Excessive Demand: Venezuelan Energy Woes

Kennon Pearre

Office of the Simon Chair

During a mid-June news conference, Venezuelan Energy Minister Ali Rodriguez announced that current “demand is excessive”, and that all Venezuelans must join the campaign to save electricity. Despite an abundance of energy resources, Venezuela has been forced to ration its electricity in certain regions since May, but the impetus behind last week’s announcement came after the states of Zulia (which contains Maracaibo, Venezuela’s second largest city), Trujillo, Mérida, Táchira, and Barinas experienced blackouts. Whereas last year’s rolling blackouts were blamed on severe droughts which limited hydroelectric production, recent power failures are largely due to the nation’s inability to meet rising demand.

Measures to lower electricity consumption have been implemented by the government through financial incentives.  Consumers who reduce energy use by 10 percent in comparison to 2009 levels will receive a 25 percent discount on their electricity bill, while those who use 20 percent less will attain a 50 percent discount. However, those who use 20 percent more electricity in comparison to 2009 levels will be fined around 200 percent of their bill. In addition, commercial users are now required to install their own generating capacity or face surcharges and possible power cuts if they are unable to reduce consumption by 10 percent. 

The ramifications due to the government’s inability to increase energy supplies are affecting not only businesses but government credibility. Despite government plans to finance infrastructure improvements and add 9,000 megawatts to the national power grid by the end of next year, a lack of investment in the power sector has made the “to do” list extensive. In addition, allegations that the state-run utility company is plagued by corruption make doubtful the possibility of increasing generating capacity in the near future. 

The rise in utility prices and energy shortages have the potential to become a political liability for President Chávez. While desperately trying to avoid a repeat of last year’s energy crisis, the mandated energy saving measures could disrupt industrial production, while further rolling blackouts could hamper already declining oil output. With the 2012 presidential elections around the corner and President Chávez’s popularity already in decline, Venezuela’s recent energy problems may pose an additional challenge to Chávez’s bid for reelection.
 

Photo courtesy of Wikimedia Commons