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Venezuela Announces Special Measures to Boost Electricity Production, Lower Consumption

Mérida, November 5th 2009 (Venezuelanalysis.com) -- On Wednesday, the Venezuelan government announced a series of new measures to reduce the consumption and increase the production of electricity, which has been rationed over the past two months through daily, one to two-hour rolling power outages in much of the country.

To reduce both domestic and commercial consumption, the state electricity corporation, CORPOELEC, will charge higher rates to consumers who exceed a ceiling of kilowatt hours. Also, the government will revamp its two year-old “Energy Revolution” light bulb exchange program by replacing 74 million incandescent light bulbs with fluorescent, energy-saving bulbs.

In addition, the government will restrict the importation of air conditioners, freezers, refrigerators, and water coolers that do not meet certain energy efficiency requirements, and require such appliances that are already in the country to be labeled with their level of energy consumption and sold by the end of June 2010.

To increase the supply of electricity, the government will invest an additional BsF 413 million (US $192 million) to accelerate construction that is underway on new thermoelectric and hydroelectric infrastructure nation-wide, with the goal of expanding the public sector electricity generating capacity by 1,440 megawatts by the end of this year.

The government will also provide financial incentives for private businesses to provide for all or part of their own energy needs, and contribute any excess energy they produce to the public electricity grid.

Investments in new electricity infrastructure will be exempt from sales tax for five years, and the companies who make such investments will have preferential access to government-issued dollars and credits. Also, the state will provide free oil to new private thermoelectric plants, and some contributions of excess electricity to the public grid will be compensated with credits in other areas.

In a press conference on Wednesday, Vice President and Defense Minister Ramon Carrizalez specifically mentioned Venezuela’s largest food producer, Polar, and the giant shopping mall chain, Sambil, and said, “Those whose electricity consumption is very high surely will have the need to generate their own electricity.”

Businesses which do not comply with the new regulations will be taken over by the state, “with the goal that this energy contribute to the provision of public electricity services,” according to the executive measure emitted by the Council of Ministers this week.

Carrizalez was joined by Energy and Petroleum Minister Rafael Ramirez and the new minister for electricity, Angel Rodriguez, in a special press conference to announce the measures on Wednesday.

Ramirez explained the origins of the current electricity shortage in the more than 40% increase in electricity consumption since President Hugo Chavez took office ten years ago.

Ramirez said Venezuela’s basic industries, private business sector, and public institutions account for approximately 60% of national electricity consumption. He added that the demand for electricity in Venezuela rose by 6.4% in 2005, 8.6% in 2006, decreased in 2007 as a result of the government’s light bulb exchange program, grew again by 5.6% in 2008, and is projected to grow by more than 7% by the end of this year.

In 2007, the Chavez administration nationalized Venezuela’s 14 regional electricity companies, and brought them under the control of a national company, CORPOELEC. The National Assembly passed a law aimed at making deep changes to the public electricity sector, but the management so far has been accused of corruption and has not implemented the changes.

Last month, Chavez created the new Ministry for Electricity to “strengthen and revive the national electric system.” He put a special commission of ministers in charge of increasing production, reducing national demand by at least 20%, and incorporating worker unions into the management and decision-making process at CORPOELEC.

Published on Nov 5th 2009 at 9.22pm