VZCZCXYZ0000
RR RUEHWEB

DE RUEHQT #1110/01 3172111
ZNR UUUUU ZZH
R 132109Z NOV 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0332
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHCV/AMEMBASSY CARACAS 0131
RUEHGL/AMCONSUL GUAYAQUIL
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO
RUEHSG/AMEMBASSY SANTIAGO

UNCLAS QUITO 001110 
 
SENSITIVE 
SIPDIS 
DEPT FOR WHA/AND, WHA/EPSC AND EEB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EINV EC
SUBJECT: GOE STRUGGLING IN FACE OF ENERGY CRISIS 
 
REF: QUITO 1026 
 
¶1.  (SBU)   Summary.  Shrinking reservoirs caused by a delay in the 
start of seasonal rains have reduced output of Ecuador's 
hydroelectric plants, causing a severe electrical power shortage 
and prompting the government to ration electricity usage throughout 
the country.  The government is negotiating to obtain energy from 
Peru, to finalize purchase of around 70 small generators from Cuba, 
and is reportedly buying  U.S. power generating turbines. 
President Correa has laid blame for the current predicament on a 
lack of foresight and investment by previous administrations, and 
global warming, for which he also blames the standard of living in 
the United States.  Commercial losses, estimated as high as $20 
million per day, are exacerbating Ecuador's economic recession, 
putting the government increasingly on the defensive.  End Summary. 
 
 
 
And Then the Lights Went Out 
 
¶2.   (U)   On November 5, for the first time in twelve years, the 
GoE began a series of on-going programmed power cuts throughout the 
country in response to a severe, nation-wide power shortage.  No 
warning of a potential energy shortfall was given to the public 
prior to the energy cuts, prompting widespread criticism as 
families and business scrambled to cope with the loss of 
electricity.  Local power companies have been posting information 
daily on their websites regarding scheduled outages by 
neighborhood, but they have not been reliable and outages are 
lasting as long as eight hours per day. 
 
¶3.   (U)   Despite announcements that the cuts would be targeted on 
residential, instead of industrial areas, businesses have been hard 
hit.  Quito's Chamber of Commerce has estimated the country could 
lose as much as $20 million a day as a result of the power 
rationing, with commercial output cut by 30-50%.  Businesses 
complain that a lack of timely, reliable information regarding the 
electricity rationing has made it impossible to plan and adjust 
operational/employee schedules.  Traffic and communication problems 
stemming from the power cuts, as well as safety concerns at night, 
have also dampened commercial activity. 
 
¶4.   (U)   The immediate cause of Ecuador's power shortage is a 
drought in the southern province of Azuay which has led to low 
water levels in reservoirs that feed the country's hydroelectric 
plants.  Hydroelectric plants account for about 45% of the 
country's installed power generation capacity, but actually supply 
most of its energy.  In 2008, of the 19,109 Gigawatt-hours of 
electricity generated in Ecuador, 59.1% was supplied by hydropower, 
and 38.3% from thermal electric power plants.  Currently, only 
about 834 Megawatts (MW) out of a total of 2056 MW installed 
hydroelectric capacity are reported to be operational.  The massive 
1075 MW Paute hydroelectric power plant in Azuay, which supplied 
33% of the nation's power last year, is only operating one of its 
ten turbines due to low water levels.  The relatively new San 
Francisco hydroelectric plant, seized from Brazilian firm Odebrecht 
in September 2008 for alleged construction flaws, is currently 
operating at only 90 MW of its 230 MW nominal potential capacity. 
 
¶5.   (SBU)  To make matters worse, the country's antiquated 
thermoelectric plants are running far below maximum capacity. 
There is about 2500 MW of thermoelectric power installed in the 
country, but only about 1880 MW are connected to the national grid, 
the remainder being private generation facilities usually for 
industrial purposes.  Of the thermoelectric power available for 
public use, news reports claim that 500 MW of capacity are totally 
off-line, with the rest operating below capacity.  Most of these 
thermoelectric plants are state-owned, run on fuel oil or diesel, 
and have long suffered from a lack of resources for purchasing 
replacement parts, fuel and needed maintenance.  Noble Energy's 130 
MW Machala Power and Duke Energy's 180 MW plants are considered two 
of the most efficient thermoelectric plants in the country 
(septel). 
 
