Re-engineering Iraq

U.S. and Iraqi officials have spent billions on restoring Iraq's electrical system. So why is Baghdad getting just 6 hours of electricity a day?

"We had an incident", the engineer tells me.

These four words get your attention in Iraq.

We're in the northern outskirts of Baghdad, in a spotless white conference room at the new Quds power station. We're out in the Red Zone, the area surrounding central Baghdad's massively guarded Green Zone enclave. There are probably people nearby, perhaps as close as the sprawling crude-oil pumping facility across the road, who would kill us if they got the chance. That's why we've arrived at the plant in two convoys, each with three heavily armored SUVs and a security contingent of eight men outfitted with assault rifles, grenades, body armor, radios, electronic beacons, navigational and medical equipment, and other gear.

It's a lot of men, guns, and hardware for a routine meeting at a power plant. But the statistics bear out the caution. As of this past November, at least 412 civilian contractors had been killed in Iraq, according to U.S. Department of Labor figures cited in a recent report to the U.S. Congress. Scores more had been injured or kidnapped and released. The contractors included all kinds of workers: engineers, security agents, truck drivers, even cooks.

To put the figures in perspective, there are well over a thousand engineers in Iraq working on reconstruction, [see " "] several thousand if you include military and Iraqi engineers. About 2000 of some 3200 projects have been completed, according to U.S. government figures released this past autumn. The projects range from the refurbishment of schoolrooms to the construction of airfields and huge new transmission substations. As of fall 2005, the United States had spent or committed more than US $20 billion to the effort, other countries had pledged $13.6 billion, and Iraq itself had contributed about $24 billion, including seized assets of Saddam Hussein.

It would be hard to find another endeavor, anywhere, anytime, in which so much was asked of engineers, personally and professionally. Never before has so vast a reconstruction program been attempted in the face of enemy fire or managed in the shadow of geopolitics, where infrastructure itself became a battleground.

Insurgents were blowing up electrical transmission towers at an average rate of two a day this past August, and Iraqi workers and foreign contractors were risking their lives to put them back up. Throughout reconstruction, projects have gotten funds, lost them, and sometimes even gotten them back again, according to changes in the prevailing political winds. Generating plants have been built that can't be fueled; a water pumping station repaired for $225 million was rendered useless by countless leaks in the pipes connected to it. Five distribution substations were built for $28.8 million, but they'll sit idle for years because the infrastructure to tap into them hasn't been started yet.

These are the kind of developments that compelled me to come here, not only to Iraq, but to this particular power plant. Its technology and its array of problems make the Quds power plant emblematic of the potential and pitfalls of the electrical reconstruction so far. Even the morning's ride out to the plant is a quick lesson in the logistics of getting around Iraq. Before stepping into the armored vehicles, I give my full name, Social Security number, and blood type to the leader of our security team, who dutifully files the information for use in the event that the morning's ride doesn't go well. Then I wriggle into my body armor and don a Kevlar helmet for the 45-minute ride out to the plant.

Around the time we pass through a checkpoint and leave the Green Zone, security agents in the engineer's convoy, which had left about a half-hour ahead of mine, are shooting out the radiator of a car that had aggressively approached the convoy, ignoring repeated warnings to back off. The rear SUV in the three-vehicle convoy had the standard orange warning, in big Arabic script as well as in English, telling drivers to stay at least 100 meters from the vehicle. When cars got too close, a security agent in the rear SUV went through a series of actions to try to get the driver's attention: first waving an orange flag, then firing a small incendiary known as a pin flare at the road in front of the oncoming car, and then firing warning shots into the air. But one driver kept closing in on the trailing SUV. The next step in the sequence was firing at the radiator until the car stopped. The car's driver wasn't hurt; indeed, he is even eligible to file a claim for compensation for the damage to his car.

All of the money pledged so far for Iraq's reconstruction adds up to roughly $60 billion, according to a report last July by the U.S. Government Accountability Office (GAO). U.S. officials whom I interviewed in Iraq this past October said that the current consensus was that the final tally might be as high as $100 billion. For comparison, in the first two years of their reconstruction after being devastated in wars, Germany, Japan, Haiti, Bosnia, Kosovo, and Afghanistan together received a total of $25.6 billion, in 2003 dollars, according to the United States Institute of Peace, a congressionally created organization devoted to conflict resolution. The first European Recovery Program, known as the Marshall Plan, which rebuilt much of Western Europe after World War II, spent the equivalent of about $90 billion in today's dollars between 1948 and 1951.

The huge reconstruction program in Iraq has five main parts: security and justice; electricity; water; oil; and a catch-all category that includes transportation, telecommunications, buildings, health, and education.

According to last summer's GAO report, some $5.7 billion had been spent on work in the electrical sector in the two years prior to spring 2005. That total included $4.9 billion in U.S.-appropriated funds and $816 million in Iraqi money. What that investment bought was, among other things, the addition or restoration of several thousand megawatts of generating capacity (although at any given time less than half of it is actually available on the grid), several hundred kilometers of new or refurbished transmission lines, one new and one rebuilt transmission substation, and 44 new or improved distribution substations.

