Home Editorial Mr. President, Eject the “Thriving Cartel” From LEC

Mr. President, Eject the “Thriving Cartel” From LEC

by newsmanager

For over two months now, electricity supplies to Monrovia, Liberia’s Capital, and its immediate environs have been fluctuating days and nights.

At times, several communities do not get electricity for a whole week or more.

Even at the time this editorial was being inked yesterday, electricity supply in the densely populated Rehab Community where President George Manneh Weah lives was extremely unstable, troubling, and unimaginable. Many could not fathom why a community in which the Nation’s President resides has been effectively exposed to darkness.

Interestingly, in May last year, the Compact Completion Report released by the United States (US) sponsored Millennium Challenge Account-Liberia provided, among other things, graphic accounts relative to how the state-owned Liberia Electricity Corporation (LEC), has been awash by massive theft of electricity and “expanding corruption” at the behest of a “thriving cartel.”

In October 2015, the US and Liberian governments signed an agreement to establish Millennium Challenge Account-Liberia (MCA-Liberia) as the legal, independent and autonomous agency of the Government of Liberia responsible for the implementation and oversight of the Millennium Challenge Corporation’s Liberia Compact.

The five-year Compact was in the amount of a whopping US$256,726,000. Its primary goals were to reduce poverty through economic growth via sustainable electricity provision, and the improvement/maintenance of the country’s road network.

In other words, it was designed to address two binding constraints to economic growth currently existing in Liberia including lack of access to reliable and affordable electricity, and an inadequate road infrastructure.

The Compact which was also intended for the Liberian nation to access more reliable and affordable electricity and to improve the planning, and execution of routine, periodic, and emergency road maintenance came into force on January 20, 2016, and expired on January 20, 2021.

The energy project had a budget of approximately US$201 million and was implemented through four interconnected activities, each with sub-activities: Mt. Coffee Rehabilitation Activity, Mt. Coffee Support Activity, Liberia Electricity Corporation (LEC) Training Center Activity and Energy Sector Reform Activity.

Moreover, during ceremony marking the Compact Completion, held last year at the Mount Coffee Hydro facilities in White Plant, Lower Montserrado County, which was attended by President Weah and other top Liberian government officials, development partners, among others, it was made abundantly clear that LEC is faced with a chain of gargantuan challenges including massive theft of electricity, limited technical capacity, political interference, lack of accountability, transparency, and probity in its operation, mismanagement, just to name a few.

The Compact Completion Report released to President Weah at the program contains a number of key recommendations, including the urgent need to look at both institutional and environmental sustainability issues.

The report stressed that the long-term success of the Mount Coffee Hydro is dependent on some key factors and while the Compact’s projects have made a number of achievements, there are many concerns about the sustainability of these achievements over both short-term and long-term.

It stressed the success of the Liberia Electricity Corporation (LEC), which is in turn dependent on good governance and sound economic management and the Political and Financial Support and Commitment of the Government of Liberia (GOL).

The report further said while the Management Services Contractors have been able to bring some operational stability to LEC, the Corporation lacks the necessary Capital Expenditure (CaPEx) and Operational Expenditure (OpEx) funds that would enable it move to the next phase of the business plan.

According to the Compact Completion Report, the January 2021 update of LEC business plan shows that the utility needs US$ 109 million of Capital Expenditure (Capex) funding for its turnaround.

The Report, however, added that the World Bank is in position to fund at least US$42 million of that amount, leaving a gap of US$65 million that needs to be funded through external sources by April 2024.

Moreover, LEC’s current financial projections also show a net operating cash flow deficit of US$16 million as of May 2021. According to the report, because of the lack of capitalization, LEC is not able to expand its customer base in response to output and that people who cannot get connected resort to illegal connections, thereby exacerbating the utility’s losses.

The report also stated that LEC is therefore still caught in a spiral of commercial losses which at one time was as high as 74% of power produced.

As if these major findings were not enough to warrant much-needed attention from the Liberian ruling establishment for appropriate corrective action, the Compact pointed out that because GOL has not been able to capitalize the utility, it was not certain if the MSC contract were to be picked up after the contract ends.

It stressed that when LEC lacks funds to provide or maintain basic services such as meters or transformers, more people go unserved, resulting in more illegal connections. This leads to more equipment blowing, thereby repeating the cycle.

Commenting on bringing LEC Technical and Commercial losses under control, the report indicated that an evaluation study by Mathematica found that while LEC has had an almost fourfold increase in MCHPP’s total electricity supply (in MWh per month) from 2015 to 2019, total electricity sold only doubled.

Similarly, the report said technical losses increased from about 500,000 megawatt hours (Mwh) in January 2015 to 1.9 million MWh in September 2019.

More strikingly, commercial losses increased from 1 million MWh in January to 10.8 MWh in January 2019 and that since 2018, commercial losses have steadily risen and stabilized around 58 percent, for a total loss rate of about 70 percent.

The report, among other things, asserted that “Liberia presents the exact context in which corruption proliferates: weak governance, poverty, poor utility management, high energy demand, and high tariffs.”

“As a result, LEC has one of the highest rates of commercial losses in the world, with thriving cartel responsible for grand electricity theft and small-scale, but widespread power theft in communities,” the Compact report pointed out.

It added that LEC is beset by technical inefficiencies, an ability to connect customers despite excess generation capacity, expanding corruption, and unsafe infrastructure.

The report made it clear that utility requires increased funding for Operations and Capital Expenses, a systemic response to theft and corruption, and support from the Government of Liberia and donors to implement the reform needed to sustain the utility.

LEC has been allegedly implicated in similar cartel during the erstwhile administration of former President Charles Taylor when the Liberian government through the Ministry of Finance moved to purchase four generators for electricity supply. At the time, the Taylor-led regime then, asked LEC officials to purchase the generators.

Interestingly, however, the then LEC executives bought refurbished generators from Chez Republic, a move, which according to sources closed to the development, angered former President Taylor to dismiss both the then management team and board of directors of LEC.

This is one of the reasons why some independent commentators are of the common view that based on President Weah’s expressed determination to develop the Liberian nation, he has to take full charge of the electricity provision situation in the country by holding LEC officials’ feet to the fire to perform in the best interest of the country, now than later and for his administration to provide the necessary funding support and political will.

Besides, President Weah needs to stamp his political authority to rescue LEC from the visible mess the entity is entangled with as result of the reported ‘poor management of the entity and massive electricity theft,’ gross lack of technical expertise, among others.
After all, Liberia’s economy will not experience vibrant growth and development in the absence of electricity that serves as a principal engine to attracting both local and foreign investment, enhanced security, etc.

This is why, we, at THE INDEPENDENT, are calling on the Weah-led government of Liberia to rise to the challenge by exalting the necessary effort to improve electricity provision in the country for the benefit of all and sundry.

It is also important for the government to seek other options including West African Power Pool project to light up not only Monrovia, but other parts of the country where the vast majority of the citizens reside. In other words, Monrovia is not Liberia.
To put it succinctly, electricity is security and an engine to National Development. This is our plead, Mr. President.

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