It is universally recognized that electricity is a vital commodity and a key element for achieving economic and social development, as it has a direct impact on the lives of all citizens, as well as other sectors such as water, telecommunications, health, education, industry, and the service sector.

The electricity crisis in Lebanon is the result of the accumulation of several issues and the deliberate desire of the political authority to bring the sector to a collapsing point.  This situation affects all productive sectors as well as state finances, as the electricity sector in Lebanon has, for decades, been a major contributor to the economic and financial crisis that the country is suffering from. Successive governments have failed to properly address this issue, both from a technical and political perspective.

Contrary to what many stakeholders, legislators, and specialists believe, Lebanon does not lack laws regulating the production and distribution of electricity. The country has enough laws and decrees. Were they to be implemented, the electricity sector would have overcome the crisis it suffers from today.

This paper reviews the laws, decrees, and regulations that deal with the electricity sector in Lebanon.

Law Establishing the Electricité du Liban (EDL)

In 1964, Decree No. 16878 was issued, establishing the EDL. The EDL was entrusted with the production, transmission, and distribution of electrical energy on all Lebanese territories, and was to be a national public institution of an industrial and commercial nature, i.e. an institution that operates according to the principle of profit and loss. The decree required the transfer of all electrical installations invested by public (e.g., government and municipalities) and private (e.g., companies) entities to EDL. The decree also requires the transfer of ownership of concessions or licenses for the production, transmission, and distribution of electricity to EDL upon expiration or cancellation, in addition to the production, transmission, and distribution facilities implemented or to be implemented by the Ministry of Energy and Water or by the Council for Development and Reconstruction upon their completion. In addition, the decree gave exclusivity to the EDL, preventing any individual or company from being given any concession, license, or permission to produce, transmit, or distribute electric power, or to renew or extend it for any reason whatsoever. However, it allowed individuals and companies to produce electricity for their own needs, provided they did not distribute it to others.

Despite this absolute exclusivity, the decree allowed the EDL to lease the investments entrusted to it on a transitional basis for a maximum of five years, starting with the issuance of the decree or the transfer decision, subject to the approval of the Minister of Energy and Water.

Before the outbreak of the war in Lebanon (1975-1990), the EDL succeeded in securing electricity and owned several thermal and hydroelectric production plants, in addition to its close and fruitful cooperation with all concessions, both those that produced electricity and those that distributed it, in addition to purchasing electricity from the Litani River National Authority, which produces electricity through hydroelectric plants. However, the repercussions of the war and the official and political neglect of the sector and its lack of development led to bad repercussions on the EDL, and on the sector as a whole. The philosophy of creating an independent public institution of an industrial and commercial nature, i.e. an institution that operates according to the principle of profit and loss, has disappeared for many reasons, the most important of which are:

• Direct political interference in the appointments of the EDL’s board of directors, which is responsible for managing the institution: The board consists of seven members, including the chairman of the board, who are all appointed for a renewable three-year term by a decree adopted by the Council of Ministers upon the proposal of the Minister of Energy and Water. The minister also appoints a government delegate who attends the EDL board meetings and has the right to vote. The Financial Controller, appointed by the Minister of Finance, attends in an advisory capacity and has no right to vote.
• Mixing the positions of chairman of the board of directors and general manager into one person, while the organization’s statute and the decree on the general system of public institutions are clear about the responsibility of public institutions, which is through a decisive authority of the board of directors headed by the chairman, and an executive authority headed by a general manager who can attend board meetings without the right to vote.
• Contrary to Article 8 of Decree No. 16878, which gives the corporation the right to set electricity tariffs in accordance with the requirements of the investment it makes and to contribute a reasonable percentage to the financing of the employment needed to develop its activity, the Council of Ministers took this power and became subject to political tensions, preventing the establishment of a fair tariff for both the consumer and the continuation of the corporation's work, so the electricity commodity became a great burden on the treasury and was one of the main reasons for the financial collapse of the state.
• Political clientelism dominated the EDL’s appointments.
• The destruction of the EDL’s main building as a result of the Beirut port explosion on 4 August 2020 and the resignation of many of its technical staff due to the financial crisis that has gripped Lebanon since 2019.

Electricity Sector Regulation Law

In 2002, Law 462 was issued to regulate the electricity sector as part of the reforms that the international community demanded from Lebanon at the Paris Conference held to give Lebanon a series of aid packages. The Lebanese parliament approved a series of reform laws, including the law regulating the electricity sector.