Still, there's a long way to go. According to the latest figures, the country's 173 generating units, spread among some 35 power plants, can reliably produce just under 5000 MW at peak periods. That falls well short of peak demand, which was estimated to be 8845 MW last summer and is expected to be 10 000 MW next summer.

Most officials, Iraqis included, agree that there is more power available in Iraq now than there was before the 2003 war. However, that fact is less germane than most people realize, because the allocation of electric power has shifted seismically, and more or less in sync with the shift in political power. Basically, parts of Baghdad and central Iraq now get much less power than they did before the war, while parts of the south and north actually get considerably more.

For many years, the mainstays of Iraq's electrical capacity were steam generating plants near the huge oil fields in the south and hydroelectric plants in the Kurdish regions in the north [see map, " "]. Relatively few plants were concentrated around Baghdad, where most of the demand was. So to keep parts of the city energized close to 24 hours a day, as Saddam wished them to be, operators had to black out different parts of the Shiite south and Kurdish north on a rotating schedule.

Rotating blackouts are still a way of life in Iraq's electrical sector, but now they're not done for Baghdad's benefit. The city still gets about half of its power from the north and south, but these days city residents get anywhere from 6 to 9 hours of electricity a day, compared with about 15 hours for people living in Basra.

In the most recent survey by the International Republican Institute, a prodemocracy advocacy group in Washington, D.C., 2200 Iraqis were asked which of 10 different problems "requiring a political or governmental solution" was most important to them. The first choice, by a margin of about 10 percent, was "inadequate electricity." "National security" came in fifth; the "presence of multinational forces" was seventh; and "terrorists" was eighth.

A popular if not universal idea is that a more robust electrical system would be a weapon against the insurgency; it's a concept the insurgents themselves have helped propagate by focusing so many of their attacks on the electrical infrastructure. Counterinsurgency, it has been said, can't really succeed without successful efforts to improve a country's political and economic base. And few analysts dispute the idea that one of the key obstacles to further economic progress in Iraq is its inadequate electrical system.

Never before has so vast a reconstruction program been attempted in the face of enemy fire or managed in the shadow of geopolitics

"If the electricity problem were to be resolved, it would be the catalyst for economic growth," an IEEE member in Iraq writes in an e-mail. "Social problems would ease tremendously, as power would be available during the extreme summer heat and for cooking and TV (allowing more access to news and international programs)," he adds. The member is an electrical engineer who has worked in Iraq on and off for two years under a contract with a U.S. government agency. (Like many other sources for this article, he would comment only on condition of anonymity.)

Editor's Note: An unusually large number of sources for this article are not identified. Iraqi sources had to be granted anonymity for their own safety, and many engineering contractors would speak freely only on condition of anonymity.

Not just its size and scope make the Iraqi reconstruction effort unusual. Administratively, it is also unlike anything else in recent history. In the electrical sector alone, four bureaucracies have a major role. At the top of this list is Iraq's Ministry of Electricity, the huge and monolithic government agency that, in theory at least, is responsible for everything related to electricity in the country, from running power plants to sending out bills.

Today, the Ministry of Electricity is one of several Iraqi agencies working primarily with three U.S. government organizations to operate, maintain, and improve Iraq's infrastructure. Two of these three U.S. organizations are temporary agencies created by a presidential directive in May 2004. One is the Iraqi Reconstruction Management Office (IRMO), which is part of the U.S. State Department. The other is the Iraq Project and Contracting Office (PCO), which was created specifically to oversee the $18.4 billion set aside by Congress in the fall of 2003 for Iraq's reconstruction. The PCO was recently absorbed into the U.S. Army Corps of Engineers, which had previously had a separate presence in Iraq.

IRMO staffers, working in the huge diplomatic maze in Saddam's vast former palace in Baghdad, advise key officials at such Iraqi ministries as Interior, Oil, and Electricity. They help them develop plans and strategies, set priorities, monitor spending, and coordinate with the U.S. military. The PCO, meanwhile, oversees contracting for big projects and supplies. But it is the IRMO, working with Iraqi officials, that has final say over how reconstruction money is being allocated. And in any case, the PCO, though now part of the Army Corps of Engineers, reports to the U.S. ambassador in Baghdad. So, ultimately, no large U.S.-funded projects can be undertaken in Iraq without the approval of the State Department.

The third U.S. bureaucracy involved in Iraqi reconstruction is the U.S. Agency for International Development (USAID), the government office created in 1961 to oversee nonmilitary foreign humanitarian efforts.

The huge reconstruction effort is divided not only by agencies but also by sectors and components within sectors. In the electricity sector, there are separate generation, transmission, and distribution components. Many of the most important generating projects have been under the auspices of the PCO; for many of these, the supervisory contractor has been a company called the Iraq Power Alliance [see sidebar, " "]. It is a joint venture of the engineering firms WorleyParsons Ltd., in Sydney, Australia, and Parsons Brinckerhoff Ltd., in London.

