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President Hugo Chavez and his Bolivarian Bozos are determinedly moving the deck chairs on the Titanic to create the illusion that the regime can reverse the collapse of the national power grid and keep the foundering revolution afloat.

Chavez issued a decree on 8 February 2010 declaring a national power emergency, less than a month after he sacked former electrical Energy Minister Angel Rodriguez amid furious presidential assurances that Venezuela’s power crisis was caused by El Nino, by the political opposition and by US-driven Imperialist global warming. But “it’s not my fault,” Chavez whined plaintively.

The “national power emergency” will last 60 days, during which new Electric energy Minister Ali Rodriguez Araque (aka Comandante Fausto during his youthful adventures in the early 1960’s as a failed Communist guerrilla backed by Havana) will have “special powers” to do whatever is necessary to end the power crisis.

Chavez immediately followed up that decree by chaining the nation’s television stations at 11 p.m. Caracas time to the first emergency session of the Electricity Joint Chiefs of Staff (“Estado Mayor Conjunto Eléctrico”) in Miraflores Palace, presumably so that all Venezuelans could see their feckless leader leading the committee in charge of moving the Titanic’s deck chairs.

Chavez assured the nation’s television viewers that his regime will commission 60 MW of generation capacity in February, another 540 MW in March and a further 665 MW in April. He also said that some of the new generation equipment is being imported from Houston, Texas. It appears, based on Chavez’s remarks, that he is counting desperately on “gringo” manufacturers and suppliers of power generation equipment to bail his butt out of the pit he dug himself into after 11 years of sustained Bolivarian corruption and incompetence.

As always, Chavez lashed out at private companies, accusing them of being the “large consumers of electricity” in Caracas, which “demonstrates the damage caused by the capitalist model.” He also announced a new power rationing plan for Caracas that will explicitly target “high residential…and commercial…industrial consumers.”

High residential consumers, which according to Chavez constitute 24% of the capital city’s residential power users, must reduce consumption immediately by 10% or else they will be required to pay a 75% surcharge. Any residential consumers that increase power consumption by 10% over the average consumption during the previous year will pay a surcharge of 100% of their power bill, and if they increase consumption by 20% the surcharge will rise to 200%. However, any residential consumers who reduce power use between 10% and 20% will be rewarded with a 25% discount, and if the power savings exceed 20% the discount will be 50%.

All commercial activities, industries and offices that consume 25 KVA will be levied a 20% surcharge on their power bills. And anyone who exceeds their power consumption quotas or is found to be using too much electricity will have power supplies cut off for periods of 24-48 hours. If initial sanctions do not work, then power supplies will be suspended “permanently.” Minister Rodriguez Araque said that his ministry will deploy “inspectors” to every residence and business establishment in Caracas to ensure the new power consumption quotas are obeyed.

Chavez also said there are over 8,000 high power consumption clients in Caracas, and that a list of these wasteful electricity consumers will be published soon. But it wasn’t immediately clear if Chavez was referring to business consumers or residential consumers.

The “special powers” that Chavez granted to “Comandante Fausto” include designing and executing the “necessary and urgent strategies” to ensure that private and public consumers of electricity pay their outstanding debts to the state-owned power utilities.

However, since the only deadbeats are government entities, it remains to be seen how Rodriguez Araque intends to collect the billions of dollars owed to Corpoelec and its affiliates by the basic industries, the state and municipal governments, and the various ministries that are controlled by the Chavez regime. By one estimate, chavista-controlled local/state governments and other revolutionary public entities owe Corpoelec over $2 billion.

Of course, it’s to be expected that opposition-controlled municipal and state governments will have power supplies cut off even if they pay their power bills on time. It’s also to be expected that middle class Venezuelans who do not live in the “barrios” will see power supplies suspended too. Presumably, this will confirm Chavez’s whiney lamentations that the power crisis is not his fault.

