Glenn Zorpette has an interesting article in the New York Times today about Iraq's challenges in restoring its electrical grid. It's a fascinating glimpse into the progress and challenges of reconstruction in Iraq. According to Zorpette:
Iraq is now producing only about 4,000 megawatts of electricity, as opposed to 4,500 before the war, despite huge increases in demand because of the widespread availability of household appliances since the Baathist regime fell. Baghdad, which had consistent power under Saddam Hussein, now gets only about four to six hours of electricity a day. (Other areas of the country that were slighted under the dictatorship have seen improvements in service.)
Zorpette explains that the problems with Iraq's electrical grid are several: Continued terrorist attacks on the electrical system; failure to charge adequately -- or at all -- for electricity; and alleged payroll fraud in the electricity ministry.
Here's an excerpt:
Electricity has become a main focus of the struggle to win Iraqi hearts and minds, with the insurgents doing everything they can to damage power grids and stop the Americans and Iraqi government forces racing to patch them up. In the United States Government Accountability Office's hierarchy of reconstruction financing, "electricity" is now second only to the category called "security and justice." More than $5 billion of American funds and about $1 billion of Iraqi money have gone into repairing the grid. Yet all this money and effort has done little to brighten the lives of Iraqis.
The reasons are many and complicated. One of the biggest, of course, is the insurgents, who have kidnapped, tortured and killed dozens of electrical workers, knocked over scores of transmission towers, and bombed substations with astoundingly effective timing and precision.
In addition, Zorpette explains, the Iraqi electricity ministry is not charging even remotely realistic rates for electricity. Its rates are at least 15 or 20 times too low just to break even. Also according to Zorpette, the ministry also needs to crack down on widespread electricity theft and install more electricity meters:
Its own figures show that it manages to collect what it is owed for only about 30 percent of the electricity it produces. Reconstruction officials told me that 10 percent to 25 percent of that power is simply siphoned off with illegal taps. And, officially, 25 percent to 30 percent of Iraqi homes and businesses wired to the grid do not have a working electricity meter, and are therefore not being billed.
Zorpette alleges that the Electricity Ministry's payroll is also swollen with non-existent employees:
In the absence of an adequate banking system, most workers in Iraq, including government employees, are paid in cash. This makes it hard to do rigorous accounting at the ministry. Since 2003, its payroll has swelled by 10,000 people, to 48,000. No one doubts that this number includes hundreds, maybe thousands, of "ghost employees"— people invented so their pay can be taken by somebody else.
All of these problems are ones that can be -- and eventually will be -- ironed out. Some of them are functions of Iraq's history and recent progress. If electricity meters did not exist in many places during the Bathist regime, then installing them universally will be a huge undertaking in itself.
The problems of fraud, both on the consumption side and in the electricty ministry payroll, also suggests that this would be an ideal utility to turn over to private industry. No private company would tolerate "ghost" employees or meterless customers.
Recognizing that security is still a problem, there is still a tremendous need for normal market forces to begin to operate in the provison of electrical services in Iraq. As soon as possible, proper free market incentives need to be restored. Otherwise, the Iraqi electricity ministry will continue indefinitely as a bottomless money pit.
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