There’s A Well-organized Electricity Theft Cartel -US Ambassador McCarthy

United States Ambassador to Liberia, Michael McCarthy says the Americans have been informed by multiple sources that there is a “well-organized electricity theft cartel that benefits well-connected businesses and even government officials.”

The US Envoy to Liberia made the assertion assertion after a tour of the Liberia Electricity Corporation (LEC) power facility on Bushrod Island in Monrovia on August 26, 2021.

Addressing a press conference, Ambassador McCarthy said “we know that some LEC investigators trying to fix this problem have been harassed by some representing themselves as security officials.  This is absolutely unacceptable.”

As major investors in Liberia’s power sector, McCarthy said the United States Government is calling on “government officials to do everything possible to stop this corruption and prosecute the perpetrators, no matter how important they may be.”

“To sum up this situation, the LEC has lost $220 million dollars in the last five years alone to technical and commercial losses and unpaid bills.  That is money that could have been spent increasing the grid to provide electricity access for all.

Put another way, those who steal from the LEC are not robbing a deep pockets corporation, they are stealing from the Pro-Poor Agenda,” he stressed.

 

Read full text of Ambassador McCarthy Statement Below:

 

Ambassador McCarthy’s Full Remarks

Thank you all for joining us here today.

I just returned from a tour of the Liberia Electric Corporation’s facilities on Bushrod Island.  I’ll be honest, I was both impressed and discouraged by what I saw and heard.

LEC’s international management has greatly improved LEC’s operational readiness and facilities.  They were supported by donor funding, and they have the capacity to provide power to Liberians on a consistent basis.  Donors like the United States and the EU have contributed to more than 15,000 new connections over the last three years and project to connect another 160,000 households and businesses in the next two.

But as you all well know, reliable, consistent electricity supply is not the reality for most Liberians.

We just celebrated the end of our Millennium Challenge Corporation Compact earlier this year and the complete rehabilitation of the Mt. Coffee Hydropower Dam.  That Compact was a $257 million, 5-year effort to support Liberia’s development, especially its power sector.  Our goal in that effort, and every effort we make here, is to support the Liberian people—every person in every county, not just those living in Monrovia and not just the elite or those serving in the government.

Now, imagine the concern I, the EU, and other donor countries—as well as my colleagues in Washington, D.C.— have when we continue to see issues in the power sector so soon after the investment of hundreds of millions of dollars—if not more—in the sector’s development.

The first main message I want to communicate to you and all Liberians—which was reinforced by our visit to LEC’s Bushrod facility today—is that electricity generation, transmission, and distribution is very expensive.  Utilities around the world invest large sums in infrastructure, operations, and maintenance in order to ‘keep the lights on’—and they receive very low return on investment.  Liberia’s power sector is no different, except that it is losing money every day.

Take, for example, the Mt. Coffee Hydropower Dam, the largest source of power in Liberia.  Through the Millennium Challenge Compact, the people of the United States provided more than $150 million to rehabilitate that power plant.  That was a grant; it was not a loan.  It was a gift that Liberia never has to pay back.  To make that investment in Liberia’s future, sustainable, proper maintenance must be funded.  A lack of commitment will result in much larger sums of money needed to restart and rebuild the hydro plant again and no guarantee of where that money would come from.

In addition to the capital investments, it is very expensive to run an electric utility.  LEC needs staff, engineers, and customer service representatives.  It needs facilities like the one we visited today.  It needs wires, poles, trucks, and meters to make sure that the electricity generated reaches your home and is safe to use.  All of that costs money.

Nowhere in the world is electricity free.  I pay an electric bill at my home in the United States.  As Minister Tweah said last week, Liberia is no different: if you want electricity, you must pay for it.  Nobody has ever promised free electricity to the people of Liberia.

That brings me to my second message: More than half of all the electricity LEC generates is not paid for.  And each connection that isn’t generating revenue is a step toward the collapse of the electric grid.

I want you to look at this chart.

 

You are looking at the total electric supply, which has been steadily increasing since 2015.  Now, the green is the amount of that supply that was properly sold and paid for by LEC customers.  The gold is the amount of electricity that is either lost to unpaid connections—both commercial and household—or technical issues.

As you can see, about two-thirds of the electricity being generated by LEC does not result in revenue.  Without that revenue, how can LEC fix the technical issues?  How can they quickly respond to power interruptions?  How can they continue to connect more of Liberia to the power grid?

LEC is a public, government-owned utility, which produces regular reports on operating status.  In its latest report, the LEC reveals that it has not been current in its bills for years.  And that’s not because it’s been wasting money.  I believe the current international management team, which until very recently was paid for by the Millennium Challenge Corporation, has been running LEC as professionally and efficiently as possible.  The reality is that no utility anywhere in the world can survive where less than half of its electricity is paid for.  And LEC is no exception.  If LEC can’t resolve this power theft issue, it will continue to weaken financially, become even more dependent on government funding, and reduce reliability in operations.  This would in turn have a serious impact on the economic development of this country, which depends on reliable electricity, just like any other country, to attract new investments and grow the economy.  That is the level of seriousness we are facing.