The engineering firms working in Iraq are among the world's best. The fees they've been awarded are huge even by the standards of big-project engineering. The engineers they've sent to Iraq are capable, hard-working, and often incredibly courageous, as I saw for myself during a 10-day stay in which I was granted access as unrestricted as the security situation allowed.

So, nearly three years after reconstruction began, why does Iraq's electrical infrastructure still fall short by 4000 MW?

There are a lot of reasons. Here are the fundamental ones:

A poor match between generating technologies and the kinds of fuels available in Iraq.

A well-armed insurgency that has made destroying electrical infrastructure a centerpiece of its bid to destroy the country's fledgling democracy.

Revenue levels coming into the Ministry of Electricity that are so low as to be insignificant, a function of a ruinously low rate structure and far too few electric meters actually recording how much power people are using.

Management and personnel problems at all levels of the government, including the ministry, which is generally believed to have thousands of fictitious employees created for the sole purpose of getting a paycheck cashed by someone else.

The erosion of operational and, particularly, maintenance skills among workers at the country's Ministry of Electricity.

On our way to the Quds power plant, we pass through Baghdad's northern outskirts in a three-car convoy. It's 9:30 in the morning on a sunny but not oppressively hot autumn day, and men, women, and children are out on the streets. Some of the women wear dark chadors, the traditional Islamic robes; some do not. Along the roadside here and there, vendors sit by big piles of watermelons or amid arrays of black plastic jugs of gasoline.

Traffic is moderately heavy. Jim Hawkins, an Army major sitting next to me in the armored Toyota Land Cruiser, points out a white-and-orange sedan whose tail is jacked up unusually high. It might be a future car bomb, he says. The improvised bombs made by the insurgents are heavy and are often based on explosives from artillery shells. So to avoid the suspicion that a car with a sagging tail end would arouse, insurgents often jack up the rear suspension of a car before they put a bomb in its trunk.

Behind me, I hear an occasional crack as one of the security team in the trailing Land Cruiser fires a pin flare into the road or a rifle shot into the air, warning an approaching vehicle to back off.

We come upon a traffic jam that seems to extend ahead for several kilometers at least (we can't see it at the time, but there's an Iraqi military checkpoint up ahead). With hardly any hesitation, our convoy swoops at high speed across the median to the other side of the highway, with traffic going in the opposite direction. Our driver, a young, thin, silent Brit in dark glasses, known as Fish, plunges into oncoming traffic. Happily enough, it makes way for us. "This is the first time I've ever done this sober," I joke nervously to Hawkins, who is unfazed.

Our driver, a young, thin, silent Brit in dark glasses, known as Fish, plunges into oncoming traffic

In the vicinity of the Quds complex, I notice several towering flare stacks across the street from the power plant, at an oil field called East Baghdad. Atop one of the stacks, an enormous orange flame indicates that natural gas pouring out of the oil deposits is being burned off steadily to keep it from exploding. Such flaring goes on continually all over Iraq. It is so widespread in the huge southern oil fields west of Basra that it actually fills the night sky with light.

The flaring is notable because if all that gas were captured, pressurized, and distributed rather than being burned off, it could be used to meet more than half of Iraq's demand for electricity. At the moment, Iraq is flaring more than 28 million cubic meters of gas a day. It's enough to fire at least 4000 MW of electricity.

The gas is sorely needed. Most of the generating units installed or refurbished so far during reconstruction--40 out of a total of about 57--are based on combustion turbines. They run optimally only when being fueled by natural gas, which few of them are at the moment. The rest are running on diesel fuel or heavy derivatives of crude oil left over after the more desirable fuel grades are separated out in refining.

Those more desirable grades of crude are shipped out of Iraq, to bring desperately needed revenues into the country. And the Ministry of Electricity pays the Ministry of Oil only a small fraction of the world-market price for the fuels it needs to generate electricity. Thus, the Electricity Ministry must be content with whatever it can get, and generally what it gets are fuels that few other utilities in the world would be willing to burn.

"The fuel situation is a mess," says Keith W. Crane, senior economist at the Rand Corp.'s Washington office. He was an advisor to Ambassador L. Paul Bremer, the civil administrator of Iraq after the war. "There are no prices, no incentives, nothing."

Diesel fuel, which isn't produced in sufficient quantities in Iraq, is trucked to the generating plants from Turkey at great cost. But that obstacle is nothing compared with the problems of the heavy fuels, including something called Bunker C, which powers a lot of Iraq's generating plants. Even under the best circumstances, a PCO generation specialist in Iraq tells me, a combustion turbine running on crude oil or diesel fuel requires two or three times as much maintenance as one running on natural gas. And present-day Iraq isn't an example of the best circumstances.

Before these heavy fuels can be burned in a combustion turbine, they have to be treated with a substance called an inhibitor to mitigate the effects of elements like vanadium that would damage the turbine blades. The inhibitor binds the vanadium to magnesium, to keep the vanadium from corroding the blades. Unfortunately, the resulting compounds are deposited on the turbine blades. So the units have to be taken out of service every week to have their blades cleaned.

