Business Week: Lights Out in Venezuela

Although Venezuela has the region's largest oil and natural gas reserves, its electrical system has been neglected for years by successive governments. In April, large parts of the country, including the capital of Caracas, were without power for hours, resulting in chaos. Huge traffic jams clogged the city, subways did not operate, and many people were trapped in elevators. 'We are on the edge of a grave crisis,' says Andres Matas, a Caracas electricity analyst. 'We are on the edge of nationwide power rationing. Some parts of the country already have partial rationing, like in the east.' Venezuela has the region's highest power consumption per capita as well as the lowest rates, with about 40% of all users paying a subsidized tariff of about 80¢ per month for up to 200 kw/hour. When coupled with an economic expansion, the power demand is, not surprisingly, surging. 'Growth in annual power demand has been about 5% to 7% during the past few years, and we expect that to continue, particularly in a high oil-price environment,' says David Voght, an analyst with IPD Latin America, an energy consultancy in Caracas.