The question of generator profits has been hotly contested in recent months, with some politicians, journalists and ordinary citizens accusing generator owners of taking advantage of the state’s failure to provide electricity to reap excessive profits.

 

Generator owners, meanwhile, charge that the political class is demonizing them for political gain ahead of elections and setting tariffs at rates that don’t cover their costs, let alone make profit.

 

Lebanon’s entire private generator industry is technically illegal but, given the constant shortfalls of state energy utility Electricité du Liban, officials and the public have largely accepted the generators as a necessary evil. In recent years, the state has attempted to regulate the industry.

 

The most recent attempt was in September, when the government again tried to require generator owners to install meters and charge based on consumption. So far the latest attempt at regulation, like those before it, appears to be falling flat.

 

In the meantime, amid worsening shortages in state energy supply, those Lebanese who can still afford a generator subscription are facing skyrocketing costs with little effective oversight and control of the sector.

 

L’Orient Today set out to analyze, to the extent possible with the information available, the pricing structure and profit margins of the generator industry.

 

Interviews last month with 31 people found that, of the 22 who had subscriptions to neighborhood generators, just four had meters installed on their lines, despite the fact that generator owners have been obliged to install such meters since October 2018. None of the four people with meters lived in Beirut.

 

Fifteen Beirutis who spoke to L’Orient Today said they had unmetered flat-fee generator subscriptions. The 11 of them who received 5 amperes reported paying between LL550,000 and LL2,000,000 monthly.

 

There was little rhyme or reason in the billing rates. Three residents of the neighborhood of Geitawi, all with 5 ampere flat-fee subscriptions, reported paying LL550,000, LL900,000 and LL1,250,000, respectively.

 

The situation is unsustainable for many consumers. At the current exchange rate of LL27,000 to the dollar, LL1.25 million lira comes out to $46 per month for an electrical service that is shut off for several hours a day and doesn’t allow the customer to use larger appliances.

 

Given the opacity of the generator sector in Lebanon, L’Orient Today has calculated the bills customers would pay under different conditions to see what factors might lead to generator owners collecting profits higher than the ministry price table provides, and which situations might lead to generator owners making less.

 

The results suggest that meters do not always work in the customer’s favor, but might often work in their favor depending on how much power they use, which could well be less than the amount priced into their flat rate.

 

Metering is thought to cut into generator owners’ profits, in part by tying their revenue to the amount of power generated. In order to charge customers more, they must produce more electricity, which costs them money both in fuel and in wear and tear on their machinery.

 

Under a flat-fee system, profits are maximized by generating as little electricity as possible while still holding onto subscribers.

The flat fee also allows generator owners to take advantage of the fact that people likely aren’t using their full capacity 100 percent of the time, whereas those extra profits would be lost under a metering system, where customers only paid for the energy they actually used.

 

The official prices issued on Nov. 1 were, for city-dwellers, a fixed LL30,000 cost for 5 amps or LL60,000 for 10 amps, plus LL5,200 per kilowatt hour. The generator owners’ syndicate decried the rate as “unfair,” demanding LL5,900 per kilowatt hour, plus a fixed charge of LL50,000 and LL100,000 for 5 amps and 10 amps, respectively.

 

At the official rate, someone on a 5 amp subscription who used 100 kilowatt hours was supposed to pay LL550,000; someone using 200 kilowatt hours, LL1,070,000; and so on.

 

For a flat-rate customer who paid LL1,200,000, for example, their bill was equivalent to the official price for using 225 kilowatt hours. If they used less than that, their LL1,200,000 bill would end up being higher than the official tariff they should have paid; if they used more than that amount, their LL1,200,000 bill was less than what the tariff would have had them pay.

 

A 5 ampere subscription can deliver 1.15 kilowatts per hour. So a generator subscription that is offered for 14 hours per day can deliver a maximum of 483 kilowatts per month, which the Nov. 1 official tariff priced at LL2.5 million – above what people told L’Orient Today they paid that month as flat-fee users.