Thursday, February 11, 2010

The electricity mess of Chavez for dummies

Finally the Chavez administration has decided to act more decisively on the issue of the Guri damn running dry and shutting down most of the electric generation of Venezuela. Thus a punitive decree was issued where people who are unable to save a certain amount of electricity at home will be punished with amounts as high as twice their electricity bill. That is right, Chavez and his government screwed up big time but it is the consumer that will be punished as Chavez is unable to accept his part of responsibility in the crisis. True, were he to accept, it would bring additional political trouble, but the way he is proceeding could well bring an outright uprising which is what, after all is said and done, it seems he is seeking.

But I digress. The objective of this post is to go on the electric crisis history point by point for the reader to clear up the B.S., floating around (from the chavista propaganda to the anti Chavez one only too willing to exaggerate chavismo woes, something admittedly difficult to do).


  • In 1999 when Chavez assumes power, electricity production is sufficient for the country. Plans exist taking into account the expected population and production growth.
  • In 1999 Caracas Electricity is private and is considered as one of the best managed companies of Venezuela. If its rates are the highest of the country it also has the very best service. Blackouts are a very rare occurrence in Caracas Metro area.
  • Part of the regional utilities and the electric distribution system is private or privately managed. Usually those areas also report a better service.
  • The electrical generation system is based on a series of major dams on the Caroni river with the Guri one the center piece and main reservoir. Several damns upstream or downstream of Guri could more than double Guri generation. Production is cheap enough that the metallurgy industry is located near to Guri, and some electricity is sold to Colombia and planned for sale to Brazil.
  • The major problem of electrical utilities in Venezuela is the large amount of electricity stolen without the state being willing to intervene to put order while it tries to limit as much as possible rate hikes (see picture above, typical scene in many Venezuelan streets). In addition government dependencies are the main deadbeats.  This problem exists today, probably worse than what it did as Chavez populism stops him to crack down on juice robbers while red ministries do not get red faced at avoiding paying their utility bills to state companies.
  • In 2000 Caracas Electricity, a Venezuelan company, is sold with government blessing, and probably encouragement, to financial U.S. giant EA&S. But inflation control policies make EA&S limit their investment as they cannot see return. It is reported that EA&S in fact sold a lot of the real estate of Caracas Electricity to recoup its original investment, weakening considerably its operative capacity.
  • Starting in 2002, political necessities changed the priorities of the Chavez administration.  As such, short term social programs and foreign adventures to create a subsidized group of "friends" and client countries take the precedence over long term national plans.
  • As a consequence, of all the long term plans that Chavez inherited, only Caruachi is partially completed while Tocoma is running several years behind schedule.  The upper Caroni dams are scrapped altogether.  It is important to note that Caruachi, Macagua and Tocoma are downstream of Guri and as such could work in full until Guri stops working, and could probably work significantly even if Guri stops working.  Hence the criminal responsibility in not having neither Tocoma or Caruachi complete today as it was originally planned.  After 11 years in office, Chavez has no excuse on this error...  Other dams elsewhere are not completed though they were supposed to be operational by now.
  • As early as 2003 EDELCA and others reported that the electricity generation plans were running late and that the country could face an electrical shortage soon.  The El Niño phenomenon during these years drove the point home, the alert was given.  As such the government decided to embark in a massive construction of thermal plant to soften any energy crisis that could come from a particularly dry spell.  It is to be noted that El Niño that year was not accused of all ills as it is accused this year.
  • But after the Recall Election of 2004 Chavez "revolution"  turned more radical and more interested in foreign ventures.  As such these plans were never carried out fully.  To date, not even 20% of what was supposed to be built  has been done so, or is not finished, or is delayed, or.....
  • After his reelection of 2006 Chavez became even more radical and nationalized all electrical utility companies, from EA&S to local distribution ones.  The only effect we could observe has been a further slowing down of service and construction while the payroll increased considerably.  It has been reported that some of the best managers left by the old system have left the country, made uncomfortable by the new political orientation at work, corruption and what not.  Thus the experienced staff was gutted, just as it happened to PDVSA in 2003, allowing other countries and their business to benefit of Venezuelan know-how. 
  • As soon as 2006 problems started been reported and since 2007 the country has been experiencing major blackouts, covering at times more than half of the country for several hours.  Minor blackouts are routine since 2007 in many Western areas.  This is a consequence of a poor to non existent maintenance of the Venezuelan grid, without any relation to El Niño or any other excuse.  The Venezuela grid is now old and outdated, still pretty much the same as it was in 1995.
  • The situation of the thermo-generating plants is critical on many levels (plants running on gas, oil, coal or other fuel).  Equipment in many is simply broken down making such plants work as low as 20% of their potential.  New plants are not finished and delayed.  New plants have trouble finding fuel since the gas projects supposed to generate the needed burning gas did not materialize.  And yet production was expected to become so important that Chavez wanted to build a trans-South America gasoduct!  In addition production of an alternate form of fuel for these plants, relatively cheap Orimulsion, was stopped under Chavez, him also bearing the full guilt for this catastrophic miscalculation decided out of spite.  As a consequence many of today thermo generating plants run on expensive gas oil which could be exported, generating the dollars needed to revamp the electric system of Venezuela.
In short we are faced with a problem that has no short term solution, and probably not even a medium term solution considering the incompetence and corruption existing in Chavez administration. The only thing offered is punishment for heavy consumers (defined by the state as it pleases); a decrease in industrial production which will keep the country in recession; to dot small communities with small generators bought in a hurry and fed with gas oil at ruinous transporting charges; hiring expensive foreign experts that really cannot do much at this point while ignoring in Venezuela the people qualified enough but who refuse to wear the red jersey and chant Uh! Ah!; and prayers to God, really!

