Cablegate: Record Breaking Electricty Production

DE RUEHGB #3209/01 2671138
P 241138Z SEP 07




E.O. 12958: N/A

BAGHDAD 00003209 001.2 OF 002

1. SUMMARY: On September 16, 2007, the Ministry of Electricity (ME)
set the latest in a series of record-breaking electricity production
output levels. For the past five weeks the ME has sustained an
upward trajectory of power production, which holds the promise of a
new higher overall baseline power production level. System output
improvement is largely the result of USG reconstruction programs and
the effect of the Surge on repair efforts. In the coming fall and
winter months, however, the ME will need to temporarily close
generation facilities for planned maintenance. These "planned
outages" may curtail current production levels. To mitigate
curtailment, the Iraq Transition Assistance Office(ITAO), working
with the U.S. Army Corps of Engineers, Gulf Region Division (GRD) is
assisting the ME to re-route fuel from the plants closed for
maintenance to plants that are idle for lack of available fuel. The
Embassy is also helping the ME to facilitate the delivery of $150
million in diesel fuel that awaits transportation from Kuwait to the
Mussayib and Qudas power stations. END SUMMARY.

New Record Highs

2. The ME set its all-time electricity output record on September
16, 2007. The system produced 123,430 megawatt hours (MWH), which
met 60% of demand nation-wide and 46% of Baghdad's estimated demand.
Under the equivalent hours of power calculation, this level of
output translates into 11 equivalent hours of power (HOP) supplied
to Baghdad and 15 HOP to Iraq outside Baghdad.

3. HOP is an attempt to divide total power output over a 24 hour
period to establish some "quality of life" determinant that provides
a snapshot of electricity availability to typical consumers.
However, it can be misleading because the Iraq grid on a typical day
provides nearly 24/7 service to essential service customers, such as
hospitals, water plants and some government services facilities, via
dedicated lines. Some residential customers are also served by those
lines, which supplies them with more actual hours of available
electricity than residential customers not served off those
essential service lines. Further, in order to ration electricity,
the ME must employ rolling blackouts, which affect areas in
different way. Therefore, on a given day, some customers get more
power than others residing across the street, or across town. For
customers willing to pay, private generating units and neighborhood
suppliers offer a supplemental market apart from the grid. Some have
estimated that supplemental market provides as much as 25% more
available power to the market.

4.On September 11, 2007 the ME established a new system peak
capacity record of 5,530 megawatts (MW), the capacity equivalent of
supplying power around the clock to about 5.5 million homes.

5. By comparison, the ME's prior output record was set on July, 16
2006. That day the ME supplied 116,000 MWH, which met 34% of
Baghdad's demand and 50% of demand outside Baghdad. Under the HOP
calculation, production at that level supplied the equivalent of 8
HOP to Baghdad and 12.6 HOP to Iraq outside Baghdad.

Sustained Production Growth

6. Apart from setting new record highs, the ME has sustained a five
week period of production growth, which is now roughly 25% higher
than it was a month ago. During this run the ME has set and broken
twelve output and/or capacity records. And the grid has produced
capacity over 5200 MW every day since early August. For the most
part, the ME's production success is due to the effects of USG
funded reconstruction programs and the Surge.

7. The ME's current output trend may establish a new system
production baseline. However, in the short-run output could dip
because the ME will soon be shutting down generators to conduct
planned maintenance. The ME is working with the Mission to implement
actions to mitigate the output suppression effects the maintenance
outages may otherwise have on power supply. One is to examine the
feasibility of re-routing fuel that would otherwise be burned in the
plants closed for maintenance to plants that are now idle for lack
of any fuel to power them. Also, the ME, with USG assistance, is
working to secure delivery of $150 million of diesel fuel that it
has already purchased from Iraq's Southern Oil Marketing Company

The Reasons for Increased Electricity

8. There are five contributing reasons that account for current
production success; four are a direct or indirect result of USG
* USG-funded (IRRF) and managed (GRD/ITAO) Operations & Maintenance
(O&M) programs are yielding an additional 20% of output due to
operational efficiencies.

BAGHDAD 00003209 002.2 OF 002

* New Iraqi generation and USG-funded rehabilitated units have come
* Dura - Units 5 & 6 (180 MW)
* Qudas - Four Units (132 MW)
* Mussayib - Thermal Units (400 MW)
* Nasiriyah -Thermal Unit (150 MW)
* Mussayib - Gas Turbine commissioned (45 MW)

* The Surge has suppressed attacks on infrastructure and repair

* Capacity increases have marginally stabilized the network, making
it (slightly) more resilient to
conditions that would otherwise cause a shut-down.

* Finally, cooler weather allows generators to operate more


9. ITAO/Electricity hopes that current output levels reflect the
establishment of a new system production baseline. In the
short-term, however, the ME must soon begin shutting down some units
for planned maintenance. Therefore, unless the capacity lost to
maintenance can be replaced, current levels of output will
temporarily decline. There are two possible, realistic, mitigating
actions available to the ME. Currently, about 450 MW of capacity is
idled simply for lack of fuel. The ME has purchased from the
Ministry of Oil, through its SOMO production company, $150 million
of diesel fuel, the delivery from Kuwait of which has been delayed
pending resolution of a variety of transportation disputes.
Officials from our Iraq and Kuwait embassies, working with the ME,
are attempting to facilitate a resolution that will liberate the
diesel for the Iraqi power plants.

10. GRD and ITAO are also working with the ME to assemble the ME's
maintenance plan to assess the feasibility of re-routing fuel from
the shuttered-for-maintenance-plants to the idled-for-lack-of-fuel
plants during the maintenance period. Success with either or both of
these contingencies could provide sufficient capacity to substitute
for that lost to the planned outages and sustain the current
baseline levels. And, with cooler temperatures around the corner,
demand will ease, giving the ME some flexibility and relaxing some
stress on the network.


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