# 2.3.2 Institutions

At least two aspects of the sector’s institutional arrangements underpin the technical and financial performance of Morocco’s power utilities. These are: the nature of utility governance and the socio-economic and socio-political considerations underlying the liberalization of generation and distribution.

The governance of ONEE is one illustrative explanation for the performance of utilities. Across a range of governance indicators, ONEE’s performance ranks lower than the comparators from the rethinking power sector reform project observatory (Table 4). On both accountability and autonomy, ONEE scores below the international benchmark as well as most of the comparators. Notably, members of ONEE’s board are not necessarily selected through a competitive process, they can be removed at the sole discretion of the appointing authority and are not required to declare conflicts of interest. The board itself does not have the explicit responsibility of deciding and implementing tariff adjustments and to approve human resource hiring and firing decisions. However, the board has the responsibility for defining corporate strategy, has an audit committee and publishes an annual report.

_Table 4: Governance and management practices in Morocco and comparators, 2015_<sup>_65_</sup>

||Egypt<br>EEHC(Discos)|WESCO<br>India,|CESU<br>Odisha|APSPDCL <br>Indi|APEPDCL <br>a,AP|JVVNL<br>Indi|JDDVNL<br>a,Raj|LESCO<br>Pak|KE<br>istan|Morocco<br>ONEE|International<br>benchmark|
|---|---|---|---|---|---|---|---|---|---|---|---|
|**Overall Utility Governance**|**55%**|**68%**|**26%**|**52%**|**52%**|**63%**|**63%**|**52%**|**90%**|**53%**|63%|
|**Corporate Governance**|49%|86%|13%|47%|47%|67%|67%|56%|94%|35%|62%|
|_Accountability_|_42%_|_83%_|_25%_|_50%_|_50%_|_67%_|_67%_|_67%_|_100%_|_25%_|60%|
|_Autonomy_|_56%_|_89%_|_0%_|_44%_|_44%_|_67%_|_67%_|_44%_|_89%_|_44%_|63%|
|**Utility Management**|**61%**|**50%**|**40%**|**56%**|**56%**|**60%**|**60%**|**48%**|**86%**|**70%**|64%|
|_Financial Discipline_|_53%_|_43%_|_36%_|_53%_|_53%_|_64%_|_64%_|_50%_|_79%_|_57%_|59%|
|_Human Resource_|_71%_|_70%_|_40%_|_43%_|_43%_|_36%_|_36%_|_43%_|_86%_|_79%_|62%|
|_Information and Technology_|_60%_|_36%_|_43%_|_73%_|_73%_|_80%_|_79%_|_50%_|_93%_|_73%_|71%|

_Source: Rethinking power sector reform project_ Unlike its performance on corporate governance, ONEE performs much better than most of its comparators when it comes to good management practices for financial discipline, human resources and information and technology. In fact, its overall utility management score is better than the international benchmark.

ONEE’s performance on financial discipline and accounting practices compares favorably to the regional and international comparators. Its financial practices (64 percent) rank higher than the international benchmark (59 percent) (Table 4). As an SoE, the utility does not have a credit rating, is not at liberty to issue new equity. However, it issues bonds and is required to meet financial performance targets by its shareholders. It produces annual financial accounts, and these are audited by an external auditor and are produced in compliance with national accounting standards, but they are not made public, presenting a big challenge in evaluating the utility's financial performance.

On human resource practices, the utility performs quite well (79 percent) scoring much above the international average (62 percent). Apart from giving managers the autonomy to hire or fire employees and implement investment projects, ONEE follows all HR good practices on the index. These include, carrying out annual staff performance reviews,

> 65 For more detailed governance and management indices, refer to Tables A.5. to A.8. in the annex.

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