Chavez and his guru Giordani and the corrupt PDVSA administration under Ramirez are the three real guilty parties of this catastrophe long announced and all but totally ignored.  And yet the two ministers are still in office, are asked to solve a problem that they do not seem to fully comprehend while Chavez tries to convince us that El Niño is the sole guilty party.  No one dares to calculate how much corruption will increase as Chavez has decreed that the "electricity ministry" is exempted from comparing prices, enabled to buy at will.  Such is the magnitude of the crisis, and of the greed of chavismo underlings.

25 comments:

  1. Tragedy of the Common Wire?

    ReplyDelete
  2. You call it punishment, but it least it has, in a twisted way, a market component to it. Use less, pay less per KW. Use more, pay more. We actually have that in place in my municipality.

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  3. Somebody should talk about what Chavez's blind decisions are doing to the country in terms of inciting violence and crime. I'm visiting Venezuela this week, and the crime levels are FRIGHTENING. I wrote a little bit about what I have heard from friends, cousins and news since I got here on Sunday:
    http://inanutshelll.wordpress.com/2010/02/10/crime-is-out-of-control/

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  4. jsb

    what you have in your municipality is a system fit for a place which has an equilibrium. that is, YOU ARE GUILTY because you want to increase consumption. thus it is fair that you pay more.

    in venezuela the government policies are the ones that caused the disaster because through a decade of low prices and tolerance to electricity robbery it has promoted unrestrained consumption at all levels of society. cracking down suddenly on consumption is thus undeserved punishment because if i have three plasma large screen TV, 6 A/C running night and day, a jacuzzi, etc, etc... it is because i could afford it courtesy of a dollar at 2.15 when it should have been at 5, and an electricity bill that i did not even bothered to read, sending the maid with petty cash to stand in line and pay for it.

    what the government needs first is tackle its own administrative mess, create a flat rate for a certain amount of KW consumption and force everyone to pay for it. then, for those who consume above that flat rate charge the real price of electricity, with a further surcharge if needed above a further higher level, with incentives for savings and switching to more energy efficient apparatus.

    but no, what it does is allow those who steal electricity, mostly in lower class sections that supposedly vote for chavez while punishing the rich who do not vote for him. after the political tascon list apartheid now we have the electrical apartheid where the rich that support chavez will not suffer snce they will pay their new bills with money they stole from the state to begin with.

    i think i better stop now

    :)

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  5. Boludo Tejano11:50 AM

    Good summary, Daniel. The whole electricity quilombo shows the absurdity of a caudillo who wants complete control but refuses to assume responsibility for that control. “Yo no fui.” Then who was it? It wasn't President Sulfur who made the decisions to not invest in adequate funding for maintenance and expansion of the electrical system.

