market and may even work in collusion with the local municipal authority to protect this monopoly.

The Lebanese government's efforts to regulate the market have had limited success. In 2011, the Parliament established a joint mechanism for regulating the pricing of private generator services between the Ministries of Interior, Energy and Water, and Economy, whereby the Ministry of Energy and Water issues tariff guidelines at the end of every month which all three ministries are responsible for enforcing. The tariff guidelines indicate a fair price for each hour of generator use depending on the level of subscription (5 or 10 amperes) based on the price of diesel fuel and the associated costs for generator operation, as well as a profit margin for their owners. Most recently, in January 2015, the Ministry of Economy also called publicly for consumers to report any violations of the pricing policy through the Consumer Protection hotline or mobile application.

Despite the existence of these regulatory mechanisms, however, municipalities continue to differ in their implementation of these standards or do not enforce them at all, and citizens are largely unaware of the ministries' pricing policy or are too afraid of being cut off from their generator subscription to report infractions. However, at the time of writing, the Consumer Protection Directorate is accepting all complaints about unfair pricing as long as a consumer can present an invoice from the generator owner. If the pricing does not follow the Ministry's guidelines, the generator owner will be issued a fine, according to the Consumer Protection Directorate staff.

This is not a new problem for Lebanon; it began at the end of the civil war in 1990 and has been exacerbated by the absence of an effective official policy for the power sector and the protection that these private operators enjoy from influential benefactors.

As a result, the average Lebanese citizen pays two electricity bills each month in order to receive an adequate supply of power, and while the national power company Electricité du Liban is over $4 billion in debt and fails to collect as many as 55 percent of bills, paradoxically the private generator owners and their benefactors rake in the profits and collect an estimated $1 billion annually, or an average of $1,902.59 per minute (according to 2011 estimates).

Sources:
http://ftp.moim.gov.lb/UI/news/news679.html
http://www.dailystar.com.lb/Business/Lebanon/2011/Sep-12/148493-policy-powers-gray-market-in-generators.ashx#axzz32vzFAjG3
http://gulfnews.com/news/region/lebanon/the-big-electricity-scam-in-lebanon-1.1372491


Background on the project:
The idea for the project was initially proposed by a team of Lebanese citizens participating in an event to mobilize professionals to develop creative ideas for solving common problems of corruption in Lebanon. The event, "Solutions for Corruption in Lebanon," was organized by the Lebanese Advocacy and Legal Advice Center (LALAC) in May 2014, and was part of a regional "No Impunity" initiative by Transparency International.

LALAC challenged six teams of professionals from a variety of fields (communications, law, information technology, media, design, activism, economics, sociology, political science, etc.) to define legal, political and/or social actions to solve common cases of corruption in Lebanon through collective action.

A judging panel of prominent representatives from the public sector, civil society and media selected the winning team, which proposed a solution for corruption in the private power market. In collaboration with the Lebanese Transparency Association, the winning team applied and was granted funding to implement their idea from Transparency International.

The winning team was composed of: Mr. Ahmad Dirani, Ms. Zena Sbeiti, Ms. Hanan Younis, Mr. Rony El Assaad and Mr. Makram Ouaiss.