VENEZUELA: Chavez Declares Electricity State of Emergency

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TAGS: ENRG ECON AMGT EINV ABLD AEMR VE
SUBJECT: VENEZUELA: Chavez Declares Electricity State of Emergency

REF: 10 CARACAS 151; 10 CARACAS 139; 10 CARACAS 35; 09 CARACAS 1475
09 CARACAS 1367; 09 CARACAS 1318


1. (U) SUMMARY: Speaking on national cadena (mandatory television
and radio coverage of a presidential speech) around 5 p.m. on
February 8, President Chavez emitted decree Number 7,228 declaring
an electricity state of emergency and naming an "electricity
general staff." Returning to national cadena at 11:00 p.m. the
same night, Chavez announced electricity tariff fines for users
that do not reduce consumption over the next sixty days as well as
tariff discounts for those that do. Other electricity rationing
measures across Venezuela remain in place. The government hopes
the rationing will extend the time the Guri hydroelectric plant can
operate assuming seasonal rains do not begin to replenish water
behind the dam. According to statistics published February 8,
Venezuelan electricity consumption grew 4.55% in 2009. END
SUMMARY.



The Electricity State of Emergency


2. (U) President Chavez claimed that 46% of Venezuela's electricity
consumption derives from the private sector, 25% residential, 17%
the public sector, and 12% "social residences." He said, "This
reflects the capitalist model. The great inequality. This is why
we have to progressively change it." He designated residential
users consuming more than 500 KWH of electricity as high volume
users and mandated that they reduce consumption by 10% effective
February 9 or face penalties (using the corresponding month in 2009
as the baseline). Chavez also claimed that 24% of residential
consumers in Caracas meet the 500 KWH threshold. [NOTE: An energy
specialist speaking on Globovision's "Alo Ciudadano" ("Good Morning
Citizen") program noted that only 50% of Caracas consumers have
electricity meters making it hard to measure consumption. The
specialist said that almost all households consume more than 500
KWH. END NOTE] The announcement carried the following provisions
to incentivize electricity savings:



B7 Failure to reduce consumption by 10% will result in a 75%
charge to the monthly bill,

B7 Consumption increases greater than 10% will be fined by
100% of the monthly bill,

B7 Consumption increases greater than 20% will be fined by
200% of the electricity bill,

B7 Consumption decreases of 10-20% will receive a 25%
discount, and

B7 Consumption decreases greater than 20% will receive a 50%
discount from the bill.



Press reports of the President's statement did not include
incentives for decreasing consumption up to 10%. [NOTE:
Electricity tariffs in Caracas have not changed since 2002. END
NOTE] The same incentive plan will be applied to commercial users
consuming more than 25 KW. Commercial users that do not comply in
the first month will be issued a warning. If they continue to
violate the required reduction in consumption, electricity service
will be cut for 23-48 hours. A third transgression will result in
the permanent suspension of electricity service. These measures
are in addition to mandatory electricity rationing (i.e., rolling
blackouts) already in place outside Caracas. [NOTE: A rationing
plan in Caracas was repealed by President Chavez on January 13,
less than 24 hours after being implemented. END NOTE.] Chavez

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clarified, however, that the measures would not apply to the
sanitation, health, fuel distribution, or security sectors.




3. (U) According to President Chavez, the declaration of an
electricity emergency:



B7 Grants extraordinary powers to Electricity Minister Ali
RodrC-guez to decree exceptional measures that he deems necessary to
ensure the population's electricity supply.

B7 Charges RodrC-guez along with Planning and Finance
Minister Jorge Giordani with designing and executing necessary
measures to ensure that public and private entities pay their debts
to the state-owned electricity utilities.

B7 Orders the national electricity holding company
(Corpolec) and its utility subsidiaries to accelerate timelines and
execution of work related to the expansion of the nation's
electricity infrastructure and to adopt measures needed to
guarantee continued electricity service.

