regulation.<sup>15</sup> Joskow’s (2008) theoretical description of model reforms include additional elements.<sup>16</sup> However, no available comparative study uses more than those shown in Table 1, and many focus on a narrower subset. Bacon (2018: 57) puts this down to lack of data, as well as the small number of developing countries that pursued more than a few elements, even though all elements are “identified as necessary to obtain the maximum benefits”. The objectives and variations of model reforms are discussed in Section 2.2, followed by concurrent critiques in Section 2.3. First, however, to complete the historical perspective, it is worth noting factors that contributed to the reforms becoming a norm, and subsequent sector developments.

**_Table 1: Summary of power sector market-oriented reform elements as measured in eight comparative studies_**

|**Reform**<br>**element**|**Implied state with no**<br>**reform**|**Implied state with**<br>**full reform**|**Number of**<br>**studies to**<br>**measure it**|**Reform element objectives**|
|---|---|---|---|---|
|(1)**Legislation**|No law provides for regulator,<br>unbundling, etc.|Law provides for regulator,<br>etc.|3|Pave way for other reform elements.<br>Greater certainty.|
|(2)**Independent**<br>**Regulator**|Government (which may own<br>utilities) directly provides all<br>regulatory functions.|Regulator separate from<br>other government bodies<br>and from utilities|6|Hold utilities accountable. Set prices<br>(absent competition). Less political<br>intervention. Greater certainty.|
|(3)**Commercial,**<br>**corporate utilities**|Utilities run as government<br>agencies (few commercial<br>freedoms or pressures).|Utilities are corporations,<br>and operate on a<br>commercial basis.|4|Better management. Use profit to<br>incent efficiency. Less political<br>intervention. Facilitate unbundling<br>andprivatization.|
|(4)**Separate**<br>**utilities**|Single entity for generation,<br>transmission, distribution,<br>and retail.|Separate entities for<br>generation, transmission,<br>distribution, and retail.|8|Remove conflicts of interest across<br>supply chain. Improve management.<br>Pave way for competition.|
|(5)**Private sector**<br>**participation**|All power is generated by<br>state-owned utilities. All<br>utilities are state-owned.|Power is generated<br>through IPPs. Utilities are<br>privately owned.|8|Incent efficiency and private<br>investment. Reduce need for public<br>capital. Allocate risk efficiently.|
|(6)**Market**<br>**competition**|Only one supplier (and its<br>customers) can access the<br>grid. Each utility is a<br>monopoly.|New ‘third-party’ suppliers<br>can access the grid.<br>Competition in wholesale<br>and retail markets.|7|Incent efficiency and innovation.<br>Downward pressure on prices.|
|(7)**Efficient**<br>**Pricing**|Electricity prices (set by<br>government) do not reflect<br>costs nor incent efficiency.|Electricity prices (set by<br>regulator or market) reflect<br>costs and incent efficiency|2|Efficient supply and use of power.<br>Attract private investment.<br>Less subsidy burden.|

Source: Original based on ESMAP 1999; Rufin 2003; Conway & Nicoletti 2006; Nagayama 2009; EBRD 2010; Erdogdu 2011; Sen & others 2016; Foster & others 2017. For details see Table 3 in Appendix A.

**From the 1980s to ‘90s, with the culmination of the Cold War, the promotion of market ideas took on strong geopolitical dimensions** . The fall of the Berlin Wall in 1989, and Soviet Union’s collapse in 1991, represented a critical juncture for countries in Eastern Europe and Central Asia to reconsider their approach to markets. In 1990, Western governments established the European Bank of Reconstruction and Development (EBRD) with the explicit mandate to support multiparty democracies and market economies in Central and Eastern Europe. Former-Soviet states, including the Russian Federation, also joined the IMF and World Bank around this time. Most ‘transition economies’ already had near-universal electricity access and adequate or excess capacity, but their average electricity prices were generally well below costs (Bacon

> 15 This order of elements does not indicate relative importance or implementation sequence, which vary as discussed in Section 2.2.

> 16 Joskow (2008) includes: horizontal integration of transmission facilities and network operations; active ‘demand-side’ institutions that help customers respond to market signals; mandates for distribution companies to supply households and small businesses where retail competition is unavailable; and ‘transition mechanisms’ to help move from the old system to the new.

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