Essential public services including schools, hospitals, security companies, etc. will be exempted. The government also plans to reduce the work-day at all government offices to five hours, or 25 hours per week. Not that it will matter all that much, since government employees usually do not work a full eight hours and should not be expected to do more work in a five-hour day than in eight hours.

This presidential decree supposedly will accelerate the process of importing electricity generation equipment from countries like Russia, China, Belarus, Japan and Germany, among others including the much-hated Gringos.

Chavez says that his presidential decree also will allow the “immediate development” of maintenance plans to salvage Venezuela’s deteriorated electricity grid, which collapsed as a direct result of the Chavez regime’s failure to maintain the existing grid or complete even 25% of planned generation and transmission projects that were launched in 2002-2003. It’s not clear how a piece of paper will accelerate anything after 11-plus years of less progress than a constipated snail.

But all the presidential noise, smoke, mirrors and circus entertainment is all about moving the deck chairs on a sinking revolution which cannot be refloated.

And here’s where the revolutionary arithmetic becomes perhaps deliberately – mindboggling and confusing.

The electrical emergency decree is supposed to speed up the expenditure of $14 billion through 2015 to add 14,000 MW of new generation capacity to a national grid which has a rated capacity of over 23,000 MW, although over 7,000 MW of that existing capacity is inoperative. These $14 billion, presumably, would be in addition to the more than $16 billion which Rodriguez Araque claims were spent in the electricity sector since Chavez came to power, although the results are not readily visible anywhere in Venezuela.

Presumably, this presidential decree also will accelerate the arrival of “technical advisers” from Cuba, Russia, China, Brazil, Belarus, Argentina and other strategic “friends” of the Bolivarian regime. Chavez already declared that Cuba will receive $2.5 billion in payment for the advisory services of Ramiro Valdes, a Havana hatchet man best-known for killing unarmed innocent people and Internet censorship in Cuba.

Ali Rodriguez Araque also says that the regime plans to add 4,000 MW of new generation capacity in 2010 at a cost of $ 4 billion. In addition, he says the regime will build new solar and aeolic (wind) generation plants, and install 2,000 MW of generation capacity at a cost of $1-2 billion, consisting of small generation plants with an average capacity of 5-10 MW each. Finally, the new electrical Energy Minister, who knows next to nothing about electricity, says the regime may purchase (or lease) floating power generation plants that would be anchored on the coast of states like Miranda and Vargas (i.e. Caracas). The reported cost of these floating generation plants is about $4 billion, according to published reports.

However, this presidential decree – like everything else the Chavez regime has said or done in relation to the national electricity crisis – is bullshit.

The Chavez regime cannot end the power crisis before the end of 2010 as pledged only a week ago by Rodriguez Araque. In fact, Chavez admitted two Sundays ago that the power crisis will be worse in 2011 than in 2010, although Edelca has forecast “national collapse” by end-May 2010. It is a fact that Venezuela will suffer a power crisis that will continue well after the next presidential elections at end-2012.

While the Chavez regime wildly tosses out investment numbers that do not add up, a few serious economists are trying to figure out just how much the power crisis will cost Venezuela. VenEconomy’s Robert Bottome, one of Venezuela’s most respected economists and forecasters, estimates very conservatively that the power crisis will cause a cumulative GDP contraction of at least 18% spread over 2010, 2011 and 2012, including an 8% loss in 2010, 6% in 2011 and 4% in 2012. But when Caracas Gringo remarked in a telephone chat with Mr. Bottome that Chavez is already saying 2011 will be worse than 2010, VenEconomy’s CEO conceded that he is being deliberately very conservative.

Caracas Gringo is the pseudonymous of a Midwest Yankee who has lived and worked in Latin America over 38 years. Petroleumworld does not necessarily share these views.

Editor's Note: This commentary was originally published by Caracas Gringo blog on 02/09/2009. Petroleumworld reprint this article in the interest of our readers

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Petroleumworld News 02/14/09

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