More specifically, labor productivity rose between 19.8 and 26.0 percent during the transition. After this period, an additional increase was observed between 2.4 and 6.9 percent with respect to the transition levels. This is a consequence of a significant reduction in the labor force as well as the natural positive trends that were observed in terms of the number of connections as well as their total consumption. Consistent with previous analyses, distributional losses have decreased significantly after the transition, resulting in a 13.2 percent reduction. As it is well understood in the sector, most of the improvements in this area have responded to investments in the network in order to reduce the technical losses as well as improvements in the cadastres and monitoring in order to limit the commercial losses. In general, these improvements are observed at least one year after the change; hence, it is expected to find no significant impact during the transition and a significant one afterwards. Quality of the service, measured as duration and frequency of the interruptions presents significant reductions in both indicators during and the transition. During the former, a 11.7 and 6.1 percent reduction was observed for duration and frequency. After the transition, an improvement of 30.0 and 32.7 percent was observed, respectively. Similar to the case of distributional losses, the quality of service measured as the duration of interruptions may be improved with better management, whereas significant improvements in the frequency of interruptions require investments in the network.

With regards to operational expenditure per MWH sold, the amount was halved; possibly achieved with the reduction of the number of employees and its total labor costs, the reduction of the cost of the energy bought given the improvements in the generation segment, and finally because of some managerial improvements with the introduction of the private sector in the utility. Tariffs also presented some increase. While average residential tariffs increased by 12.0 percent and industrial ones by 3.8 percent, after the transition only industrial tariffs presented a significant change reducing them by 4.3 percent with respect to the transition. Finally, the cost recovery ratio resulted with a 21.4 percent improved after the transition indicating more alignment between the cost structure and the revenues, given by the average tariffs.

# **6.2. Existence of a Regulatory Agency**

We defined a dummy with a value equal to one starting in the year when the regulatory agency was established<sup>5</sup> . We ran two different specifications. First, we ran the ownership dummies and the one for the existence of a regulatory agency (see Table 4). These specifications allowed for the identification of the impact of ownership when we controlled by the existence of a regulatory agency and the effect of the existence of regulation when we controlled by ownership. In a second set of specifications that was run, we interacted the ownership dummies with the one for existence. This allowed us to identify some complementarities between both phenomena (see Table 5).

Most of the results regarding the change in ownership from the previous description hold when we control by the existence of a regulatory agency; however, their magnitude is slightly reduced. For instance, the effect on labor productivity is reduced by one fourth. Similar to the quality of the service, the result during the transition becomes nonsignificant. On the contrary, the results for the post transition remain significant with a 10 and 17 percent reduction of the impact of the change in ownership, with respect to the results previously described when we did not account for the existence of an agency.

> 5 Note that there are some differences between when the agency was created (in general by law) with respect the years when it was established. The governance data reported both dates. Despite we selected the year when it was established we run similar specifications with the year of creation and we obtained similar results.

- 16 -