American University of Beirut

Unbundling Lebanon's Electricity Sector

Research Report​​

Prepared by:

Marc Ayoub, Program Coordinator, Energy Policy and Security at the Issam Fares Institute (IFI), AUB
Pamela Rizkallah, Researcher at the Issam Fares Institute (IFI), AUB
Christina Abi Haidar, Legal Energy Expert

Lebanon’s electricity sector is facing severe threats and is at risk of complete collapse. In fact, it among the first services to reflect the collapse of the economy. At the center of this collapse lies Lebanon’s public utility, Électricité du Liban (EDL). The latter has not only been suffering from political, financial, and administrative burdens over decades, but its headquarters in Beirut was also completely destroyed as a result of the Beirut Blast on August 4. Accordingly, it is currently operating in unusual circumstances.

A regulatory framework was put in place 19 years ago: Law 462/2002 was supposed to organize the electricity sector, establish the National Electricity Regulatory Authority (NERA), and unbundle the electricity activities, and which, to date, has never been implemented, due to the continuous political disagreement around its role and powers. Rebuilding the electricity sector, EDL specifically, cannot be avoided, and would need a transformative energy vision where the role of the utility has a significant impact on the way the power system will operate in the future.

Based on extensive interviews with stakeholders in the sector—both at the central level and within EDL, including energy experts in the field—this paper tries to understand EDL’s current organizational structure and operations, the challenges it is facing at several levels, and the impact EDL’s service can have on the overall operating model. At the same time, this study explores how it is possible to implement Law 462/2002 in its current form without any amendments. It also presents a realistic timeline for its implementation. This is done through an in-depth legal assessment of the law’s sections, along with other laws and decrees that govern both the electricity sector and EDL. This implementation timeline, which would take almost a year, should parallel the launching of the unbundling process and the formation of at least three publicly owned companies that will manage the generation, transmission, and distribution. This should be accompanied by the involvement of the private sector in both the generation and distribution within a period of two years, and in up to 40 percent of the shares of the newly formed companies.

Finally, the paper draws on the lessons learned from other electricity utilities in the MENA and around the world and deduces what could fit for the Lebanese context. We find through our research that the main takeaways revolve around the importance of a regulator, policy incrementalism, the impact of a successful unbundling of an electricity sector, the flexibility and adaptability of an electricity sector, and the importance of a comprehensive regulatory framework targeting renewable energy.​

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