VZCZCXRO5988
PP RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHEG #2054/01 2621504
ZNR UUUUU ZZH
P 181504Z SEP 08
FM AMEMBASSY CAIRO
TO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 0506
INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 CAIRO 002054 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA CANEDO 
ENERGY FOR ERICKSON AND SPERLE 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EG
SUBJECT: ELECTRICITY DEMAND OVERWHELMS SUPPLY, LEADS TO 
POWER CUTS 
 
REF: A. CAIRO 1146 
     ¶B. CAIRO 1359 
     ¶C. CAIRO 1855 
 
Sensitive but unclassified. Please handle accordingly. 
 
¶1. (SBU) SUMMARY:  The independent press reports that power 
cuts and brownouts have made life uncomfortable in villages 
and towns across the Delta region since early August and 
railed against the government for failing to meet electricity 
demand outside of major cities.  Minister of Electricity and 
Energy Hassan Younes admitted that the government did not 
expect the rapid growth in consumption since late summer and 
confirmed that several short power interruptions had occurred 
across several governorates.  Embassy contacts note that the 
power cuts were organized by the Ministry of Electricity in 
advance but not publicized.  END SUMMARY. 
 
 
DEMAND HIGHER THAN EXPECTED 
---------------------------- 
 
¶2. (SBU) Minister of Electricity and Energy Hassan Younes 
admitted September 14 that interruptions in electricity 
supply had affected several governorates across the Delta. 
Younes said that unusually warm weather had pushed 
consumption of electricity up by 12% year-on-year over August 
and September 2007, significantly higher than energy 
analysts' prediction of 6-7% growth and said that the 
government had not anticipated this. 
 
¶3. (SBU) Mohamed Omran, first undersecretary at the Ministry 
of Electricity, told econoff that the ministry was addressing 
the gap between consumption and supply by cutting electricity 
to rural governorates outside of Cairo on a rotating basis, 
for two hours at a time, in order to fully meet demand in 
major cities and industrial areas.  He stated that press 
reports of day-long power cuts affecting hundreds of 
thousands in Gharbia, Suez and Damietta governorates were 
exaggerated but did not say whether the Ministry would 
announce power cuts in advance to affected communities.  The 
embassy's contacts in Gharbia confirmed that electricity 
supply was only interrupted for several hours and said this 
was due to an accident involving the main transformer in the 
area. 
 
MEETING FUTURE GROWTH 
---------------------- 
 
¶4. (SBU) The general manager of PGESCo, a major player in 
power plant construction and electricity generation in Egypt, 
which is partly owned by Bechtel, told econoff that 
electricity producers need 65 million British Thermal Units 
(MMBTU) per day of natural gas to generate enough power to 
meet current demand.  PGESCo estimates that demand will 
continue to grow by at least 6.5% a year for the next five 
years and electricity generation will require approximately 
93 MMBTU by 2012.  PGESCo said that the state-owned Egyptian 
Gas Holding Company (EGAS) has not provided electricity 
producers with enough natural gas to meet their requirements 
for the last six months.  EGAS made up the difference by 
giving producers imported fuel oil. 
 
 
CONSUMPTION PATTERNS AND CONSERVATION 
-------------------------------------- 
 
¶5. (SBU) Omran noted that the consumption of electricity grew 
exponentially amongst the poor and middle classes as the 
price of air conditioning units fell in the local market in 
recent years.  The price of electricity per kilowatt is low 
for most residential users, despite annual increases of 7% 
over the last three years, but prices vary substantially 
depending on whether the consumer is a residential, 
industrial or commercial user. (NOTE: Only residential users 
who consume less than 200 kilowatts per month are eligible 
for subsidized rates. END NOTE.) The ministry and the World 
Bank are reviewing the price structure for electricity and 
considering different tariffs for peak vs. off-peak hours and 
for different seasons.  Minister Younes announced on 
September 14 that the GOE planned to establish an agency and 
a national strategy to rationalize the use of energy and 
devise conservation strategies.  The agency will report to 
the cabinet. 
 
¶6. (SBU) COMMENT:  Although gas production is expected to 
 
CAIRO 00002054  002 OF 002 
 
 
grow over the next decade with the advent of new on- and 
off-shore fields, it is likely that the GOE will need to 
import natural gas or more refined petroleum products like 
fuel oil within the next five years, in order to ensure 
sufficient electricity generation.  (See refs A, B and C.) 
The use of imported gas or fuel will drive up production 
costs substantially if the GOE passes on these costs to 
electricity generators and distributors.  Demand is expected 
to keep growing in Egypt as the population grows and economic 
growth remains high.  Also contributing to the growth in 
demand is an increase in consumer credit for items such as 
air conditioning units. 
SCOBEY