The importance of this law lies in that it is comprehensive and detailed, and is suitable as a framework law, from which complementary regulatory and executive laws and decrees can and should emerge:

• The law defines the functions of the Ministry of Energy and gives it clear and important powers.
• Separating the administrative and executive decision-making in the sector from political whims and issues, as is the case in all developed countries, by establishing a regulatory body for the electricity sector that enjoys legal personality and technical, administrative, and financial independence, and defining its tasks and powers, especially in how it grants licenses to the private sector to produce and distribute electricity.
• Transforming EDL into a company and/or mixed public-private companies for distribution and production in which the private sector can be a partner according to transparent and free rules that secure the interest of the state, attract respected international companies, and maintain competition that benefits the Lebanese citizen and the consumer in general.
• The law considers electric power a strategic and vital economic commodity and considers activities related to its production, transportation, and distribution as public utilities, each of which is functionally, administratively, and financially independent of the other.
• The law divided the production of electrical energy into two types:
• Private production, which is intended for the use of the private producer. To encourage citizens, the law exempts the establishment of production facilities for private use with a power of less than 1.5 megawatts, provided that the production processes take into account the requirements of the environment, and public health and safety. If private production exceeds this amount, the law gives the authority the right to grant permission to establish, equip, develop, own, operate, or maintain production facilities for private use, provided that the capacity does not exceed 10 megawatts.
• Public production, which is intended for sale, as the law gave the authorities the right to issue a license to closed companies to grant a concession for a maximum of fifty years to establish, equip, develop, own, operate, manage, or market devices within the scope of public services in the fields of production and distribution related to a capacity of more than 10 MW or the right to use the said devices under a financial lease contract.
• In order to ensure maximum competition, the law empowers the authorities to issue licenses for a maximum of fifty years, either by conducting public tenders for production exceeding 25 megawatts and distribution in areas where the number of energy consumers exceeds fifty thousand or by conducting solicitations for production not exceeding 25 megawatts and distribution in areas where the number of energy consumers does not exceed fifty thousand.
• In transportation: The law keeps the transmission of power as the property of the Lebanese state, i.e. the EDL or any other publicly owned company to which the ownership of the transmission equipment is transferred.
• Distribution: The law gives the right of distribution to a “privatized company(ies)” whose purpose is to carry out all or some of the production and distribution activities, and to carry out its activities after obtaining a license granted by the regulatory authority.

The above in-depth review of the law shows that it is comprehensive. Had it been implemented since its adoption in 2002, the electricity sector would have been one of the advanced sectors and not a burden on the state treasury. This is especially true since it combined the vitality of the private sector with the public sector's defense of the interests of the state and the consumer, maintained the centralization of power transmission, and granted decentralization in the production and distribution sectors. This allowed it to introduce competition to a sector in which the more transparent competition, the cheaper and more available electricity will be.

Between the Decree Establishing EDL and the Energy Regulation Law

With the lack of implementation of the Energy Regulation Law, Lebanon is faced with an unprecedented legal situation. On the one hand, there is a law that gives the EDL exclusivity in production, transmission, and distribution, and on the other, a law that breaks monopolies and opens the energy market to private-sector partnerships. However, in the absence of implementation decrees from the Council of Ministers, especially the naming of the regulatory body, the law was not implemented or there was no intention to implement it. Instead, the law was attacked by amending its Article 7 four times to temporarily substitute the Council of Ministers for the Regulatory Authority only in granting permits and licenses for energy production, although the powers of the Regulatory Authority are vast and complex and cannot be reduced to granting production licenses. Moreover, Lebanon's current issue lies not only in production but also in energy distribution and transmission. Unfortunately, due to political wrangling, this amendment has only been implemented twice, when licenses for wind energy production in Akkar and solar energy licenses were given to 10 private companies. Unfortunately, these projects have yet to see the light of day.

Decisions and Laws Breaking the EDL's Monopoly

With no application of Law 462, Lebanon has seen several decisions and laws that break the EDL's monopoly in the production and distribution sectors. Although they were few and ineffective, it is worth looking at them:

- The Waste Law:

In 2018, Law No. 80 on Integrated Solid Waste Management was passed, which authorized financing for waste disposal for private legal or natural persons, municipalities, and municipal federations. This includes owners of licensed solid waste treatment plants and/or final disposal centers, who can link the electricity produced at a price 15% lower than the average electricity sales tariff. The license granted by the Ministry of Energy and Water shall be revoked, withdrawn, or suspended if the licensee violates the conditions on which the license was granted, without any compensation to the violator. The mentioned price can be modified by a decree adopted by the Council of Ministers based on the proposal of the Ministers of Energy, Water, and Environment.

Although this article breaks the EDL's monopoly over the production process, it gives the power to issue licenses to the Ministry of Energy and Water, without any mention of the regulatory body that is supposed to be established according to the Energy Sector Regulation Law. It also gave the Council of Ministers the power to amend tariffs based on the proposal of the Ministers of Energy and Environment, although the latter has no role in issuing licenses. It is worth noting that this article has not been implemented to date, and therefore no electricity has been produced by the waste disposal plants.

- Net metering

In 2011, the EDL issued Decision No. 318-32 that allows consumers who produce renewable energy to export the excess renewable energy they produce to the EDL's electricity grid, enabling them to benefit from a discount on their electricity bill or what is known as Net Metering. This decision is renewed annually by the EDL's Board of Directors and the approval of the Ministers of Energy, Water, and Finance.