"To buy inhibitor, in dollars per liter, is more expensive than crude," one engineer tells me. "Last summer," he goes on, "we bought all the inhibitor on the shelf in the world for a four-month supply in Iraq. Let me put it in simple terms: nobody's dumb enough to do what we're doing."

Iraq's 110 combustion turbines alone could in theory generate well over 4000 MW if they were being fueled by natural gas. So far, though, the actual output of these combustion turbine generators hasn't come close to half of that figure. At Quds, I begin to understand why.

Arriving at the Quds administrative building, the security team that got us there checks the building before we can go inside. After we get the all clear, I go upstairs, to the nicely furnished conference room, where I get a status report from the American engineer who arrived in the earlier convoy, the Iraqi plant manager, and two Iraqi engineers who have been brought out of retirement to help deal with the problems at the plant. I can't use any names, the Iraqis tell me, and I can't take their pictures, because they live in the area and would become targets for insurgents.

Quds has eight combustion turbines. Four are General Electric Frame 9s, rated for 123 MW burning gas or 90 MW burning crude oil or diesel. At the moment, three are running on crude oil and one on diesel fuel, filling the air with a whining thrum. The other four combustion units are General Electric LM6000s, rated on gas at 30 MW apiece. Engineers have tried to set them up to burn diesel fuel, but without success. It has been several months since any of them have run.

"The basic problem with Quds is, we have four LM6000s out there that essentially don't have a fuel supply," says a U.S. power-generation engineer who did a yearlong tour in Iraq. "We installed a third of a billion dollars' worth of combustion turbines that can't be fueled."

The LM6000 combustion turbines are a type known as aeroderivative. They are basically Boeing 747 turbines mounted on heavy stands. They work well on natural gas, but to run on diesel, they need high-quality fuel and a fair amount of operational sophistication, two things in short supply today in Iraq. "The first time I went to Quds and saw those LM6000s, the first words out of my mouth were, 'What the hell are those things doing here?'" says the generation specialist in Iraq.

There are two distinct accounts of how the LM6000s wound up at Quds. The power-generation engineer no longer in Iraq says that they were purchased partly as a result of a misunderstanding. The buyers had bought them thinking that their dual-fuel classification meant they could be powered by crude oil and natural gas. (In fact, it meant they could be fired by highly pure diesel fuel or natural gas.) When the bids were made, in September of 2003, "no one understood that the LMs can't run off crude," the engineer says.

However, representatives of General Electric Co. and the PCO strongly deny this account. They say that the PCO bought the turbines intending to fuel them with a "distillate" derived from the crude oil pumped at the East Baghdad facility across the street. They were stymied, they say, when it turned out that East Baghdad couldn't pump crude fast enough to give them distillate in sufficient quantities to run the LM6000s.

The LM6000s are supposed to run continuously for months at a time, to avoid the thermal shocks of being cycled on and off. Each of the four units has special tandem high-pressure filters, built by Westfalia Separator Deutschland GmbH, in Oelde, Germany, to remove impurities and debris from the diesel fuel. If one filter clogs, operators are supposed to switch on the fly to the other filter, allowing the turbine to keep running while the clogged filter is cleaned. But the plant's Iraqi operators have had trouble switching between filters, and at the moment three of the four units are damaged and unusable.

It may be just as well. If the operators could somehow manage to get all four LM6000s running continuously, they would consume a truckload of diesel fuel every 45 minutes, I am told. All of it would have to come down from Turkey. At $85 a barrel.

The LM6000s "need high-quality fuel, and a lot of care, and a lot of experienced people to run them," says one of the Iraqi engineers brought out of retirement. "Still, if you are in a sea and drowning, you will grab anything," he adds with a shrug.

Why not pay a few technicians from Westfalia to spend a couple of weeks here showing the Iraqis how to properly operate the filters? The American engineer gives me a patient, sad smile. It would cost at least $60 000 a day to do that, he estimates, if you figure in the costs of the security teams and everything else you'd need to provide safe lodging and transportation for the technicians.

Suddenly, that gas I saw being flared across the street at the East Baghdad field seems all the more wasteful. The gas from just that one flare stack could fuel two of the LM6000s, the American engineer tells me. I ask the obvious question: why aren't they building the pressurization system and short pipeline that could get the gas across the street to the combustion turbines?

It turns out that just before the first Gulf War, in 1991, an Italian company had installed all of the infrastructure needed to capture, dry, pressurize, and clean up the natural gas at East Baghdad. But when the war broke out the Italians fled before they could get the system running. The equipment has lain there ever since, unused and sinking into disrepair.

In 2004, $50 million of Iraqi money was set aside to refurbish the gas equipment at East Baghdad. Another $250 million was earmarked to reconstruct gas pipelines and compressors to move gas from the huge southern oil fields as far north as Quds. But the Ministry of Oil didn't commit to using the funds during that calendar year, so the money was transferred to the Ministry of Finance, as specified in the legal code then in effect in Iraq.

What happened to the $300 million then? "We have no clue," says the U.S. power-generation engineer, who was working in Iraq at the time and following the situation.

