DISJOINTED POWER "SYSTEM" PLAGUES BABIL PROVINCE

C O N F I D E N T I A L SECTION 01 OF 03 HILLAH 000108

SIPDIS

SIPDIS

E.O. 12958: DECL: 7/18/2017
TAGS: ENRG ECON EIND EPET PGOV SOCI IZ IR
SUBJECT: DISJOINTED POWER "SYSTEM" PLAGUES BABIL PROVINCE

REF: HILLAH 84

HILLAH 00000108 001.2 OF 003


CLASSIFIED BY: Charles F. Hunter, PRT Leader, PRT Babil, REO
Al-Hillah, U.S. Department of State.
REASON: 1.4 (b)


1. (U) This is a PRT Babil Cable.


2. (C/REL MNF-I) Summary: Babil residents suffer from an acute
shortage of electricity from the national grid, averaging
between four and six hours of electricity per day. Demand for
power from neighborhood and (for those who can afford it)
personal generators continues unabated, thereby contributing to
the diesel shortage and the rise in black market rates for fuel.
Seeking to ease the burden, the provincial council (PC) created
an electricity committee tasked with alleviating the shortfall
by regulating prices for power produced by neighborhood
generators while selling diesel intended for generator operators
at discounted prices. In response, operators have curtailed
their services and show no inclination to expand their services.
The availability of power seldom, if ever, matches demand.
Suffering residents have taken to sleeping on their roofs and
ice salesmen do a brisk business from roadside stands. The
causes of the shortage are many and complex. According to the
regional director general for electricity distribution, Babil
province suffers from low generating capacity and receives a
disproportionately low share of electricity in comparison with
the other provinces under his purview. In addition, the steady
influx since 2003 of consumer goods and appliances has driven up
demand to probably more than double that of the Saddam era.
Widespread and flagrant tapping into power lines -- especially
those for the emergency grid for essential services --
exacerbates the situation.

-------------- --------------
ELECTRICITY DG: NOT ENOUGH GENERATING CAPACITY, QUOTA TOO LOW
-------------- --------------


3. (C/REL MNF-I) PRT Babil recently met with Director General
for Electricity distribution for the Middle Euphrates Region
Hashim al-Jaafari who alleged that in addition to suffering from
low generating capacity, Babil also received a
disproportionately low share of electricity in comparison with
the other provinces under his purview. In addition to an
inefficient gas power plant in al-Hillah (30 MW),Babil receives
energy from the Mussayib power plant in north Babil. Al-Jaafari
said that although Mussayib has the capacity to generate up to
700 MW per day with all four units operating, in reality the
plant usually produces approximately 400 MW per day. Moreover,
al-Jaafari claimed that the majority of this energy is sent to
Baghdad and asserted that the amount of electricity allocated to
Babil province by quota constituted "an injustice." Al-Jaafari
contrasted Babil's daily allocation (per the national quota) of
120 megawatts (MW) to Najaf's 100 MW, Karbala's 90 MW, and
Diwaniya's 70 MW and noted that while Babil's allocation topped
the other four provinces under his oversight, the numbers were
not in proportion to its population. Indeed, al-Jaafari said
that Babil's 120 MW were far from his estimate of the province's
needs of 300-320 MW. In a separate meeting, Provincial Council
(PC) energy committee chair, Bassem al-Janabi concurred with
this assessment and added that 25 of the 120 MW intended for
Babil province is restricted to volatile mixed Sunni-Shi'a
northern Babil (out of all proportion to the population of the
rest of the province which is overwhelmingly Shi'a). (Note:
Iraq Transition Assistance Office (ITAO) reports that
electricity generated in Mussayib and sent outside the South
Central region goes to Basrah rather than Baghdad. ITAO
corroborated Al-Jaafari's assertion that Babil's quota is too
low by noting that Babil's 5.5 percent of the national
population is assigned a mere 2.7 percent of power from the
national grid. End note.)

-------------- --------------
--------------
DG (CONT'D): "GUARANTEED" 10 AMP SUPPLY . . . BUT NOT FOR 24
HRS. . . .
-------------- --------------
--------------


4. (C/REL MNF-I) Al-Jaafari reiterated the Ministry of
Electricity policy that customers will not be charged market
rates for power until generation matches demand. He conceded
that current demand is probably at least twice that prior to
2003 and expounded on a new offer of a steady ten-ampere supply
from the national grid, which Jaafari cited as sufficient for
emergency needs such as lighting and air conditioning. (Note:
Nearly all air conditioning units now sold in Iraq require more
than ten amperes. End note.) Subscribers to this plan receive
a breaker that limits the current to a maximum of ten amperes
for which they pay ID 2 per ampere per day. Jaafari cited over
11,000 subscribers to this plan in the South Central region thus
far, including 2,000 in Babil and 8,000 in Najaf. Yet, while he
enthusiastically touted the conservation effects of this plan,
he cautiously added that even subscribers to the ten ampere

HILLAH 00000108 002.2 OF 003


program would suffer service interruptions of between two and
four hours per day. (Comment: Civil Affairs at post estimates
that the operational and maintenance costs for the ten ampere
breakers most likely exceed the cost of the electricity saved by
operating the system. End comment.)

