Lebanon’s electricity overhaul begins

After long suffering from chronic electricity shortages, mounting financial losses, and repeated reform attempts that failed to produce lasting change, Lebanon has taken what could become one of the most consequential steps in overhauling its power sector. The Council of Ministers has approved a comprehensive electricity reform policy that lays the groundwork for restructuring Électricité du Liban (EDL), strengthening regulatory oversight, and gradually transitioning the country toward a competitive and financially sustainable electricity market.

Prepared by the Ministry of Energy and Water under the title “Electricity Sector Regulation, Transitional Framework and Long-Term Model,” the policy seeks to redefine how electricity is generated, transmitted, distributed, and regulated in Lebanon while addressing the structural deficiencies that have long burdened the country’s economy and public finances.

From emergency management to structural reform

Recognizing that incremental measures are no longer sufficient, the newly approved policy adopts a long-term institutional approach rooted in Laws No. 462 of 2002 and No. 318 of 2023. Instead of pursuing an immediate liberalization of the electricity market, the government proposes a carefully managed transition designed to strengthen institutions before introducing competition.

The policy acknowledges that Lebanon’s electricity sector currently lacks the technical, regulatory, financial, and institutional foundations required for a fully liberalized market. As a result, the reform follows a phased model that prioritizes governance, operational efficiency, and regulatory capacity before separating market activities and opening the sector to greater private participation.

Central to this transition is the activation of the Electricity Regulatory Authority (ERA), which will play an independent supervisory role in overseeing market operations, ensuring transparency, and regulating future participants in the electricity sector. The Ministry of Energy and Water and the ERA have also been tasked with jointly preparing a unified implementation roadmap that will establish clear timelines, legislative requirements, and operational milestones for carrying out the reform.

Unlike previous reform initiatives, which often focused on short-term electricity production, this policy places institutional restructuring at the heart of the modernization process, recognizing that sustainable electricity supply depends not only on increasing generation but also on building an efficient governance framework.

A two-phase roadmap toward liberalization

To avoid disrupting electricity services during the reform process, the policy introduces a gradual transition based on two distinct phases.

The first phase focuses on transforming EDL into a single public joint-stock company (Public SAL). Under this model, EDL would continue overseeing electricity generation, transmission, and distribution as an integrated entity while operating under enhanced corporate governance standards and independent regulatory supervision. Although the company would remain publicly owned, the new structure is intended to improve operational efficiency, strengthen financial accountability, and prepare the institution for future restructuring.

During this transitional period, the government also plans to establish a specialized unit responsible for developing the “single buyer” mechanism. This entity would eventually purchase electricity in bulk from various producers before supplying it to distribution operators, creating a more organized and transparent wholesale electricity market.

The second phase represents the long-term vision for the sector. Rather than maintaining a single vertically integrated utility, electricity activities would be legally and operationally separated into specialized entities. Independent generation companies (GENCOs) would compete in electricity production, while a dedicated transmission company (TRANSCO) would manage the national transmission network. The single buyer would become an autonomous legal entity, and regional Distribution System Operators (DSOs) would assume responsibility for delivering electricity to consumers across different parts of the country.

This functional separation is designed to improve transparency, increase efficiency, and create the conditions necessary for fair competition without compromising the reliability of the national electricity system. Importantly, the policy also specifies that existing contractual arrangements and concessions will remain in force throughout the transition, minimizing legal uncertainty while allowing reforms to proceed gradually.

Building investor confidence and strengthening governance

Beyond restructuring EDL, the reform aims to establish a regulatory and institutional environment capable of attracting long-term investment. Lebanon’s electricity sector has historically suffered from regulatory uncertainty, political interference and corruption, as well as inconsistent planning; factors that have discouraged both domestic and international investors.

By activating the ERA and clearly defining the respective roles of policymakers, regulators, and market operators, the government seeks to introduce greater transparency and predictability into the sector. A stable regulatory framework could encourage investment in new generation capacity, renewable energy projects, transmission infrastructure, and advanced distribution technologies.

The policy also highlights that any future legislative amendments required to complete the transition will be pursued separately through the appropriate parliamentary process, ensuring that reforms remain legally sound while avoiding unnecessary disruption during implementation.

A sector long in crisis

Lebanon’s electricity sector has long been regarded as one of the country’s most pressing governance and economic challenges. For years, EDL has operated as a vertically integrated public monopoly, controlling more than 90% of the country’s electricity generation and distribution assets. Despite this dominant position, it has consistently struggled to meet consumer demand.

Under the best operating conditions, EDL currently provides only between 8 and 10 hours of electricity per day, while national demand remains nearly three times greater than the available supply. The persistent gap between supply and demand has forced households, businesses, hospitals, and industrial facilities to rely heavily on private diesel generators, creating an expensive parallel electricity market that now supplies roughly two-thirds of Lebanon’s electricity consumption.

These long-standing deficiencies stem from years of previous policies and management decisions that accumulated over time under former ministers, rather than from the current administration's handling of the electricity sector. In this regard, the policy paper identifies several structural weaknesses that continue to undermine the sector’s performance. Technical and non-technical losses (including aging infrastructure, inefficient transmission networks, electricity theft, and illegal connections) account for approximately 40% of all electricity delivered through the national grid. Meanwhile, billing and collection remain another major obstacle, with collection rates hovering around just 60%, significantly weakening EDL’s financial sustainability.

These deficiencies have contributed to years of financial deficits, requiring repeated government subsidies while discouraging investment in modern infrastructure. Rather than functioning as a reliable public utility, the electricity sector has become a major source of fiscal pressure and a constraint on Lebanon’s broader economic recovery.

In this sense, therefore, for millions of Lebanese citizens who have endured years of daily power shortages and costly dependence on private generators, the aforementioned reform offers cautious optimism. If the government succeeds in translating its roadmap into tangible improvements, the initiative could finally begin to restore confidence in one of Lebanon’s most vital public services while supporting the country’s broader economic recovery.