¶6.   (U)  Last year Ecuador imported around 500 GWh of energy from 
Colombia, to supply about 2.5% of the country's total energy needs. 
However, imports from Colombia typically vary over the year 
depending on demand, and at times have accounted for 5-10 % of 
Ecuador's energy supply.  The GoE lost this important source of 
energy when at the end of September this year, Colombia announced 
it would restrict sales of electricity to Ecuador and Venezuela due 
 
to an impending shortage of energy in its domestic market caused by 
a lack of rain to fuel its hydroelectric plants (ref A). 
 
GoE Action: Too Little Too Late 
 
¶7.   (U)  On November 6, President Correa signed a presidential 
decree which established a 60-day "state of exception" for the 
electricity sector and outlined general measures to deal with the 
crisis, but fell short of a substantive solution to the problem. 
Decree 124 allows for the use of public funds to pay for imports of 
fuel for thermoelectric plants and calls for the Ministries of 
Defense, Transport and Public Works to prioritize the 
transportation of fuel to power generation plants.  The decree also 
calls for the relaxation of government procurement rules to allow 
for the timely purchase of goods and services needed to overcome 
the emergency.  Entities within the public sector which have 
generators are obligated to use them, as are private sector firms 
with generating capacity.  The government has restricted the hours 
of operation of nighttime businesses such as bars and discotheques, 
limited nighttime public events, and suspended sporting events in 
the evening, as well as instituted other energy savings programs. 
 
¶8.   (SBU)  According to the Minister of Electricity and Renewable 
Resources Esteban Albornoz, daily energy demand in Ecuador is 
running about 42,000 Megawatt hours per day (MWh/d) and the country 
is experiencing a generation shortfall of about 7,000 MWh/d, or 
around 17%.  The GoE is scrambling in a number of different 
directions to cover the gap.  In addition to touting the purchase 
of around 70 small generators from Cuba for use in the countryside 
(to be delivered in January), the GoE is negotiating the purchase 
of electricity from Peru, trying to lease power barges, and a 
delegation that traveled to Houston on November 11 is reported to 
be purchasing U.S. power generating turbines.  There is widespread 
expectation that the power shortage will continue in some form 
until the end of the year. 
 
¶9.   (U)  Once the rains start in earnest the immediate crisis may 
fade, but Ecuador will still be facing a tight energy picture 
through the next year.  The government has 17 energy projects in 
various stages of development which will eventually add 1,115 MW of 
additional capacity.  However, the large-scale projects, such as 
the 1500 MW Coca-Codo Sinclair hydroelectric plant and the 487 MW 
Sopladora plant are not expected to be operational until 2015 and 
2014, respectively, and energy demand has been growing at about 5% 
per year.  Four hydroelectric projects are currently under 
construction:  Mazar, Baba, Toachi-Pilaton, and Ocana.  The first 
to come on-line will be Mazar (February-March 2010) and Baba (end 
of 2010), but these will add only 160 MW and 42 MW, respectively. 
During his recent trip to Russia, President Correa signed an MOU 
for cooperation in the electric sector, more specifically for help 
with the construction and purchase of equipment for the 
Toachi-Pilaton hydroelectric plant.  The GoE is also reportedly 
seeking an agreement with Iran for construction of the Quijos-Baeza 
and Rio Luis hydroelectric plants to supply a combined 115 MW of 
energy by 2014. 
 
¶10.  (SBU)  During his weekly address on Saturday, November 7, 
President Correa said the country was facing its worst drought in 
40 years, and blamed the negligence of past administrations and 
global warming -- in part caused by the standard of living in the 
United States -- for the country's current energy predicament. 
However, analysts in the media have been critical of the government 
for not taking preventive measures during its close to three-year 
tenure, pointing out that the frail state of the country's power 
generating system has been well known for a long time. 
 
COMMENT 
 
¶11.  (SBU)  The Correa administration is clearly on the defensive, 
and for good reason.  Its approval ratings were already dropping 
due to a faltering economy, rising unemployment and crime, and 
allegations of government corruption.  Now the daily electricity 
outages, which are an inconvenience affecting all Ecuadorians and 
which are exacerbating the country's economic problems, could 
further reduce Correa's poll numbers.  The government has its spin 
machine running full tilt, extolling the Administration's efforts 
to deal with the crisis and casting blame on others.  However, we 
seem to have reached the point where government propaganda is 
losing its impact.  Coupled with the current, strong opposition to 
administration policies from university professors, students and 
indigenous groups, the administration is increasingly being called 
 
to account for its policies and actions.  The government's 
desperate scramble to improve the electricity picture indicates 
that it recognizes this political reality. 
 
CHRITTON 
CHRITTON