metadata: authors: 0: author: Foster,Vivien
1: author: Witte,Samantha Helen
2: author: Banerjee,Sudeshna Ghosh
3: author: Vega Moreno,Alejandro
count: World
docna: 0: docna: Charting the diffusion of power sector
            reforms across the developing world
docty: Policy Research Working Paper
subtopic: Energy Policies & Economics
teratopic: Energy
abstracts: cdata!: Some 25 years have elapsed since
            international financial institutions espoused a package of
            power sector reform measures that became known as the
            Washington Consensus. This package encompassed the
            establishment of autonomous regulatory entities, the
            vertical and horizontal unbundling of integrated national
            monopoly utilities, private sector participation in
            generation and distribution, and eventually the introduction
            of competition into power generation and even retail
            services. Exploiting a unique new data set on the timing and
            scope of power sector reforms adopted by 88 countries across
            the developing world over 25 years, this paper seeks to
            improve understanding of the uptake, diffusion, packaging,
            and sequencing of power sector reforms, and the extent to
            which they were affected by the economic and political
            characteristics of the countries concerned. The analysis
            focuses on describing the patterns of reform without judging
            their desirability or evaluating their impact. The paper
            finds that following rapid diffusion during 1995-2005, the
            spread of power sector reforms slowed significantly in
            2005-15. Only a small minority of developing countries fully
            implemented the reform model as originally conceived. For
            the majority, reforms were only selectively adopted
            according to ease of implementation, often stagnated at an
            intermediate stage, and were sometimes packaged and
            sequenced in ways unrelated to the original logic. Country
            characteristics such as geography, income group, power
            system size, and political economy all had a significant
            influence on the uptake of reform. Moreover, a significant
            number of countries experienced reversals of private sector
            participation, or were unable to follow through with reform
            plans that were officially announced. Overall, power sector
            reform in the developing world lags far behind what was
            achieved in the developed world during the same time period.
            Yet, even in the developed world, the full package of
            reforms does not seem to have been universally adopted.
repnme: repnme: Charting the diffusion of power sector
            reforms across the developing world
display_title: Charting the diffusion of power
            sector reforms across the developing world
listing_relative_url: /research/2017/11/28139785/charting-diffusion-power-sector-reforms-across-developing-world
topicv3: Justice m1326106 840,Political Economy of Reform m1326263 836,Energy and Extractives m1326595 507,Power and Electricity Sector m1327094 515,Power Sector Reform m1503425 3937
publishtoextweb_dt: 2017-11-07T00:00:00Z
historic_topic: Energy
no_of_pages: 77
author_keys: 0: author_key: 452278
1: author_key: 1376293
2: author_key: 167709
3: author_key: 1157189
model_extractions: WPS8235 Policy Research Working Paper 8235 Charting the Diffusion of Power Sector Reforms across the Developing World _Vivien Foster_ _Samantha Witte Sudeshna Ghosh Banerjee Alejandro Moreno_ Energy and Extractives Global Practice Group November 2017
Policy Research Working Paper 8235

# **Abstract**

Some 25 years have elapsed since international financial institutions espoused a package of power sector reform measures that became known as the Washington Consensus. This package encompassed the establishment of autonomous regulatory entities, the vertical and horizontal unbundling of integrated national monopoly utilities, private sector participation in generation and distribution, and eventually the introduction of competition into power generation and even retail services. Exploiting a unique new data set on the timing and scope of power sector reforms adopted by 88 countries across the developing world over 25 years, this paper seeks to improve understanding of the uptake, diffusion, packaging, and sequencing of power sector reforms, and the extent to which they were affected by the economic and political characteristics of the countries concerned. The analysis focuses on describing the patterns of reform without judging their desirability or evaluating their impact. The paper finds that following rapid diffusion during 1995–2005, the spread of power sector reforms slowed significantly in 2005–15. Only a small minority of developing countries fully implemented the reform model as originally conceived. For the majority, reforms were only selectively adopted according to ease of implementation, often stagnated at an intermediate stage, and were sometimes packaged and sequenced in ways unrelated to the original logic. Country characteristics such as geography, income group, power system size, and political economy all had a significant influence on the uptake of reform. Moreover, a significant number of countries experienced reversals of private sector participation, or were unable to follow through with reform plans that were officially announced. Overall, power sector reform in the developing world lags far behind what was achieved in the developed world during the same time period. Yet, even in the developed world, the full package of reforms does not seem to have been universally adopted.

