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.
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.