Venezuela Moves to Open Its Collapsed Power Sector to Private Capital

Venezuela · Economy

After two decades of blackouts under a state monopoly, Venezuela is moving to invite private money back into a power grid that has become one of the biggest brakes on its economy.

A first vote to reopen the power sector

Venezuela’s National Assembly gave initial approval on Tuesday to a reform of the Organic Law of the National Electricity System and Service that would, for the first time in nearly two decades, allow private capital back into the country’s electricity industry. The most significant change is the incorporation of the private sector across generation, transmission, distribution and commercialisation — what lawmakers described as a “diversification of actors in the service chain” — breaking the monopoly held since 2007 by the state-owned National Electric Corporation, Corpoelec. Under the draft, private companies, mixed ventures and firms with minority state ownership could operate alongside the state through long-term concessions, with the joint ventures approved directly by the government rather than by the assembly.

It is important to be precise about where the measure stands: this was a first-reading approval, not enactment. The bill requires a second debate and final ratification in the coming days before it becomes law. But the direction of travel is clear, and the text goes beyond ownership. It also envisions an overhaul of the tariff scheme, with rates that reflect the real cost of service and allow a “reasonable return,” the end of the deep subsidies that have long kept prices artificially low, and the operational decentralisation of Corpoelec itself.

Two decades of blackouts

The reform is a response to a long collapse. Corpoelec was created by decree of the late president Hugo Chávez in 2007, merging state and private power companies and nationalising one of the country’s oldest utilities. A system that had run under a mixed, regionalised model began to falter from a lack of maintenance and new investment. In 2009, a severe drought left the Guri hydroelectric plant — the backbone of a grid that depends heavily on hydropower — at critical levels and ushered in routine rationing. A first major national blackout struck in 2013, leaving most of the country dark for more than a day, and in March 2019 the longest blackout in Venezuelan history lasted six days, crippling water, telecommunications and health services.

Chronic power shortages have since become one of the biggest obstacles to economic recovery. The problem is especially acute for the oil sector, the country’s main source of hard currency: lawmakers backing the bill have argued that rising oil production requires electricity the grid cannot currently supply, and many companies already rely on self-generation to keep operating. Opening the sector to outside capital is, in that sense, aimed as much at unblocking oil output as at keeping the lights on in Venezuelan homes.

Part of a broader opening

The electricity bill is one piece of a wider economic liberalisation that Venezuela has pursued since Delcy Rodríguez became acting president in January, following the removal of Nicolás Maduro from power. The shift marks a notable departure for a government whose predecessors built the state monopoly being dismantled, and it lands at a moment when Caracas is signalling more broadly that it wants private and foreign investment back. For investors, the appeal is obvious — a large market with enormous unmet demand — but so are the risks: a track record of expropriation, sanctions exposure, an untested concession framework, and the simple question of whether a second legislative reading will preserve the opening or dilute it. For now, Venezuela has taken a first formal step toward reversing one of the defining failures of the Chávez-era economy, and the detail of how far it goes remains to be written.