SUMMARY OF THE ELECTRICITY INDUSTRY IN VENEZUELA

The Venezuela of the last century saw a strong twilight arrive with the setting sun.
just stopped by the action of the clay lamps, with kerosene or coconut oil.
Some cities had lanterns on the corners, whose constant flickering served as
palliative so as not to leave the population covered in a cloak of shadow.

In 1888, Maracaibo was joyfully celebrating the centenary of the birth of the Zulia hero.
of independence, General Rafael Urdaneta.

In this sense, the Departmental Administration of the time, on June 1 of that year, celebrated
a contract with the businessman Jaime Felipe Carrillo, to install the lighting service
electric in the main streets of Maracaibo, starting from October 24, 1888, date
of the centenary festival of the Zulia hero.

The electric lighting service will be inaugurated on the set day, at six in the evening, and with
Hello the electric era in Venezuela, making Maracaibo the pioneering city in its use
of this service. Initiatives like this are subsequently followed in other regions of
country and all of them contribute to the shaping of the current National Electric Sector.

On June 4, 1889, a year later, the company The Maracaibo Electric Light Co. is
established in the city of New York and Mr. Jaime Carrillo appointed Superintendent
of the company in Maracaibo.

Starting in 1916, electricity service began to be offered 24 hours a day.

Eight years later, a Canadian consortium, Canadian International Power,
Acquire the company's shares and call it "The Venezuela Power Company."

The Venezuela Power Company changes its company name on May 16, 1940, C.A.
Electric Energy of Venezuela and begins the company's expansion into other areas
outside the city. Thus, the provision of the ENELVEN service not only covers Maracaibo,
but also the districts of Mara, Páez, Urdaneta, Perijá, Catatumbo, and Colón.

On October 29, 1976, the Venezuelan state, through the Investment Fund of
Venezuela, FIV, acquires the majority shares of ENELVEN which until that moment
remained in the hands of Canadian International Power.

As a result of this nationalization process, ENELVEN reaffirms its goals, whose

basic principles are summarized in: providing an efficient service to the community by
lowest possible cost; maintenance of a sound personnel management policy;
maintenance of a healthy financial status; and strict adherence to commitments
with suppliers, contractors, entities financial y governmental.
The imminent growth and development of the region leads ENELVEN to respond to the
the need for ongoing support of a reliable service and in this regard, the company
undertake large projects to meet future electricity demands. New
electric generation units are installed at the "Ramón Laguna" power plant,
Maracaibo. Along with them, the installation of gas turbogenerators at the 'Rafael' power plant.
Urdaneta, Urdaneta District; expansion of the 'Santa Bárbara' Central, in the District
Colón and Central "Concepción" in the Municipality of Jesús Enrique Lossada, Maracaibo District;
as well as the inauguration of the 'Casigua' Central in the Catatumbo District.
For the provision of an increasingly reliable service, and to use the resources more rationally
The country's energy resources, ENELVEN is currently interconnected with the system.
National Electric, through three lines of 230 thousand volts. These interconnections,
they interconnect the plants 'Ramón Laguna', 'Rafael Urdaneta' and 'Concepción', with the
National Electric System, covering the entire Western Coast System.

The application of modern work methods and management techniques, control and
optimization of available resources, and the special interest of all personnel
company for the quality of service, constitute the great endorsement to always provide a
efficient service to the community.

Basically, it has been the hand of the worker from the electricity company that has allowed
to write in golden letters, a brilliant story of a hundred years of constant efforts,
spirit of improvement and a firm willingness to serve alongside the worker, the support
the solidarity of the subscribers has served as a stimulus for this company, day by day,
reaffirm your commitment to provide the community with the necessary contribution for full
development and progress of the Zulia region.

importance of the electric industry

Electricity is one of the main forms of energy used in the current world.
Without her, there would be no proper lighting, nor radio and television communications, nor
telephone services, and people would have to do without electrical appliances that already
they became an integral part of the home.

Moreover, without electricity, transportation would not be what it is in the

Current events. In fact, it can be said that electricity is used everywhere.

Electricity is a manifestation of matter, produced by the atom and its

small particles called electrons and protons. These particles are too
small ones to see, but they exist in all materials.

The atom is made up of three types of particles: electrons, protons, and neutrons.
Protons and neutrons are located in the center or nucleus of the atom and electrons orbit.
in orbit around the nucleus.

The proton has a positive charge.

The electron has a negative charge.