This paper is a product of the Energy and Extractives Global Practice Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at vfoster@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Charting the Diffusion of Power Sector Reforms across the Developing World** **_Vivien Foster, Samantha Witte, Sudeshna Ghosh Banerjee, and Alejandro Moreno_**

# **Acknowledgements**

This paper is primarily based on data collected as part of the World Bank/ESMAP project “Regulatory Indicators for Sustainable Energy (RISE), 2017” co‐led by Sudeshna Ghosh Banerjee, Alejandro Moreno, and Tanya Primiani, and implemented by Mallory LeeWong, Joonkyung Seong, Taylor Sloane, and Samantha Witte. A full list of acknowledgements for this project can be found at http://rise.esmap.org. The study also draws on the World Bank’s Private Participation in Infrastructure database: <u>https://ppi.worldbank.org. These data were supplemented by targeted desk‐based research and</u> crowdsourcing of information from numerous colleagues in the World Bank’s Energy & Extractives Global Practice. Helpful guidance on the fragility index came from Monty Marshall (Center for Systemic Peace).

The authors are particularly grateful to the following colleagues for peer review throughout the development of the paper: Robert Bacon (Consultant); Anton Eberhard (University of Cape Town); Marianne Fay (Chief Economist, SDNVP); Catrina Godinho (University of Cape Town); Stephane Straub (University of Toulouse); and Jonathan Walters (Castalia). Financial support from Energy Sector Management Assistance Program (ESMAP) and the Public Private Infrastructure Facility (PPIAF) is gratefully acknowledged.

**Keywords:** Power Sector Reform, Power Sector Market Design and Regulation, Power Sector Restructuring, Power Sector Regulation, Power Utility Reform

**JEL Classification** : L94 Electric Utilities

1
# **Table of Contents**

|1.|Context .................................................................................................................................................. 3|
|---|---|
|2.|Methodology ......................................................................................................................................... 5|
|3.|Regulatory Reform ................................................................................................................................ 7|
|4.|Restructuring Reform .......................................................................................................................... 11|
|5.|Competition Reform ........................................................................................................................... 19|
|6.|Private Sector Participation Reform ................................................................................................... 28|
|7.|The Overall Reform Picture ................................................................................................................. 41|
|8.|Conclusion ........................................................................................................................................... 63|
|Ann|ex 1A: Developing Country‐Level Scores in the Power Sector Reform Index, 1990–2015 .................. 65|
|Ann|ex 1B: Adoption of Washington Consensus Reforms in the Power Sector, 1990 – 2015 .................... 67|
|Ann|ex 2:Cases of Failed Private Sector Participation in the Power Sector, 1990 ‐ 2015 ........................... 71|

2
# **1. Context**

During the 1990s, the World Bank, and other international financial Institutions, became prominent advocates of power sector reform in the developing world; in what became known as the “Washington Consensus”. According to this view, the main objectives of power sector reform were to improve economic efficiency and attract private sector investment. Although founded largely on economic principles, the reform model also drew heavily on the experience of two pioneering countries that reformed their power sectors during the 1980s: Chile and the United Kingdom.

According to the 1990s view, the power sector reform process should encompass four distinct reform actions. The first is _“regulation”_ , which involves the creation of an autonomous regulatory entity to provide some degree of political independence for the sector and hold utilities accountable for their operational and financial performance. The second is “ _restructuring”_ , which involves steps towards the eventual full vertical and horizontal unbundling of the incumbent state‐owned monopoly. The third is _“private sector participation”_ , which brings in private management and capital into the sector as a means to boost operational efficiency and investment. The fourth is _“competition”_ , which initially allows generators to compete to supply a monopoly utility and eventually allows customers to negotiate their supply contracts directly with power producers and traders supported by a power exchange.

Some 25 years have passed since the earliest power sector reforms, and accumulated developing country experience has shown that the model is much harder to adopt than originally believed. Even advanced reformers, a quarter of all developing countries, have taken many years to fully implement the process. Many others, roughly 35 percent of the sample, have encountered obstacles and even reversals – due to the complex political economy dynamics of the sector – and as a result have only partially adopted sector reforms. A significant number constituting 40 percent of developing countries remain largely unreformed.

It therefore seems timely to update the World Bank’s last major global stock‐taking of power sector reform uptake in the developing world (Besant‐Jones, 2006), by examining recent global trends in power sector reform. While the future of the power sector may look significantly different to the past, due to technological shifts, it remains important to distill the lessons of the standard approach to power sector reform experience to date, so as to better understand the limitations to further uptake.

To that end, this paper aims to answer a number of questions. To what extent have developing countries pursued the 1990s power sector reform model and how far did they get with it? What patterns of power sector reform can we now observe around the world? Is there continuing power sector reform momentum? How have country characteristics influenced the uptake of the different elements of power sector reform, and which types of countries have been able to go furthest with the model? Emerging answers to these questions can be previewed as follows.

