A comparative international review of power sector reform and its impact on access to electricity by poor communities
Since the early 1980's, a number of countries have been undertaking power sector reform. Very often the drivers for change included the need to reduce reliance on public finances and to obtain foreign capital, either to service loans, or for investing in new capacity. Latin American countries were the forerunners in this regard, with Chile amongst the first. The other main driver was to improve the financial and technical performance of the electricity industry. The rationale for this initiative could also be found in other factors, which are discussed as the countries are dealt with individually later in this document. One important aspect thereof is clearly the 'public benefit' implications of power sector reform, which are more pressing in developing countries. Until the 1980's, the electricity industry was viewed as a natural monopoly, and the concept of economies of scale reinforced this point of view. However, with dramatic technology improvements, it became possible to generate electricity competitively in smaller power plants, and thus alternatives to monopolistic industries were increasingly feasible. Competition is now possible in generation and supply. Developers other than the state can participate in the industry either as Independent Power Producers (IPPs) or as distributors and suppliers of electricity. According to the principle of competition, the introduction of new players into the market should lower electricity prices. This study investigates if this holds true in developing countries and whether power sector reform slows down or accelerates electrification access for the poor.
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