I understand that the electricity tariff is expensive in Liberia.  In 2020, Liberians paid 49 cents per kilowatt hour for electricity.  For comparison, Americans spend about 13 cents.  The French pay about the same as Americans.  Ghanaians spend an average of 6 cents; Guineans pay an average of 10 cents; and Ivoirians spend an average of 12 cents.  Why are Liberians paying four or five times more for less reliable electricity?

The answer is because for each person that illegally connects to a power line, they are making everyone else underwrite the cost of power and making it harder to reduce the cost for those who do pay.  They are also making all connections less reliable, which will lead to even more maintenance costs down the road.  The only way to reduce the cost of electricity is for every LEC customer to be properly connected and to pay their electricity bills.

That brings me to my third message: Here and now, I call on every user of electricity in Liberia to pay their bills in order for the power sector to survive here.  We are passing out LEC’s mid-year briefing to all of you in attendance today for your reference on the situation.

As you will see, the first culprit here are those businesses in Liberia who are illegally hooking up their power.  Businesses use the most electricity, and those who are not properly paying LEC for the power used, are risking the complete loss of current and the possibility that their own business will shut down.

The second culprit is the individual who gets an illegal connection for his or her home.  If you are not using a connection with a meter that is legally installed by an LEC employee, then you are partly to blame for this situation.  And you lose your right to complain when your power goes out and you can’t run your fan or charge your phone.

The third problem area—and it pains me to say this—is the Government of Liberia.  The Government of Liberia is the largest customer of LEC electricity, and it is often behind on payments.  In addition, there have been zero—as in not a single one—convictions of businesses and individuals for power theft.  Considering the widespread nature of the issue, how can this be?

It’s not enough to say that the power theft situation is complicated, or that it’s hard to fix.  In order to protect our investments, and your future, and to set Liberia on the path to opportunity, we need to see action—payment of electricity bills, prosecutions, convictions—and we need to see substantial sentences and fines for power theft.  This needs to be a systemic focus—nothing will improve without a strong response across the judicial system, supported at the highest levels of the Liberian Government.  In his speech commemorating the delivery of electricity to Peace Island, President Weah called for this as well.

That is my fourth message to you today: I ask the Liberian Government and the people to take power theft more seriously.  Having invested so heavily in the power sector here, it’s not too much for the U.S. Government to ask that the Liberian Government do more to protect our investments and its own power sector.  We have been told by multiple sources that there is a well-organized electricity theft cartel that benefits well-connected businesses and even government officials.  We know that some LEC investigators trying to fix this problem have been harassed by some representing themselves as security officials.  This is absolutely unacceptable.  As major investors in Liberia’s power sector, we call on government officials to do everything possible to stop this corruption and prosecute the perpetrators, no matter how important they may be.

To sum up this situation, the LEC has lost $220 million dollars in the last five years alone to technical and commercial losses and unpaid bills.  That is money that could have been spent increasing the grid to provide electricity access for all.

Put another way, those who steal from the LEC are not robbing a deep pockets corporation, they are stealing from the Pro-Poor Agenda.

So, why is the U.S. ambassador sharing this information with you today?  We care about the development of Liberia and its people, and corruption and power theft are standing in the way of that development.

The United States has spent more than a billion—that’s a billion with a ‘B’—on Liberia’s energy sector in the last decade.  That is American taxpayer money.  Every American you see in Minnesota, in Georgia, in Texas, that is their hard-earned money being invested in your development.  How can we continue to justify that generosity when more than half of the power generated by that system is permitted to be stolen, with no consequences?

Addressing and fighting corruption is a top priority for the Biden-Harris Administration, and we are acting on this priority.  In June, President Biden named corruption a core U.S. national security interest.  In a White House statement, he said that “Corruption eats away at the foundations of democratic societies.  It makes government less effective, wastes public resources, and exacerbates inequalities in access to services, making it harder for families to provide for their loved ones.  Corruption attacks the foundations of democratic institutions, drives and intensifies extremism, and makes it easier for authoritarian regimes to corrode democratic governance.  Corruption is a risk to our national security, and we must recognize it as such.”

Weeks ago, President Biden announced the Summit for Democracy, which will bring together established and emerging democracies, civil society, and the private sector in December.  The three principal themes are defending against authoritarianism, promoting respect for human rights in our own nations and abroad, and, of course, fighting corruption.  Liberia is fortunate to be the oldest Republic on the continent, with a sound system of democratic institutions.  So today we are focused on fighting pervasive corruption, respecting the rule of law, treating every person with dignity, and championing opportunity for all.

The United States and Liberia have a long and enduring relationship, and we plan on keeping it that way.  Liberians sometimes refer to the United States as their big brother, but since we are 245 years old and you are 174 years old, I prefer the idea that we are old partners, and neither of us is perfect.  Sometimes true partners need to deliver tough messages.  That is why we are here today.  Corruption prevents progress, and we are in the business of building futures together.

To circle back to the Mt. Coffee Hydropower Dam, it was built in the 1960s with U.S. assistance.  After Liberia’s terrible civil conflicts, we and other donors rehabilitated that plant to become the incredible power generator it is today.  Today Mt. Coffee is the country’s most valuable fixed asset.  We want to help keep your lights on, your business running, your schools in session, and your clinics open.  We think Liberians want that too.  But that will take a commitment against the corruption of power theft from each and every Liberian, from the government down to each of you.  We urge you to do what is right.

Thank you!

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