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Lebanese ministers close to agreeing electricity plan-minister

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By Reuters

BEIRUT (Reuters) – A committee of Lebanese government ministers have agreed most details of a plan to address the country’s ruinous electricity crisis, and will present it to the cabinet on Monday, one of the participants said on Thursday.

The decades-old electricity crisis has pushed Lebanon to the brink of financial disaster, with power cuts hobbling the economy and subsidies helping to rack up public debt equivalent to 150 percent of gross domestic product (GDP).

The plan includes increasing generation capacity, reducing losses in transmission and eventually raising consumer electricity tariffs, officials have previously said.

“The committee has finished its work and will raise its proposals at the cabinet next week to approve the plan and approve the outstanding points,” the minister told Reuters.

Once agreed by cabinet, the plan must still be approved by parliament. Energy sector activists in Lebanon have warned that implementing a plan may prove harder than agreeing to one.

Consumer electricity prices have not risen since 1996 and most power is produced using old, inefficient turbines that run on very expensive fuel oil.

Even at the very cheap rates power is sold at, state utility Electricite du Liban (EdL) only collects payment for about half the power it produces because of losses in the transmission system and unregulated connections to the grid.

The big difference between the cost of production and money that EdL collects, approximately $1 billion-1.5 billion a year, is made up by the government, mostly through deficit spending.

Since the government cannot afford to supply 24-hour electricity on this basis, it enforces daily power cuts leaving consumers to pay for expensive secondary supply from local generator companies.

The World Bank and International Monetary Fund have both told Lebanon that reforming the sector should be its priority in lifting one of the world’s heaviest public debt burdens.

The bank and other international lenders last year pledged $11 billion in soft loans and aid to help improve Lebanese infrastructure, but the money is conditional on painful reforms.

Prime Minister Saad al-Hariri has promised to reduce the state deficit as a proportion of GDP by 5 percent in five years. However, reforms have been delayed over the past year because of the extended negotiations to form the coalition government, lasting from elections in May until the end of January.

(Reporting By Angus McDowall and Laila Bassam, Editing by William Maclean)