Power's Promise: Electricity Reforms in Eastern Europe and Central Asia

✍ Scribed by World Bank

• Publisher: World Bank
• Year: 2004
• Tongue: English
• Leaves: 98
• Series: World Bank working paper, International Bank for Reconstruction and Development 40
• Category: Library

✦ Synopsis

'Power's Promise' analyzes the fiscal, efficiency, social, and environmental impact of power sector reforms in seven countries in the ECA region. Sector deficits have been falling over the last decade and the savings from lower deficits have not translated into higher social spending. More emphasis must be placed on monitoring deficits and tailoring policy reform to country-specific circumstances. The impact of reform on utility efficiency, as measured by the cost of generation, system loss collections,and operational efficiency, is ambiguous. While overall revenue per kilowatt-hour increased in almost all countries, problems continue with losses, collection rates, and staffing. In terms of social impacts, electricity spending as a share of income increased, especially for the poor, while consumption stayed the same. In terms of environmental impacts, reforms slightly improved energy efficiency in power plants, though this has little direct impact on human health, because the electricity sector's share of the total health damage from air pollution is negligible. Several lessons emerge from this analysis. Undertaking simple ex ante simulations of reform impacts will allow better identification of potential reform benefits and costs. Placing more emphasis on outcome-based indicators of service quality would help ensure that future operations produce the intended end-user benefits. In many cases, tariff increases can and should be explicitly timed to coincide with service quality improvements. Yet, this may not always be possible. Where it is not, the adverse impact of tariff increases, especially for low-income consumers, should be mitigated by improving access to and efficiency in the use of clean alternatives. Contains three related previously published titles on CD-ROM.

✦ Table of Contents

TABLE OF CONTENTS......Page 5
Foreword......Page 9
Abstract......Page 11
Acknowledgments......Page 13
Acronyms and Abbreviations......Page 15
Executive Summary......Page 17
ECA is Different......Page 21
Table 1.1: ECA is Different......Page 22
Proper Sequencing is Critical......Page 23
Table 1.2: Timeline of Reforms in the Electricity Sector in ECA......Page 24
Table 1.3: Independence of Regulatory Institutions: Paper and Practice......Page 26
Quantifying the Sector Losses......Page 29
Figure 2.1: The Electricity Sector’s Losses Declined,1993–2001......Page 31
Relationship Between the Electricity Sector Deficit and the Fiscal Deficit......Page 32
Figure 2.2: Power Sector Losses are Weakly Correlated with Fiscal Deficits,1995–2000......Page 33
Figure 2.4: Social Spending on Education, Health and Social Assistance Did Not Increase (as percent of GDP)......Page 35
Improve Transparency and Accountability......Page 37
Table 3.1: Suggested Indicators of Production Efficiency......Page 38
Table 3.2: Reported Generation Costs Went Down, 1990–2002 (cents/kilowatt hour)......Page 39
Figure 3.2: System Losses Stayed Stable, 1990–2002......Page 40
Box 3.1: Private Sector Improving Household Collections in Georgia......Page 41
Regional Companies Take on the Challenge......Page 43
Box 3.2: Opportunistic Behavior by the Private Sector?......Page 45
4. Maintaining Power to the Poor......Page 47
Table 4.1: Urban Network Energy Use in ECA, (percent of households)......Page 48
Table 4.2: Urban Non-network Energy Use in ECA (percent of households)......Page 49
Figure 4.1: Residential Electricity Tariff —Index of CPI Adjusted Real Tariffs......Page 50
Table 4.4: Consumer Surplus Fell......Page 52
Figure 4.2: Enough for Three Light Bulbs and a Refrigerator......Page 53
Figure 4.3: Electricity Tariffs are Higher Than Those for Gas, 1992–2002......Page 55
Figure 4.4: Burden of Arrears is the Same for the Poor and Non-poor, 2000–2002......Page 56
Conclusions......Page 59
Did the Reforms Achieve Environmental Benefits?......Page 61
Damage from Dirty Fuel Use May Be Large......Page 64
Conclusions......Page 67
Annex A: Overview of the Reform Process in Eight ECA Countries......Page 69
Annex B: Proceeds from Privatization of Electric Utility Companies......Page 73
Annex C: Tariff Losses, Commercial and Collection Losses, as Share of Total Losses......Page 75
Annex D: Fiscal Balance and Electricity Sector Financial Deficit (Million USD and share of GDP......Page 77
Annex E: Efficiency Indicators......Page 79
Annex F: More on the Methodology for Estimating Health Effects......Page 83
Annex G: Base Emission Factors......Page 85
Annex H: More on Factors Leading to Low Contribution of Power Sector Toward Health Damages......Page 87
Annex I: Changes in Generation Mix in the Past Decade......Page 89
Annex J: Proposed Energy Issues to be Addressed and Sample Questions in LSMS/HBS Surveys......Page 91
References......Page 93
Figure 2.3: Poor Countries Spend Less on Poor People (1997–2000)......Page 34
Box 4.1: Simulation of Alternative Subsidy......Page 57
Box 5.1: Reform Measures Expected to Result in Environmental Quality Improvements......Page 62
Figure 5.2: Electricity Contributes in Small Measure to Health Damages......Page 65
Table 1.4: Investment Climate Varies Among Reformers......Page 27
Table 3.3: Aggregate Impact of Reform on Collection Rates in Tbilisi......Page 42
Table 3.4: Service Quality Improved......Page 44
Table 4.3: Shares of Spending on Electricity Went Up, 1993 –2002......Page 51
Table 4.5: Electricity Expenditure as a Share of Total Energy Expenditure, 1993–2002......Page 54
Table 4.6: Simulation of Subsidy Cost-effectiveness for Tbilisi, Georgia......Page 58
Box 5.3: Methodology for Calculating Damages from Indoor Air Pollution......Page 66
Box 2.2: Calculating the Implicit Subsidies (Sector Losses)......Page 30
Box 2.3: Social Spending in Latin America Increased Since the 1990s......Page 36
Box 5.2: Estimating the Power Sector’s Contribution to Air Pollution and Health Damage......Page 63