The load of an electron or a proton is called electrostatics. The lines of force

associated with each particle produce an electrostatic field. Due to the way that
these fields interact, particles can attract or repel each other. The law of
electric charges say that particles with the same charges repel each other and the
Opposite charges attract each other.
ELECTRICITY PRODUCTION
The installed capacity for energy production could meet national demand,
however, the actual production is much lower. The lack of energy has had to be
covered with the purchase of energy from Colombia

ELECTRICITY CONSUMPTION

Until June 2008, the energy required to meet public demand was
8147.03 GWh. The purchase of energy from Colombia represents 5.4% of the energy
required to meet the public demand of Ecuador for the annually billed consumption
per capita consumption reaches 823 kWh, a figure that places Ecuador among the lowest consumers.
inhabitant of Latin America, this indicates the low level of industrialization of the country

PROBLEMS IN THE ELECTRIC SECTOR

After 10 years, it has been shown that the model used for the electric sector has not
It has been correct. A problem to solve is the poor management and that they need a process.
reengineering and professionalization. These changes must be focused on the structures
so that they can be adapted to the challenges expected by society.

energy collection problems

PLANNING
In this regard, the current government has made several changes to the legal framework and the plan.
electrification master (2007-2016). During this period, it has been planned to increase the
generation at 3826MW, with an investment of 4154.70 million dollars. The plan includes
the investment in alternative energies such as solar, geothermal, wind energy.

ELECTRICAL INDICATORS

Installed capacity
distribuciónClientes regulados 3.213,07 MW15.242,11 GWh21,09 %3´300.139.

THE ELECTRICITY INDUSTRY

provides the production and distribution ofelectric energyoften known as

electric powerin sufficient quantities for the areas that need itthe electricitya
through aa red.Many households and businesses need to have access to it.to electricity,
especially in thedeveloped countriesthe low demand that in the countries in
development. The demand for electricity arises from the need for it for
operation of household appliances, office equipment, industrial machinery and
provide sufficient energy for domestic and commercial lighting, heating,
the kitchen and industrial processes. Due to this aspect of the industry, it is seen as
a public service.
ELECTRICITY AS A BASIC INDUSTRY OF VENEZUELA

The importance of electrical energy is, nowadays, fundamental; it not only constitutes a
final consumer goods, but it is also an input in all processes
Production industries. Electrical energy is obtained in two ways:

1.- The thermoelectric plant, through the use of the thermal energy produced by the
burning of oil (or its derivatives), natural gas or coal.

2.- The hydropower plant, harnessing the hydraulic force contained in the riverbeds of the
rivers.

Both methods of generating electrical energy have produced the expected results.
for those who have used them, however, they are becoming more evident each day.
advantages that hydroelectric power has over thermoelectric energy: first of all, the
plants that harness energy from heat produce when burned
fuels necessary for generating it, vapors that once released have serious
implications for the deterioration of the environment in general, and in the increase of the effect
greenhouse specifically.

Secondly, the cost of the necessary industrial instruments for the

obtaining thermal energy, such as from burned fuel, whether it is oil, gas or
carbon is notably greater than the utilization of hydraulic power.

Finally, the limited nature of fossil mineral reserves (resources not

renewable) compared to the abundance of river flows (resource
renewable, although nowadays and increasingly, diminished by pollution, the
global warming and indiscriminate exploitation.

It should be noted, regarding the production and consumption of electricity, that although
it constitutes the optimal energy source available, but it has its limitations: the
impossibility of storing it and the difficulty it presents in transporting it beyond a thousand
kilometers, hence the need to produce it for immediate consumption and from an area
restricted.

Hydroelectric plant: Water falls, forced through large diameter pipes,

moves by the pressure it develops, the blades of the turbine, whose axis is
connected to the generator, the mechanism responsible for producing electricity.

The operation of hydroelectric plants is based on the start-up

of electricity-generating turbines driven by hydraulic power. With the aim of
To have water throughout the year, dams are built in hydroelectric plants.
to dam water in large artificial lakes.

The Crisis

The current national electric system does not currently have the capacity to meet the
demand. In other words, the system collapsed. There is a deficiency in generation, in the
transmission and ein the distribution,and all motivated by amanagementinefficient than in the
last 10 years I have not executedthe projectsscheduled and necessary to meet the
demand, which grew during that period by 3.3% year-on-year.

The crisis was already showing subtly in certain regions and cities of the country in which
they have been subjected to rationing or suspension for more than a year and a halfthe service
whatthe companiespublic agencies (mainly CADAFE) referred to as "suspension for
technical jobs.

On the other hand, the government createdor the Missionof

Energy in which about 52 were replaced
millions of incandescent bulbs, a topic that has already been discussed.

As we see, the government was aware of the crisis situation, so many times announced by the
experts and so many times denied by this. What exposed the government for the
followed by national blackouts (April 29 and September 1). The last one occurred on
Sunday, October 19 in the morning when the system load (demand) is
minimum...but ccoincided with amaintenancefrom two of the lines of the 800 Kv trio.
This demonstrated how fragile the national electrical system is.

The government has said that the crisis will be resolved in three months... nothing could be further from the truth.
truth.