    For those who would like some more information on the historical data for Caroni River flow from the Guri station, to show that El Nino and its effect on water flow is not something that suddenly appeared to ruin Thugo's plans to create Heaven on Earth, I refer you to my comment at Devil's Excrement.

    In looking at Figure 3. Historical flows of Caroní river at Guri Gauging Station, we see that from 1950-2003, there are 10 years that have flow significantly less than the 4.374 cubic meters per second for January-November 2009, which I arbitrarily define as around 4.000 cubic meters per second or below, with four years around 4.400, comparable with the 4.374 January-November 2009 average.

    There are links to Professor Guevara's paper The Influence of El Niño Phenomenon on the Climate of Venezuela in the comment.

    Has jsb seen the photos of Planta Centro?

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  6. Just to explain a little bit more to JSB:

    The decree punishes anyone with an average of 500KWh. Let me tell you, that is my typical electricity bill!! And we're just 3 people living in an apartment.

    We joke about it all the time, we live in darkness at home. That means, no lights at all at night except in the room we're in.

    We don't have AC (thanks to Caracas mild temps). But we do have ceiling fans for the hot season! Not many appliances, but the really needed ones, and my stove uses gas.

    I cannot see a way to 'save' more energy! I pitty the people with a larger family and home, it's an impossible task to be in the 500KWh range for them.

    Candles, wood? back to the caverns??? That's the only alternative ....

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  7. I don't really see market-driven principals at work here. If you use to much your electricity will be cut off for 24-48 hours.

    And for the crime, Chavez obviously doesn't see this as a problem. It's the poor taking back from the rich. It's also an unwritten rule of order. It's clear where the power is. The barrios are well-armed.

    Dan

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  8. Anonymous1:31 PM

    Daniel:

    Dont forget to mention Mommer and the Orimulsion. Here he tries to justify ditching this Venezuelan invention:

    http://www.pdv.com/interface.sp/database/fichero/article/525/2.PDF

    ReplyDelete
  9. Liz

    You know what is funny? Is that supposedly they "advise" people to switch to gas heaters and stoves. That is, I would have to ditch my electric stove and my electric water heater. Who will help me pay for that? But most importantly, gas is also scarce and if I were willing to make the change I would still be on occasion without gas for hot water, keeping the little bit of gas left until the truck comes one day to warm up water for my tea. Not to mention that the truck would come whenever it pleases and that day I would have to stay home until the damned truck shows up, if it shows up. And never mind that my bathrooms are not set up for gas heaters so I would have to break walls to bring the gas conduct to my water heater.

    As far as I am concerned I will pay my bill and f..k it! I can afford it, fortunately. My only regret is that my fines will not go to solve the crisis but to the pocket of some corrupt chavista.

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  10. anonymous

    Mommer is a piece of shit who on ideological basis ruined PDVSA and thus ruined the country. he know, we are told, lives in London rarely bothering to visit Venezuela, rich of the loot he took from Chavez.

    Ultimately it is still Chavez fault from trusting Mommner who was already widely discredited in the oil industry business as a primitive retrograde.

    It really does not matter which angle you look at, the guilt rests at Chavez feet. Even PSF, except for the occasional true lunatic, are staying away from opposition blog because they realize that they cannot defend their man anymore. I cannot ban in blogger contrary to what I could do in haloscan until December and yet I need to erase only a message every couple of weeks at most. Just like Mommer, PSF know deep in their hearts that they f....d up and are busy looking for the next anti US hero.

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  11. 1979 Boat People2:02 PM

    Humn,

    Aren't things dust cheap or free in the 21st Century socialist countries(Paradise on Earth) as promised by those DEAR leaders?

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  12. Charly2:48 PM

    Wait a minute, if you think you got problems with electricity wait for the great leap forward towards the abyss that will be impulsed by (Dr???) Luis Reyes Reyes, the new minister of health, the same man who didn't fill a single hole on the highway between Quibor and Carora during his mandate as the Governor of Lara not to mention that he is also another coupster.