In the meantime, the insurgency has staged devastating attacks on pipelines, timed perfectly for maximum disruption. The attacks have made it impossible to undertake a large pipeline project today.

At Quds, though, no long pipeline is needed, because the gas comes out of the ground literally across the street from the power plant. So yet another project, called the East Baghdad Oil-Gas project, has been proposed to get the gas to Quds. Because the costs of buying and trucking diesel fuel from Turkey are so high, the projected $33 million cost of the project would be recovered within three months of completion, the generation specialist says. Still, the project was recently shelved as Iraqi and U.S. officials balked at its cost at a time when funds were being shifted to security. "It's insane," the PCO generation specialist in Iraq says of the decision.

The expert at the U.S. Embassy in Baghdad responds: "We're trying to negotiate with the Ministry of Oil to make [the East Baghdad project] a priority for them."

Why did reconstruction officials limit themselves to combustion turbines? After all, had they begun putting in at least a few steam-thermal plants in the spring of 2003, their fuel problems wouldn't be nearly as extreme as they are now. Combustion turbines and steam-thermal plants have fundamental differences. A combustion turbine is spun by the hot exhaust gases of a burning fuel; in a steam-thermal plant the fuel is burned to make steam, which spins the turbine. Only the steam, not the hot, corrosive exhaust, flows through the turbine. So it doesn't really matter what kind of fuel you burn to make the steam, and the plants require much less maintenance.

"When we were starting to rebuild," says one of the formerly retired Iraqi engineers now working at Quds, "the U.S. didn't take the advice of the Ministry of Electricity on where to build plants and what kind of plants to build. It was a shortcoming in planning."

The expert at the embassy offers a different view. He notes that the initial decision to begin installing combustion turbines in the country was made by Iraqi officials, not U.S. officials, well before the start of the 2003 war. Those Iraqi officials had used United Nations Development Programme (UNDP) money to buy a dozen combustion turbines--including the four GE Frame 9s at Quds.

But just because the Iraqis had started putting in combustion turbines doesn't mean the United States should have installed lots more of them, some experts contend. One U.S. engineer puts it bluntly: "It doesn't mean it wasn't a stupid thing to do." To the dozen combustion units the Iraqis had bought under UNDP, the rebuilders added, or are adding, 30 more.

Who decided to limit new generation plants to combustion turbines? "Absolutely everyone operating in Iraq at that time," says a former official of the Coalition Provisional Authority, which ran Iraq in the war's aftermath. The blame should be spread among the Army Corps of Engineers, USAID, PCO, CPA, the State Department--and also the Ministry of Electricity, this former official insists.

But other officials and engineers, not only Iraqis but a few Americans, too, say that the Iraqi Ministry's engineers were never happy with the plan to exclude steam plants. "The Iraqis, from the beginning, wanted steam plants," declares the U.S. power-generation engineer who was there at the time.

The perceived problem with steam plants, everyone agrees, was that they take three to five years to build. "Both the Iraqis and the U.S. wanted results in months (if not days) rather than years," the former CPA official writes in an e-mail. Combustion turbines can be installed in as few as 18 months.

"The decisions were made based on expedience, not technical soundness," the U.S. engineer concludes.

And, it seems, nobody was really thinking about how to fuel the combustion turbines. "The gas-infrastructure arguments started in late February 2004"--months after the turbines were ordered, that engineer recalls. "Prior to that, there was no champion for gas. The assumption was that there would be fuels available. It wasn't until February of '04 that they realized that there were going to be severe fuel problems."

By that time, a senior CPA official, Robyn McGuckin, saw the coming crisis and tried to channel funds toward gas projects. But soon after that she went back to Washington. She continued to argue for the need to pay more attention to issues related to fuel and operations and maintenance but without, it would seem, much success. She now manages a regional electricity program in India for USAID.

"We've seen this time and time again in Iraq," says the U.S. engineer. "People go home after six months, and their ideas go home with them. All these things have to be championed and driven, or they just don't get completed."

Fuel, it turned out, wasn't going to be the only problem. Iraq's surging demand for electricity--growing at a rate of about 23 percent a year, according to the State Department--is partly a function of a rate structure that is, by universal agreement, unsustainable. Those Iraqis who are being billed for their electricity are paying the equivalent of a dollar a month, on average. The rate is 1 dinar--0.07 U.S. cents--per kilowatthour for usage up to 1500 kWh in one month (average residential use is 1374 kWh a month). For comparison, Iranians, Jordanians, and Syrians pay between 1.5 and 5 cents per kilowatthour.

Of the people who are being billed for electricity, roughly 65 percent are paying what they owe, the IEEE member in Iraq reports. But not nearly enough people are being billed. To begin with, 25 to 30 percent of Iraqis do not even have working meters, because the meters were damaged or vandalized before, during, or after the war. Second, some people have working meters that aren't being read because the neighborhoods are too dangerous. Still others have meters but are paying bribes to the meter readers to underreport their usage or let it go unrecorded altogether.

