Archive for November 1st, 2009

Venezuela’s Electricity and Water supply: Not a pretty picture

November 1, 2009


I have been trying to write about the country’s electricity and water problems for a while, but have not done it because the whole things has so many edges that to describe all of the problems would take a post so long that you would all be bored to death. But in some sense, the problems that have surfaced now, have been around for years and the fact that they have exploded now is simply coincidental. I have not been able to pin down exactly why everything happened all at once. Chavez blames the water problems for El Niño, but while there is evidence that the phenomenon has started, it can not be blamed for what is happening.

Problems with Venezuela’s water and electricity’s supplies are not new. When Chavez came to power, the Caldera Government was thinking of privatizing some of the regional electric power companies for the simple reason that the investments required with oil at around US$ 12 per barrel were beyond the capability of the country’s Government.

Chavez clearly disagreed with this even as he was not using the word socialism at the time. And he stopped the nationalizations, while simultaneously freezing rates for water and electric services. This immediately limited the ability of the water and electricity companies to fund new projects and do maintenance. No new major electric power plants have been built in the 11 years of the Chavez era. Instead smaller plants were built, most of which contribute little to the country’s power grid, because they were built without taking into consideration the ability to connect and transmit the power.

Pictures of Planta Centro, a 2,000 MW plant that s now rated at 430 MW and currently producing only 130 MW have been circulating for a couple of years, but is only now that people are paying attention.

And then there is the incredible story of Venezuela buying power plants from Cuba. These are small plants of up to 40 MW, great for Cuba which does not have the modern interconnected power grid, but not as useful  in Venezuela. Cuba does not make these plants, they buy them from Sweden or Spain and reexport them to Venezuela at an outrageous price of about $1,400 per KW, compared to $500 for a large power plant, unless Venezuela is buying that from Spain. Oh, I forgot, the 300 small power plants purchased from Cuba are currently not operating because of problems with the filters with Venezuela’s diesel.

In the middle, when oil prices were high, Chavez rather than invest money in new power plants went out and nationalized all private power generation companies, spending over US$ 2 billion in buying fully functional electric companies, rather than patching up Planta Centro or Guri.

And according to Caracas Gringo, Guri, Venezuela’s largest hydroelectric power plant is a mess, with seven of its twenty turbines out of service. There are also landslides all around the dam, and the engineers are feeling the heat to bring the turbines on line before they are ready.

One of the problems is that Chavez has named, time after time, retired or active military to lead these electric power companies, all of which had no prior experience in the electricity genration or transmission business. To top it all off, Chavez now creates an additional bureaucracy, creating the Ministry for Electric Power on top of Corpoelec (which Chavez created in 2007), the company which was supposed to consolidate all of the country’s electric power, transmission and generation. However, no cost efficiencies ahve been achieved as each of the regional companies still runs independently, with its own Board and independent structure, including bodyguards and perks for the Executives. And the firts Minister for Electric Power has no experience in the area, as he is a former oil worker who is totally loyal to Chavez and his revolution.

The situation is no different in water, where rates have been frozen in another one of Chavez’ perverse subsidies to the rich (The poor mostly do not pay for their water, if they have it).Which is the reason why Venezuelans use more water than they should, besides the fact that there is a very leaky distribution system due to the lack of investment. (There is an article on the water system in El Nacional’s Siete Dias section today, by subscription).

Take Caracas as an example. It is fed by three dams, all below Caracas’s altitude, which thus requires electricity to pump up the water. These three systems were built in 1962, 1968 and 1998, in the terror days of the incompetent IVth Republic, but this Government was too busy spending on studying Giordani’s folly, the Orinoco-Apure axis, to do anything in the last eleven years. Remarkably, 2008 was the year with the lowest rate of investment, a year with the biggest oil windfall in the country’s history.

Unfortunately, this is a problem that affects us all and has no easy solution in time. What Venezuelans face in the next few years is more blackouts and water shortages. We now have water rationing such that the water will last until May, when rains are supposed to begin again. But the calculation is precise: There will be no water if rains come in June or July, which is always a possibility.

Curiously, this is the second time in Chavez Government that water levels have been low. It happened in 2002 and then rains came and the Government forgot the problems.

Many companies now have emergency power plants just in case. Even condo buildings have begun buying them, it is a big business to import and install them. Funny thing is that two years ago, as part of the nationalization of the electric industry, Chavez also nationalized those companies that were offering industrial concerns their own power independence. The same thing that Chavez now is asking even shopping centers to have.  But he probably forgot what he did already.

When I was a kid, water problems were the rule of the day. Electricity was not, because I lived in Caracas and the private Electricidad de Caracas always provided us with power. The water problems went away as the IVth. Republic spent and built what was required.

But now, Electricidad de Caracas has been nationalized and water problems are back. Unfortunately this means that the upcoming years will be bad as our standard of living declines as water and electricity rationing becomes the rule of the day.

It’s called underdevelopment and is all part of the Devils’ Excrement.