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  13. Daniel,

    Again, a very fine job here. I'm preparing a post on the electricity issue right now, but I will not be able to get it up until tomorrow I think.

    But I want to add a comment now from an article I found at the portal of Victor Poleo, who I know is left of center, but still very critical of Chavez.

    According to Poleo, there has been an accumulation of 35 billion dollars (U.S.) across the 11 years of Chavez's administration for the electrical power sector, but only 7 billion has actually been appropriated and even then only 30% of that ($2.8 billion by my calculation) has actually been spent.

    Can you comment on the accuracy of these figures as you see it and perhaps speculate (yes, just guess) as to where it all went?

    StJacques

     

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  14. St Jacques

    It is simply impossible to account the accuracy of any government figure, the financial ones even less. Or why do you think corruption can flourish so well under Chavez? :)

    Chavez style of government is permanent improvisation, reactive or what we say better in french "à coups", by strokes, hits, bangs...

    So indeed, 30 billion might well have been allocated to the electricity sector but that does not mean at all they will be spent on building dams, power plants, grid renovation. For example Chavez is visiting Nicaragua and he learns that they have some power outage? No problem , we have 30 billion for electricity , surely we can spare some for Nicaragua. An election is coming up? No problem,, pay electricity worker double bonus making sure they know if Chavez man loses they lose their jobs. A minister does not feel safe at home because of crime? Sent EDELCA to install him an electric fence.

    See, all electricity related expenses! Et voila!

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  15. Well that's about what I thought.

    I'm using some EDELCA documentation and some of what Victor Poleo has and, frankly, there's not much else to grab onto.

    I do appreciate your time however. I'll probably be back tomorrow with a link, because I will definitely reference this post.

    Une autre fois au fond!

    StJacques

     

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  16. Of course, the Government is not subject to the decree, nor does it pay its electric bills.

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  17. Daniel, very good technical overview.
    I understand your anger and frustration.

    However, I disagree with you. The goverment now HAS NO CHOICE. What you are proning: a flat rate, pricing incentives and making the slums pay is something that could be useful in the medium to long term, but not now. Now is that or the total colapse of the system.

    Now, I am not sure about how effective the current pricing incentive will be, since people who can pay will pay and still consume, but it is either that or scheduled blackouts. If I were in charge, I would probably had a much tougher pricing policy because the situation is critical. Of course, I would have had it after voluntarily asking the population to reduce their consumption to the minimum.

    It is tough pricing or scheduled blackouts or drastically reducing working and merchants hours bringing a recession or all of the above. The situation is so bad that they have no choice. It is a lose-lose situation no matter what you do.

    Because no matter what, money cannot construct a thermal plant in a time short enough to prevent the colapse of the system.

    The situation shows that Venezuela is a country without lights...


    Here's in fact my post http://cuentosintrascendentes.blogspot.com/2010/01/pais-sin-luces.html

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  18. Excellent post Daniel.I love the Dummie style explanation because it helps me to see more clearly.

    Daniel said:

    "In 1999 when Chavez assumes power, electricity production is sufficient for the country."

    Now:

    "In short we are faced with a problem that has no short term solution, and probably not even a medium term solution considering the incompetence and corruption existing in Chavez administration."


    Now Quoting Chavez:

    "In Venezuela we are interested in development of nuclear energy, of course for peaceful purposes, for medical purposes, for purposes of electricity generation," Chavez said at a political rally.

    "Brazil has various nuclear reactors, so does Argentina. We will have ours."

    So I ponder on the following:

    How significant is it that Chavez has claimed that he is not interested in nuclear weapons?

    One would think that as the world's 5th largest oil exporter and rich in hydroelectric resources Venezuela would not need to develop nuclear power to meet its energy needs.

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  19. Bruni

    I pointed out the flaws of Chavez program and its responsibility in DEMANDING belt tightening without even acknowledging his responsibility, at least partially.

    In an earlier post I hinted at the plan I would propose: "dia de parada" an off day for every business and public administration.

    Half of the manufacturers close in turn either a Friday or a Monday.

    A third of malls and shops close on Tuesday, Wednesday or Thursday.