Other users are simply stealing electricity with unauthorized connections. Between 10 percent and 25 percent of ministry-generated electricity is stolen, according to the IRMO.

"We installed a third of a billion dollars' worth of turbines that can't be fueled"

Because electricity is essentially free, Iraqis have responded much as you might expect: by buying and using air conditioners, television sets, and refrigerators in record numbers. "We don't even know what demand really is, because it is unconstrained by price," says Crane, the Rand economist. Until the ministry begins charging more realistic rates for electricity, he warns, "you could put a hundred billion dollars into the electrical system and not satisfy demand."

With its huge oil reserves and socialistic society under Saddam, Iraq always had some of the lowest electricity rates in the region. But those low rates didn't keep pace with soaring inflation in Iraq in the 1980s and, especially, the 1990s. Under Saddam, when middle-class Iraqis made just a few dollars a month, few of them could afford refrigerators and air conditioners. Now average family income is $150 a month and a lot of people can afford appliances, as the runaway electrical demand attests.

It would seem that they could afford higher rates, too. The Ministry of Electricity would have to raise rates to an average of 1 cent per kilowatthour just to cover its costs, according to the IEEE member, who has studied the issue.

Why doesn't the ministry raise rates? There's no political will to do it, this member says. "No one wants to do a politically unpopular thing, because they want to be reappointed" to their government jobs. The inadequate capacity only makes the problem worse, according to the embassy source. No government official wants to raise rates at a time when the ministry is able to give Iraqis electricity only about half the time and when the government is trying to win people's trust by showing them that it can provide for their needs.

There's another complicating factor here, as there always seems to be in Iraq. With electricity off in Baghdad much of the time, hundreds of entrepreneurs have rushed to fill the electrical power vacuum. They've set up diesel generators, and they're providing electricity to neighborhoods during the periods when the ministry's feeders to those neighborhoods are off. The embassy source estimates that there are some 1000 MW of connected private generation in and around Baghdad alone.

It's dirty, it's dangerous, and it's of dubious legality. "People are getting electrocuted every day," the embassy source says. The operators merely run pairs of wires from each generator in a star pattern: one pair of wires for each customer. They tack the wires to the ministry's poles, creating low-hanging tangles that are now part of the landscape in most Iraqi cities .

Early on a Friday morning in October, I climb into one of a pair of Black Hawk helicopters idling on a pad in the Green Zone. The plan is to fly to Forward Operating Base Loyalty, an Army camp not far from Sadr City, the huge Shiite ghetto in northeast Baghdad. From FOB Loyalty we'll drive around and through Sadr City, where the PCO and USAID are funding an assortment of big electrical, water, and sewer projects.

The Black Hawks lift off, and we flit over groves of palm trees, dusty villages, crumbling apartment blocks, brown canals, greenish farmland, and transmission lines. Machine gunners sitting in front of hatches on either side of the helicopter peer down over their weapons through the dusty haze hanging over the city. But for the moment, at least, all is tranquil.

At FOB Loyalty we're met by Maj. Paul Ashcraft, the engineer for the Army's 2nd Brigade. Ashcraft is quietly confident and smart--he's got a bachelor's degree in electrical engineering from the U.S. Military Academy at West Point and a master's in EE from Montana State University. He didn't exactly volunteer to go to Iraq. But for career reasons he sought a leadership position in the Army's 3rd Infantry Division, knowing that if he succeeded it would mean going to Iraq.

At West Point he studied analog design, microwave systems, and photonics. He could be making good money in a high-tech corridor somewhere in the United States. But here he is, far from his family, risking his life to organize the minutiae of sewage projects in a huge ghetto and even negotiating for the privilege of doing it with Sadr City's Shiite militias.

Sadr City, once known as Saddam City, is one of the most densely populated places on Earth. Some 2.5 million people live within its 20 square kilometers. It is named for the Grand Ayatollah Mohammed Sadeq al-Sadr, who was killed in 1999 by agents believed to be working for Saddam Hussein. Al-Sadr's son, Muqtada al-Sadr, is the leader of the Mahdi Army, one of Iraq's most powerful militias. This is the militia that fought coalition forces in sprawling and bloody confrontations in April and August of 2004. Sadr City is now the Mahdi Army's stronghold, and the militia effectively controls civic life in the area, providing security and charity in the teeming region. The Mahdi Army generally gets credit (or blame) for most of what goes on in Sadr City--including much of the PCO- and USAID-funded reconstruction work, according to a report in The Christian Science Monitor.

With nearly 10 percent of Iraq's total population, meager infrastructure, and a history of neglect under Saddam, Sadr City quickly became a cornerstone of U.S. efforts to use reconstruction to win over Iraqis. "The more they see results, the more they come over to our side," Ashcraft insists. More than half a billion dollars have been spent or pledged on reconstruction in and around Sadr City.

