Venezuela to Expand National Electricity Production for Economic Growth

Mérida, May 26, 2008 (venezuelanalysis.com)– The president of Venezuela, Hugo Chávez, announced Saturday that the country’s electricity generation capacity will be expanded by nearly 40% by way of 42 structural expansion projects over the next six years as part of the “Socialist Plan of the Nation” that was launched when Chávez was re-elected to the presidency in December 2006.

During a visit to the Fabricio Ojeda Hydroelectric Center and the nearby La Vueltosa Dam in the Andean state of Mérida, where construction is underway to expand the facilities, Chávez projected, “We are going to generate 8,635 additional megawatts, today we have 22,540 megawatts of installed capacity, we are going to increase the generation capacity by 38.3%. This way we will cover the next 15 years because our population will continue growing.”

The 42 projects will receive a $10.3 billion investment from the state. They do not include funding for oil or gas – derived electricity, solar energy, or distribution infrastructure, which have been granted a separate state credit of $1.5 billion, Chávez said.

The new facilities will be constructed in several regions of the Venezuela in order to decrease the country’s reliance on the Guri Dam, which lies on the Caroní River in the southeastern Bolívar state and currently produces 72% of the nation’s electricity.

In late April, a forest fire triggered an automatic shutdown of the Guri facility, leaving half the country in a blackout for almost a day. Chávez blamed Venezuela’s reliance on Guri on the lack of investments in electricity production by previous administrations.

Chávez credited soaring worldwide oil prices and his administration’s creation of “diverse strategic funds”, including the tax on windfall oil profits enacted in April, for allowing Venezuela to finance projects without soliciting private loans.

“These resources must be taken advantage of, the profit cannot remain in the hands of [Venezuelan state oil company] PDVSA or the transnational companies, it should be a contribution to development projects in the country,” Chávez stated.

According to the president, the “Socialist Plan of the Nation” obligates the government to convert the country into a “worldwide energy power.” The first step in this process was the nationalization of Venezuela’s electricity sector in 2007.

The constitutional reform proposal that was defeated in a national referendum last December was intended “to give me instruments to accelerate socialist changes,” such as improving electricity production, the president explained.

“I said following the defeat: I was wrong, it was not the right moment, this is what I believe, we cannot skip steps in a process. But this does not mean that we are behind schedule or that we have discarded anything. To the contrary, we are obligated to continue advancing the socialist plan,” said the president.

Chávez made clear that a vital part of the plan is to “help the poorest people pay their energy bills.” To achieve this, he ordered Alberto Urdaneta, the director of Caracas Electricity, to create a new rate subsidy for the poorest sectors of the city.

“The social class of scarce resources cannot pay the same electricity fees as the people of the upper class,” he remarked, adding that “this is socialism, in capitalism it would be impossible.”

300,000 of Venezuela’s 3 million barrels per day of oil production are contributed to the Petrocaribe and Caracas Energy Accord initiatives, which provide discounted oil to countries in the region, Chávez explained.

He also recounted his previous proposal to OPEP that the organization should “take charge of helping the 50 poorest countries, which hardly consume 700,000 barrels per day, while the United States consumes between 21 and 22 million barrels per day” of oil.

Regional electric companies that have been integrated into the national management of the National Electricity Corporation (CORPOLEC) since 2007 manage Venezuela’s electricity sector. Electric Energy of Barquisimeto (ENELBAR) operates in the states of Lara, Carabobo, and Yaracuy. The Electric Energy Company of Venezuela (ENELVEN) controls Zulia and Falcón. And Caroní Electricity (EDELCA) is in charge of Bolívar and Amazonas. The rest is grouped under the administration of Anonymous Electricity Fomentation and Administration Company (CADAFE).

Chávez said the new projects underway “have taken some of the weight off [CADAFE] in order to make things more efficient.”

The economy of the state of Mérida, for which four principal rivers will be exploited for hydroelectricity, is based principally on small-scale agriculture, livestock, and tourism. The state produces 60% of Venezuela’s potatoes.

The president said Saturday that each new project should be carried out in consultation with local communities so as to lighten the government’s “cultural impact”. Upon inaugurating the new CORPOLEC management team, he said the new president of CORPOLEC, Hipólito Izquierdo García, should be “leader and manager with the workers, businesspersons, and the People.”