    Financial stuff, laboratories, public administration, etc, take turns to shut down one day a week. Only schools and hospitals remain open as usual, trying to save as much as they can.

    With such a system you only work at most 80% of what you could do but you do it well, without being threatened with fines, black outs, etc...

    And if rains are delayed, you can always increase this schedule to two days a week.

    Right now you are asking many people, in particular in the manufacturing sector to make savings that they simply cannot do, forcing some of them to go on a day stop, but an unscheduled one, creating all sorts of havoc from deliveries to payroll, without the state being able to modulate better its prediction and juice delivery.

    But of course, the system I propose requires that the government talk to all, create a consensus, seats with all at the table, share decisions with all. This is anathema for a mentally imbalance Chaevz who again last week end said that reconciliation was impossible. Thus we keep careening towards catastrophe.

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  20. Boludo Tejano10:58 AM

    Coche de fuego a la chapina:
    One would think that as the world's 5th largest oil exporter and rich in hydroelectric resources Venezuela would not need to develop nuclear power to meet its energy needs.

    Yes, one would think so. If one used logic.

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  21. Anonymous7:50 PM

    Daniel:

    As you said, Mommer, a mathematician, like Merentes ...) really ruined the Orimulsion (among other stuff...).

    If you want to reduce electricity consumption, you should use the Pareto principle, 80% of the consumption is caused by 20% of the causes. What you have to do is attack those 20% causes.

    In a place like Caracas you could reduce the water heater adjustment (45 C - 50 C), maybe change those lights that you use more (kitchen, living room) for fluorescent light bulbs, but thats practically all. If you have a water tank and a pump, install an air bladder and Pressure switch so that its cycles 20-40 PSI. Keep the cellular phones and TV´s disconnected while you are not there (this peanuts but you will feel that you are doing something ...)

    At a commercial/ business level, adjust the Air Conditioning system so they have a working thermostat and adjust at 21-23 C, keep the Condensers clean. For refrigerators adjust the temp to 4-6C, and -15C at the freezer, also keep the Condenser clean.

    regards,

    moses

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  22. Daniel:

    The Guaire river in Caracas has a flow of 10 to 15 M3 / second, how about putting a dam and a couple of Kaplan turbines ?

    Imagine making electricity out of sh....

    moses

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  23. ConsDemo10:54 PM

    Interesting history. Yes, Chavez's refusal to admit any culpability probably makes things worse for him. Plenty of American politicians have bought at least temporary forgiveness with a mea culpa. However, if Chavez were to start taking responsibilty for this, he'd also have to own up to countless other errors and miscalculations, which obviously isn't in his DNA.

    I also noticed this blurb in an El Nacional article today. It suggests a similar plan was instituted by former Brazilian President Cardoso at some point (doesn't say when).

    La medida anunciada por el presidente Chávez y es similar a la implementada por Brasil durante la crisis que afrontó el sector eléctrico debido a la falta de inversiones y a una sequía que afectó considerablemente su parque hidrológico.

    El gobierno de Fernando Henrique Cardoso obligó a los usuarios residenciales, industriales y comerciales a disminuir su consumo entre 20% y 35%. Los clientes que no cumplieran con la medida eran castigados con recargos tarifarios e incluso con cortes del servicio eléctrico.


    Cardoso apparently didn't take much of a hit politically, let's hope Hugito doesn't get off so easily.

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  24. Daniel;

    I have linked this post from a "primer" I have prepared using some of the accessible documentation from EDELCA and more at Victor Poleo's site in a post I published this evening.

    The Coming Electrical Power Disaster in Venezuela

    I was quite motivated to put some facts up to counter that unbelievable crap I see posted at Venezuelanalysis.com. If those guys were not so well paid by Chavez, my guess is they would be enduring a meltdown right now.

    StJacques

     

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  25. Hi! I'm a political science student from the Philippines. Like reading your posts.

    I have been conducting a research on the correlation of politics to the average spending of Latin American.IOn my case since I am in a group, I was assigned to do research on Venezuela.

    Can you upload pics of the actual utility bill of an average Venezuelan? We need it for our thesis.

    All the best,
    Joanna

    ReplyDelete

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