After insurgents killed scores of workers all over Iraq, reconstruction officials adopted a policy to make projects contingent on the support of the local population. So in Sadr City, for example, they've organized a working group with local leaders for this purpose. They negotiate issues big and small--ductile pipe versus PVC, or whether an asphalt road needs a 10-centimeter base of concrete. The 2nd Brigade's officers can't say for the record that they are negotiating directly with the Mahdi Army, but it's hard to imagine they aren't. "Sometimes the negotiations are delicate," Ashcraft says simply. "But we are getting a lot of work done."

They're eager to prove it to me. After a quick breakfast in the FOB Loyalty mess hall, we get a briefing on the day's tour. Besides Ashcraft and me, there will be a U.S. Army translator, three Army public-affairs officials, and 10 soldiers. We're going to see a 400-kilovolt transmission substation, some residential electrical projects just outside Sadr City in a neighborhood called Betoul, and a distribution project within Sadr City. We put on body armor and climb into four armored Humvees. There's air-conditioning, GPS navigation, VHF radios, and machine-gun turrets. We put plugs in our ears that are designed to let us converse while protecting our eardrums if we are hit by a small or perhaps a medium-size bomb. Most of us are also wearing impact-resistant goggles.

The shiny new Al Ameen substation wouldn't seem out of place in Munich or Chicago. Its cavernous switch hall is full of state-of-the-art gas-insulated switchgear from Schneider Electric SA, of Rueil-Malmaison, France. Started before the war under a contract with a French firm, the project was completed with $57 million from USAID.

Hitting the dirt road to Betoul, we soon find our way blocked by a trash heap and have to divert for a while to a route the soldiers call Predator Road, for the past prevalence of roadside bombs there. After an uneventful ride, we pull up outside some small plaster houses in Betoul, where a new, Army-funded, $620 000 distribution system recently brought electricity to 715 houses and building lots. Children swarm the Humvees, and soldiers give out crayons, coloring books, and pads of paper. A man in a white robe and several of his teenage sons come out of their house to greet us.

Through the interpreter, I ask the man if he is getting billed yet for his electricity (no) and what he has been using it for (refrigerator, air conditioners, and a television). In response to a question from Russell Goemaere, a U.S. Army major doing public relations duty, the man says that Iraqis have lately been flocking to the empty lots in the area "because they know the area has power and will soon have water as well." As I walk back to the Humvees, a child, translating for his father, asks me to take a picture of his family, which poses proudly in front of their newly electrified house.

Sadr City, our next stop, is a teeming revelation. There are people out walking and shopping at countless stalls selling fruit, clothes, and housewares; with the insurgency targeting Shiites specifically at the time, the bustling street life surprises me. Later I am told that the Mahdi Army keeps such a tight rein on Sadr City that the insurgency hasn't been able to do much there.

"We've heard stories of guys going into substations with guns and holding them up to distribution engineers' heads"

Sadr City consists of 83 sectors, each of which is the size of about 10 city blocks. In one of them, Sector 9, where about 15 500 people live, the Army worked with the Ministry of Electricity to clear out the illegal generators and spaghettilike tangles of wire and put in a new distribution system and streetlights. It cost a little over $1.6 million. The system is built around ten 1000-kilovolt-ampere padmount transformers that step the voltage down from an 11-kV distribution system. Encouraged by the success of the project, in which the Army provided the equipment and the ministry did the work, reconstruction officials drew up plans to go sector by sector through Sadr City. With $92 million from the PCO and the tacit approval of the Mahdi Army, they plan to refurbish 68 sectors on the same model, using the exact same two-and-a-half-page parts list.

Before we leave Sadr City, we spot one of the ubiquitous, probably illegal, diesel generators chugging away and leaking oil on the median in the road. We pile out of the Humvees and I take pictures of it, as some soldiers stand guard and others socialize in a market nearby.

Pity the dispatch operators of distribution substations all over Iraq. A typical substation might have dozens of feeders, each of which might supply power to a large neighborhood. There isn't nearly enough power to keep all the feeders on at once, and it is the dispatch operator's job to turn feeders on and off in a consistent daily pattern, energizing some neighborhoods and blacking out others. By simply doing their jobs they make countless people suspicious and angry, every day.

In theory, this daily pattern is set by bureaucrats at the Ministry of Electricity, who telephone or radio instructions to the substation operators. In reality, the situation is murky. "We've heard stories of guys going into substations with guns and holding them up to distribution engineers' heads and saying, 'This is what you're going to do,'" says the embassy source. "We've heard of distribution engineers' being shot." And there are other, less extreme pressures on the dispatch operators: local sheikhs, city council members, and provincial government officials have all been known to exert their influence. And, of course, bribery of operators is not inconceivable. "Guaranteed, some neighborhoods are getting 20 hours of electricity a day and others are getting 6," the embassy source says.

At a substation called Farabi, near Sadr City, I get a glimpse into the nerve-racking life of one such dispatch operator. He tells us his name, but for his own safety I'm not using it here. He sits at a desk getting instructions via two multiline phones and a VHF radio, sometimes with a receiver at each of his ears. A television tuned to an Arabic news channel chatters in the corner of the room. Venetian blinds are drawn against the afternoon sun.