-------------- --------------
RELIANCE ON GENERATORS = ELECTRICITY PRICES TIED TO FUEL PRICES
-------------- --------------


5. (U) Like their fellow Iraqis in other provinces, Babil
residents rely on multiple sources of electricity to meet their
daily needs. Most residents receive an additional several hours
of power from neighborhood generator operators, while those who
can afford it will supplement the neighborhood generator with a
personal one. The heavy reliance on generators has the effect
of tying electricity prices to fuel prices. In Babil, the PC
has intervened by moving to enforce a ID 6,000 per ampere price
on electricity from neighborhood generators. In return, it
allows generator operators to purchase their fuel at a
discounted price. Yet despite this PC intervention, alternative
sources of electricity do not come cheaply to Babil residents,
some of whom pay close to half a month's salary for electricity
from different sources outside the national grid. Faced with a
cap on profits, some neighborhood generator operators have
curtailed services. Local staff, who typically represent the
relatively affluent segment of Iraqi society report paying
between ID 70,000 and ID 90,000 for approximately five to six
hours of power per day from personal generators in addition to
roughly ID 20,000 to ID 30,000 for roughly the same amount of
time from the neighborhood generator. Even they report being
unable to run some appliances due to insufficient voltage as
well as going several hours per day without any power at all.
For many Babil residents, sleeping on the roof has become the
norm during the summer months despite the mosquitoes. Solar
panels are now discussed as another option, and a few prosperous
residents have installed units to generate electricity for
lighting and refrigeration.

-------------- --------------
--------------
BUSINESS COMMUNITY: PRICE OF GENERATORS DRIVES UP PRODUCTION
COSTS
-------------- --------------
--------------


6. (U) Babil businessmen -- particularly those in the
manufacturing sector -- have also complained about the burden
the inconsistent electricity supply places on their overhead
costs. Recently, members of business organizations expressed
the view that electricity shortages caused Babil factories to
shut their doors. Indeed, a member of the business development
group opined that the need to rely on private generators has
driven consumer costs for electricity to higher levels than they
would be had the national grid sold power at market rates
(reftel).

--------------
COMMENT
--------------


7. (C/REL MNF-I) Comment: To a large degree, Babil's story
reflects that of much of the rest of Iraq. The steady increase
in the availability of consumer goods and appliances since 2003
has strained an already broken system. Indeed, to explain the
provincial reaction to the power crunch without mention of the
national grid is impossible. Undoubtedly, electricity
production (and most likely capacity, too) is insufficient to
meet Babil's demands. The absence of a price mechanism provides
no incentive for consumers to conserve what limited electricity
the national grid has in order to maximize the number of hours
of power availability from that source. That said, the lack of
daily electricity running for a full 24 hours per day and sold
at market rates makes it virtually impossible to determine just
what the province's needs really are. Moreover, the GOI's
inability to control flagrant tapping into the power grid
further limits fair and regular access to power for the average
customer, while the PC-imposed price ceiling on power from
neighborhood generators serves as a disincentive for
enterprising operators to expand their services. The lack of
market prices on the national grid contributes to a situation
where the actual price paid by Babil residents for power from
private generators most likely exceeds the prices they would pay
for regularly available power from the national grid if it were
sold at market prices and if there were a sufficient supply
generated. Yet it is the inability of the national grid to
generate sufficient power that forces consumers to turn to the
more expensive generators. Consequently, the high prices for
non-grid sources of electricity cut into consumer spending and
impede business development -- particularly in the manufacturing
sector. The availability of a regular and sufficient supply of
power -- preferably through the grid -- forms an essential
prerequisite not only to economic growth in Babil province but

HILLAH 00000108 003.2 OF 003


also to the development of
a functioning democratic system. Not only does the lack of
enough electricity carry the hazards of inciting severe popular
discontent, it can also be seen as an indicator that as long as
the GOI is unable to provide basic services, the terrorists and
insurgents will have prime hunting grounds to replenish their
ranks with new recruits and volunteers. End Comment.
HUNTER