Venezuela blackouts from bad planning, drought

* Demand up by a third in 6 years, new projects lag

* Chavez says drought only cause of rationing

* Government says electricity deficit now 12 percent

By Marianna Parraga

CARACAS, Jan 18 (Reuters) - A severe drought has forced Venezuela President Hugo Chavez to ration electricity in South America's top oil exporter, but underinvestment and shortsighted planning during an economic boom are as much to blame as the weather.

Cities and villages are without light for hours at a time since rolling blackouts began last week in a desperate bid to stop water levels dropping further in the dams that provide more then two-thirds of the South American nation's power.

The first day of electricity rationing in Caracas was particularly chaotic. Schools, medical centers, street lights and traffic lights were without power, forcing Chavez to order a suspension of the rationing.

The program follows a dozen unplanned outages that affected large swathes of the country, spotlighting a crisis stemming from a demand surge that has not been matched by new supply.

The government accepts mistakes have been made, but says the drought triggered the current crisis.

"Has there been a delay in some projects? Yes, that's true. Has there been inefficient management in some areas? That's true. But the only cause of electricity rationing is the drought," Chavez said last week.

At the end of 2009, a report by Edelca, one of the companies that form part of the state-run Corpoelec, predicted the collapse of the El Guri reservoir, which provides 44 percent of national demand, if the drought continues during 2010 and levels of consumption are not reduced.

Electricity demand has increased by 38 percent since 2003 to an average of 14,100 megawatts (MW) in 2009 after the country enjoyed five years of high oil prices and consequent economic growth.

Although the government has added new thermoelectric plants to the system, these are not operating at full capacity and the problem of over-dependency on dams, which satisfy up to 70 percent of consumption, has not been properly addressed.

Since last August, the climatic phenomenon of El Nino has affected hydroelectricity generation by reducing water levels in reservoirs.

"The electricity problem is the result of a lack of timely planning," said Angel Navas, president of Fetraelec, the union that represents 28,000 workers in the sector. "At this level we need large, coordinated solutions."

'BETTING ON RAIN'

Venezuela has the capacity to produce 23,600 MW, which ought to give it room for maneuver in handling peaks in demand, but its effective capacity is far less, say local analysts.

The government calculates the current national energy deficit as 1600 MW, or 12 percent, a good deal more than the 3 percent that was calculated in 2009.

As of the January 14, the principal thermoelectric generator in the country, Planta Centro, only had one of its five plants in operation, and therefore was functioning at just 14 percent of its capacity.

Some of the recently inaugurated plants, such as Josefa Camejo in Falcon, one of the states worst affected by power cuts, are only partly operating because of insufficient transmission capacity or lack of fuel.

"The management of electricity has been addressed by taking too many risks, making too many demands on the system and betting on rain," said Miguel Lara, former director of Caracas-based Office of Interconnected Systems Operation.

Other analysts blame the shortages on mismanagement since nationalizations in the sector in 2007, however strategic planning for electricity was the state's responsibility long before that.

Chavez last year created the post of electricity minister to try to bring order to the industry. He fired his first minister after the chaos in Caracas last week, replacing him with former finance minister Ali Rodriguez.

Rodriguez will be in charge of a $13 billion, four-year investment plan that includes many partially completed and severely delayed projects.

He is also charged with merging 14 electricity companies into a single state enterprise, launching an energy-saving scheme, speeding up the installation of new plants and fixing the transmission and distribution bottlenecks.

But problems in the sector including GDP sapping rationing will continue at least until May when the rainy season is due to start. If the drought deepens, things will get a lot worse.

(Writing by Charlie Devereux; Editing by Frank Jack Daniel, and Martin Golan)