He is on the phones or radio for essentially the entire half-hour we are there, stopping only briefly to answer our questions, through the interpreter. He's never been threatened, he tells us, but that may be because he's never told anyone exactly what he does at the substation. He does not live in a district fed by the substation.

Is he aware of any bribery at the substation? "No, it is not so easy here, but it is possible in smaller substations" farther from the city, he says.

Of course, an adequate power supply will eliminate most of these problems. But it is years away. The next best thing would be a nationwide control system that would let controllers manage the entire Iraqi grid from a central location. It could take the local controllers, and their susceptibility to bribes or threats, out of the loop.

These centralized grid-control systems have been standard in electrical networks for decades. They are known by the acronym SCADA, for supervisory control and data acquisition. Iraq used to have one, which was built by the Swedish giant ASEA AB (now ABB Ltd., of Zurich, Switzerland) in the 1980s. But it was based on archaic minicomputers and was damaged during the first Gulf War and subsequently lost when maintenance pretty much ceased.

Reconstructors are now trying to give Iraq a state-of-the-art SCADA system that will let engineers control Iraq's entire transmission system from the Electricity Ministry's building in Baghdad. The program has two parts. One is a $117 million program sponsored by the PCO and managed by the Iraq Power Alliance; it is building a system to control Iraq's 132-kV transmission network. The other part, funded by the Japanese government and managed by the UNDP, will build a system to control the country's other, 400-kV, network.

One of the biggest challenges so far has been overcoming the mistrust of electricity officials in governorates far from Baghdad. After years of orchestrating blackouts so that Baghdad could have round-the-clock electricity, their allegiances are now often local rather than national. "The northern regions, in particular, are very concerned about the central region controlling their grid," explains the engineer from the Iraq Power Alliance who is heading the SCADA project. So in the Iraqi system every substation and power plant will have a switch allowing local officials to disconnect the facility from the SCADA system and run it independently.

"The way forward has been to tell them, 'You can always run it as you are doing it now, and as you start feeling confident you're going to be treated fairly, you can change it to remote'" control, this engineer says. Ultimately, the SCADA system will be a "resource to give them transparency, so they can see exactly how the power is being distributed throughout the country," he adds.

As it grapples with these problems, Iraq's Electricity Ministry will have to struggle with itself, too. Reconstruction and the need to fend off the insurgents have swelled the ministry's payroll to 48 000 people, 10 000 more than it had in 2003. The list includes hundreds, maybe thousands, of "ghost employees," made-up people whose paychecks are taken by someone else.

Even getting a handle on the payroll is fraught with challenges. As was true under Saddam, the vast majority of people work for the government, and today, in the continuing absence of an adequate banking system, they are paid in cash. Accountability is a challenge, and the opportunities for graft are abundant. It doesn't matter much now anyway, because no one is even proposing rooting out the ghost employees, who haunt not just the Electricity Ministry but the entire government. The conventional view is that dismissing them would worsen the country's chaotic social situation.

The ministry also faces a serious challenge in rebuilding a culture of maintenance that was gradually lost during the embargo years, from 1991 to 2003. The addition over the past two years of about 40 combustion turbines, which are maintenance-intensive, has mushroomed the issue into a full-blown crisis. The PCO generation specialist ticks off on his fingers the specialized skills needed to maintain combustion turbines: "aligning pumps and motors so they run smooth, balancing rotating equipment like turbine generators, alloy-tube welding, TIG welding...It's master mechanic skills down to apprenticeships, the whole millwright trade. It doesn't exist here anymore.

"You can't imagine how difficult it is changing a culture back to be proficient in all these specialty areas," he goes on, weariness showing on his face. "It's going to take several 10-year generations."

Reconstruction engineers began realizing the extent of the operations and maintenance problem in late 2004, when many of the plants they'd refurbished and turned over to Iraqi engineers quickly broke down because the engineers couldn't properly operate and maintain the units. Since then, USAID and PCO have put nearly $300 million into half a dozen programs aimed at schooling Iraqi engineers in operating and maintaining combustion turbines and keeping adequate stocks of spare parts (and even records of spare parts). The two organizations together expect to spend a total of $300 million to $350 million a year on operations and maintenance training for the next couple of years.

The funding is part of a focused, increasingly urgent effort to prepare the Iraqi engineers for the day when they'll have to run the generators on their own. With U.S. funds available for new electrical projects dwindling into the hundreds of millions of dollars, the obstacles to a robust electricity supply system for all Iraqis are looming large.

"To properly rebuild the oil infrastructure to produce fuel and revenue would cost about $20 billion," says the U.S. power engineer who is critical of the early decision to concentrate on combustion turbines. "Likewise, the electricity sector needs about $20 billion to provide enough electricity for the country." In fact, some observers have lately put just that electricity figure at $30 billion to $40 billion. "There is no solution to these problems without money, and the money is not there," the engineer concludes.

To which Crane, the economist, adds: "The end of U.S. grants will be healthy, as it will force the Iraqis to take responsibility for their own operations. If the government chooses to provide power for free, with constant breakdowns, so be it."

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