The importance of this decision lies in the fact that it encourages individuals to produce clean energy, the surplus of which is transferred to the public grid, thus reducing the burden of the consumer's electricity bill, as well as reducing the production of electricity through fossil fuels.

- Distribution Service Providers Project:

In 2011, private companies were introduced into the electricity distribution sector, which is monopolized by the EDL under its founding law and has become known as the Service Provider Project. This project, which divided Lebanon into four regions, was supposed to end in 2016, but it was renewed until now. This decision aims to allow private companies to replace the EDL in rehabilitating networks, installing smart meters, reducing non-technical waste, improving billing, and securing collections.

The Law Regulating Distributed Renewable Energy

In 2023, Law No. 318 was issued to regulate distributed renewable energy. This law is of great importance to the electricity and renewable energy sector in particular and is the result of many years of work dating back to 2019. The importance of this law lies in the fact that it allows the private sector to produce and sell renewable energy in quantities of up to 10 megawatts. In addition, the law allows any household with renewable energy panels to do what is called an “energy exchange” with the EDL, which means putting surplus electricity produced by renewable energy systems on the public grid. A monthly tally is made by offsetting the amounts consumed and produced, based on which the citizen pays his bills and receives a financial allowance from the state. The law also allows the establishment of shared solar energy systems between neighboring buildings, universities, and residential buildings located within the same geographical area. The law also allows the owner of the same property in different real estate areas to benefit from the renewable energy produced in one of his properties by transferring the renewable energy produced.

The law also allows municipalities and federations of municipalities to establish solar fields and sell the energy produced from them either directly or through the private sector to residents within the municipality's geographical area. By doing so, communities have solar fields that benefit all residents and help achieve electrical justice and 24/7 electricity, reducing the burden of using polluting and expensive private generators.

In addition, the law gives producers and consumers the right to make direct purchase contracts without the need for an intermediary, i.e. without the intervention of the ministry or the EDL. As for importing power from one region to another, it is also allowed through the use of the EDL's network. In this case, a so-called transit fee is imposed, which the consumer pays to the EDL.

This law is an important step in breaking the EDL's monopoly on the production process, incentivizing reliance on renewable energies, and encouraging private sector investment in the clean energy sector due to the financial returns that can be achieved. If implemented, the law will bring Lebanon closer to fulfilling its pledges to international bodies by 2030, including reducing greenhouse gas emissions by 30 percent and producing 30 percent renewable energy, thereby reducing the use of fossil fuels and dependence on private generators.

This law also establishes a general directorate within the EDL to deal with renewable energy, which is a first in the history of the organization.

The main objective of this law is to incentivize the private sector to invest in the renewable energy sector without the need for any permits or intermediaries, thus reducing the bureaucratic burden on the private sector and the financial burden on the state. Unfortunately, the original draft of the law was amended to make its implementation contingent on the establishment of the non-existent Electricity Regulatory Authority, which should have been appointed in 2002. Consequently, there are fears that the fate of the law will be similar to that of Law 462 or subject to jurisprudence that distorts its content and becomes a tool in the hands of politicians.

In short, Lebanon suffers from several issues that contribute to the decline of the electricity sector, whether in terms of energy production, transmission, or distribution:

• Lack of electricity production: Lebanon's electricity plants do not produce enough power to meet the needs of the population, businesses, and factories, resulting in frequent power outages.
• Deteriorating and outdated infrastructure: Most of Lebanon's power plants and distribution networks are corroded and old, which increases technical waste and malfunctions when transmitting power.
• Inadequate maintenance: Power production, transmission, and distribution plants lack regular maintenance, leading to an increase in breakdowns and rationing.
• Corruption and mismanagement: The electricity sector suffers from high levels of corruption and mismanagement, which leads to wasted resources, inefficient investment of funds, and prevents service improvement.
• Dependence on fossil fuels: Lebanon relies mainly on fossil fuels to produce electricity, which makes it vulnerable to rising fuel prices and market fluctuations in addition to the increase in environmental pollution and the health impact on citizens.
• Accumulated debts: EDL suffers from large debts because of its inability to adequately finance its operational and investment needs.
• Neighborhood generators: Many Lebanese resort to using private generators or subscribing to neighborhood generators, which now cover all Lebanese regions, to cover the shortage of electricity, adding additional burdens on subscribers.
• Lack of collection and non-technical waste: Many Lebanese refrain from paying their electricity dues and bills. The main reason for this reluctance is the lack of seriousness in issuing and collecting bills, in addition to the absence of a political decision to prevent participants from hanging on the grid, which leads to significant non-technical waste and incurs more financial losses for EDL.
• Lack of enforcement of laws: The Lebanese are still impatiently waiting for the implementation of Law 462, issued in 2002, which regulates the electricity sector. Since the sector is still subject to political wrangling, it is not possible to implement this law and other reform laws, such as Law 318, which was issued in 2023 and relates to the regulation of distributed renewable energy.

This research confirms that the issue with Lebanon's electricity sector has never been the absence of laws, but rather the lack of intention to implement them.