B7 Permits Corpolec, with the permission of the Electricity
Ministry, to enter into agreements with independent electricity
providers to purchase electricity. [NOTE: The Bolivarian Republic
of Venezuela (GBRV) nationalized most of the domestic electrical
sector in 2007. END NOTE]

B7 Calls on all levels of government to eliminate any
non-authorized connections to the national grid.

B7 Instructs the Electricity Ministry to produce a registry
of entities that have a capacity to generate electricity.

B7 NOTE: Under Venezuelan law, a declaration of a state of
emergency removes the requirement that government entities follow
the regulations of the Public Law on Contracting. END NOTE.




4. (U) President Chavez also announced the establishment of an
"Electricity General Staff" including, Vice-President Elias Jaua,
Ministers RodrC-guez and Giordani, Minister of Energy & Petroleum
Rafael Ramirez, and Minister of Basic Industry and Mining Rodolfo
Sanz. Chavez charged this group with reviewing proposals submitted
by the technical commissions sent by Argentina, Brazil, and Cuba
and offers received from Chinese, Russian, and European businesses
and their respective governments. Finally, Chavez claimed that he
would publish a list of 8,000 large consumers located in Caracas.



The Reason for the Emergency -- Guri's Steady Descent


5. (U) According to data published by the GBRV Office of National
Electricity System Management (CNG),the water level in the
reservoir of the critically important Guri dam was 265.77 meters
above sea level (MSNM by its Spanish acronym) on November 1, 2009.
By February 1, 2010 it had fallen to 258.08 MSNM. The Guri
reservoir levels are critical as once it hits 240 MSNM the
hydroelectric system will start to fail, effectively eliminating
about 70% of Venezuela's electricity generating capacity (until
water levels are restored). In the following graph of Guri's water
levels (CNG data),EconOff added the linear trendline (an Excel
function) in mid-January. At that point, it appeared as if Guri's
water levels would not decline to critical levels in May. On
February 2, Econoff added the red line reflecting the impact of a
recent acceleration of decreases in Guri's water levels. This
trend suggests water levels will drop to the critical 240 MSNM
level by the beginning of June (unless rain significantly
replenishes the Guri reservoir before then). Historically, the
advent of the rainy season in May reverses declines in the

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reservoir's levels.



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6. (SBU) At a diplomatic event the evening of February 10, the
Brazilian DCM told us that a Brazilian technical commission had
just assessed that there is five months of water behind the dam.
The commission also believed that it could provide technical
assistance to the GBRV which would allow the generation of more
electricity from Guri without the use of more water, thus extending
for 40 days the period before the dam would have to shut down. In
contrast, the Russian DCM at the same event said that a visiting
Russian commission had reached the conclusion that there were no
realistic short term measures to avert a crisis if water fell below
minimum levels at the Guri dam. By contrast, senior Central
University of Venezuela (UCV) professors told EconOff on February
10, that based on confidential electricity system data they had the
Guri reservoir would hit critical levels in April. The Brazilian
commission confirmed that Venezuela only has 17 GW of available
capacity and needs to add 4 GW of capacity to the system [NOTE:
Venezuela has an installed capacity of 23.65 GW - 14 GW of
hydroelectric and nearly 9.65 GW of thermal electric. Only 12.8 GW
of installed hydroelectric capacity is currently available and 4.9
GW of thermal electric installed capacity is available. END NOTE.]





7. (SBU) COMMENT: There is no consensus on how soon a crisis might
occur, but there is consensus that sometime between April and July
one will transpire stemming from the possible shut-down of the Guri
hydroelectric plant. In the meantime, there appear to be no short
term measures to avert severe rationing if rain does not begin to
refill the Guri basin in the next four to five months. This is
just about the time when heavy rain is expected in the Amazon basin
which feeds the Caroni river and Guri dam. The collapse of Guri
could profoundly affect nearly every aspect of life in Venezuela.
Chavez's announcement effectively implements rationing in Caracas -
although not the rolling blackouts associated with the failed
January plan - and is intended to extend the time Guri can generate
power, assuming there is no rain. END COMMENT.
DUDDY