Let us remember that it is necessary to install about 7000 MW in the next 5 years (1400 MW per
year). To get an idea, such annual generation capacity is equivalent tothe constructionof
a plant similar to 'Tacoa'. A plant of this capacity takes a construction time
for at least 3 years... not 3 months. To see the deterioration of Planta Centro,
click here

On the other hand, the current government "froze" thedevelopmenthydroelectric of Alto Caroni, (see
demand projection chart) so the future development of electricity generation
It will have to be thermal (Nuclear...don't even think about it since a plant of this type takes 15 years.
to build it). The fastest to install would be turbines togas4th generation type GE 9E
in frame 7.

Here arises a question: Where is the gas that will fuel these turbines?

When installing the missing generation capacity, a gas supply will be required to
feed these turbines about 1,400 million cubic feet per day (MMPCD).
The country, today, not including isyou volume, prethere is a deficit of 1500 MMPCD. In other
words, we do not have gas in the medium term. It would need to be generated, and eThe PlanSowing
Oil company, today has a delay of 3.5 years.

Another option would be to feed the turbines con hydrocarbonsliquids (read diesel). This
focus impliesa consumptionfrom 180 thousand barrels per day, volumes that would not go to
exportincluding thus the income ofcurrencies. Pon the other hand, it should be remembered that
every day theproductionCrude is less for feeding the refineries and they are not
working at full capacity... perhaps the option would be to import diesel, just like today.
import gasoline.

Another way to generate thermally would be Orimulsion™ or coal. In both cases, the
turbines would be steam (not gas)... and their installation and construction takes longer. With
Regarding Orimulsion™, we must remember that the regime eliminated it in 2003.
Regarding coal, in the mid-1980s, there was talk of a plant.
electric in Zulia called "Carbo Zulia". The studies indicated that it was necessary to
complement the zulian coal with metallurgical coke to enhance its quality.

We can indicate that regardless of the fuel chosen, the deficit

thermal generation can be covered, as early as between 3 and 5 years, working
strongly, an aspect that the regime has not given good indications. It is worth noting that for
the supply of fuels will be required, regardless of where it is installed
generacion, of systemsoftransport, docks,pipelines, multi-product pipelines andstorage
which complicates the situation even further.

Regardingthe investmentit is estimated at $360/KW, so each turbine of the

indicated above hasa costaround 54 million dollars. This must be added to the cost
for plant and equipment construction. A total estimate is set at $1000/KW, for a
total investment only in generation of around 7000 million dollars. It is also of
clarify, even having the availability ofthe money, thatthese teams are not in a
supermarket-type shelf...but they have delivery times, in some cases even more
of 2 years.

Regarding 'Distributed Generation', which the government has suggested as the

panacea, we can indicate that with the installation of 1000 MW con plantsof 15 MW of
capacity (67 plants in total) does not solve the problem in the short term. These units of
generation have been installed in isolated communities where today it is impossible due to
expensive to bring them electricity from the interconnected electrical system.

The logical approach is to install large generation centers, just as was done in the
the 1960s of the 20th century, when the hydroelectric development in Guyana was planned,
the construction of Planta Centro (CADAFE), of Tacoa (ELECAR) andRamein Laguna
(ENELVEN).

This planningmacro and national allowed that thepopulationVenezuelan will enjoy the
electricity 24 hours a day, and not in a partial way as is characteristic of generation
distributed, and that existed in many cities and towns ofVenezuelafor the time.
Well, this stage has already been overcome, this is what the government offers to alleviate the situation to which
has led us by its inefficiency in not executing the necessary projects to absorb the
growth of demand and not executingthe programsof maintenance that requires
a system as complex and fragile as the electrical one.
 Some government spokespersons have expressed that shared generation has been applied.
Cuba, and that has been successful. It may have been so... but, did Cuba have, or does it have a
electrification index like that of Venezuela, which (even today) is within the
older people in the world.

In other words, there is an industrial sector in Cuba like that of Venezuela (what remains);
he/she has aindustryofAluminumthat depends 100% on electricity; this is the sector
commercial and ofservicesas developed as in Venezuela; the Cuban population has the
artifacts and electrical equipment that the Venezuelan possesses, etc. The answer is NO. That is the
reason for the success of distributed generation in Cuba.

On the other hand, distributed generation is lostthe economyofscale, whichHe does it

whatthe costsincrease, and therefore the user will have to pay ainvoicehigher.
Likewise, due to being less efficient than steam turbines, gas-liquid turbines (if
dual ones) will use more fuel, and since their location will mainly be in
isolated populated centers from gas distribution systems or if they are close there is no gas,
these turbines would be powered by diesel, premium fuel in ethe market
international.

Another aspect we must consider is the suitability of the transmission systems and
distribution to placethe offerwhere the demand is located. For planning purposes
a directional sense is used that for every dollar invested in generation, it must be employed
0.33 dollars in transmission and 0.17 dollars in distribution andmarketing. This doese
that for an investment in generation of 1000 $/KW, the total investment would be on the order of
of the 1400 $/KW.

For the case we have analyzed in this document, regarding the need to install
around 7000 MW in the year 2012, the estimated investment would be 9800 million dollars.

This investment would need to include the replacement or upgrade of the current plants.
due to its obsolescence.