**_Electricity Sector Reform in Developing Countries, Jamasb, Mota, Newbery, Pollitt_**

dates back to 1996 and, therefore, precedes the macroeconomic crisis that eroded much of the achievements of the regulatory regime in Argentina.

In Argentina, the majority of state-owned firms were privatised between 1989 and 1993, with privatisation proceeds from the electricity sector amounted to about 25% of the total. Delfino and Casarin (2001) examine the welfare impacts of the program in the Gran Buenos Aires area of Argentina, using a family expenditure survey of about 5,000 households. Between the time of privatisation and the end of 1999, expenditure on electricity in real terms for a representative small consumer (average monthly maximum consumption <150 KWh) increased by about 20%, while an average large user (>150 KWh) enjoyed a tariff reduction of about 23%. The paper shows that nearly all income groups among the existing customers increased their consumer welfare after privatisation, with the exception of the lowest income group. The results indicate that higher income groups have, in absolute terms, benefited more than low-income groups, although in percentage terms, the benefits are more similar. It also finds that losses to the poor are lower than the reduction in variable charges to high consumption customers. Also, new customers enjoy higher welfare measured as the difference between the cost of provision of access and consumer surplus.

Ennis and Pinto (2002) examine the effect of privatisation on income distribution and the welfare of the poor. Argentina’s macroeconomic performance in the 1990s as measured by inflation control, growth and budget deficit was positive, but weak on unemployment and inequality. Privatisation of the electricity industry resulted in increased collection rates and improved quality of service. Cross-subsidies were eliminated and the government financed some of the subsidies. Household survey data shows that between 1985/6 and 1996/7, the budget share of water and electricity rise sharply for the lower deciles. In real terms electricity prices for residential users, inclusive of taxes, remained stable, while pre-tax prices are 12% higher. At the same time, prices for industrial users decreased by about 7%. Prices were still low by international standards. Access to service for the poorest groups rose sharply: residential service in Buenos Aires area increased from 65% in 1985/6 to 99% in 1996/7. The estimated change in consumer surplus between 1985/86 and 1996/97 shows substantial welfare gains, especially for lower income deciles due to increased access and lower prices.

The paper, however, points out that the results can be sensitive to the choice of years. The collective fiscal effect of privatisation of electricity and other industries was also significant. The privatisation proceeds amounted to about one-third of the government bonds outstanding in 1990. The sale of assets allowed the government to repurchase some bonds and, thereby, reduce interest payments. The falling public debt and reduced expenditures on utilities was accompanied by increased social expenditures. At the same time, between 1992 and 1999 the dividends paid by the privatised firms amounted to an average of 38.5% (increasing from 12% ($US 159 mill.) in 1992 to 64.1% ($US 1,670 mill.) in 1999) of the all dividends paid. However, it is argued that the distributional impact of all dividends has been limited as some individuals and employees owned part of the issue shares.

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