Overall, power sector reform in the developing world lags far behind what was implemented in the developed world during the same time period. Closer inspection shows that the most significant differences lie in the area of vertical and horizontal unbundling, which is twice as common in OECD as in developing countries, as well as implementation of wholesale power markets, which is ten times more likely in OECD than developing countries. Nonetheless, full power sector reform has not been universal even in developed countries. The percentage of countries that have implemented some degree of private sector participation in either generation or distribution hovers around 70 percent for _both_ developed and developing countries, although the depth of private sector participation tends to be significantly greater 3
in the OECD countries. However, 17 percent of the OECD countries that introduced a wholesale power market did so without fully vertically unbundling their power sectors.

Following rapid diffusion during the decade 1995‐2005 the spread of power sector reforms slowed significantly in the subsequent decade 2005‐2015, on almost every dimension of reform. The slowdown is particularly evident in terms of the number of countries establishing regulatory entities or conducting private sector participation in generation or distribution in the later decade. For the majority of countries, reforms were only selectively adopted often according to ease of implementation, and reform programs often stagnated midway. A third to a half of developing countries are at such an intermediate stage, having implemented reforms in some areas but not in others; and in many cases reforms have been halted for over a decade.

Reforms have sometimes been packaged and sequenced in ways unrelated to the original logic. For example, 25 percent of developing countries have allowed for private sector participation without following through on competition, while another 15 percent have gone further on competition then their sector restructuring efforts would prepare them for. Some 13 percent of developing countries have created regulatory entities without having introduced private sector participation to their utilities, while a similar share find themselves in the opposite situation. While the principles of reform suggest that distribution private sector participation should precede private sector participation in generation, the percentage of countries doing so was about the same as those that began by privatizing generation.

Country characteristics such as geography, income group, power system size, and attributes of the political system seem to have had a statistically significant influence on the uptake of reform. One of the largest influences has been system size: countries with installed capacity above 10 GW scored more than twice as high on the reform index as those with systems below 1 GW. Similarly, countries in the middle‐ income bracket, and those with relatively competitive political dynamics scored much higher than others. Geographic region was also an important driver, with Latin America and the Caribbean standing out as the pioneering region for power sector reform, and the Middle East and North Africa as well as Sub‐ Saharan Africa starting later and introducing reforms more slowly over the entire period.

Moreover, of the 34 countries still at an early stage of reform, the vast majority fall into one of the categories that have historically found power sector reform challenging to implement: fragile states (14 cases); small systems (31 cases); low income bracket (16 cases); or weak rule of law (32 cases). About 16 of these countries are in Sub‐Saharan Africa. In fact, there is not a single large stable middle‐income country in this group. This raises questions about the applicability of the classic power sector reform agenda in those countries that currently face some of the greatest power sector challenges.

These patterns of uptake of power sector reform already tell an illuminating story. They illustrate that the full package of Washington consensus reforms has proved challenging to implement in their entirety in a developing country environment, and – though undoubtedly much more widespread – still remain far from universal even in OECD countries.

_Finally, it is important to note that the aim of this paper is entirely descriptive as opposed to normative._ That is to say that the diffusion of power sector reforms is documented without making any value judgment as to whether or not this was the right policy choice, or attempting to evaluate the associated impacts. A significant cross‐country econometric literature on the impacts of reform already exists. See 4
for example: Gassner et al., 2008<sup>1</sup> ; Nagayama, 2010<sup>2</sup> ; Erdogdu, 2014<sup>3</sup> ; Jamasb et al., 2014<sup>4</sup> ; Urpelainen and Yang, 2017.<sup>5</sup> Moreover, an evaluation of the impact of reform would not have been feasible to implement in any meaningful depth given the scope of the data set covering 88 countries over a 25‐year period. Rather, the primary contribution of this paper is to provide a much more detailed characterization of the content, timing and sequencing of power sector reform measures than has previously been possible.

The remainder of the paper is organized as follows. Chapter 2 presents the methodology, while Chapters 3 through 6 report the findings on the regulation, restructuring, competition and private sector participation measures of reform, respectively. In Chapter 7 the four dimensions of reform are drawn together to distill the overall findings of the analysis, before concluding in Chapter 8.

# **2. Methodology**

This paper draws on a number of data sources to create an unprecedented time series data set comprising information on which countries adopted which types of power sector reforms at which dates. The database covers 88 developing countries for the period 1995 to 2015. Complementary information for 22 OECD countries is available for a subset of variables and time periods. An important source of data is the RISE (Regulatory Indicators for Sustainable Energy) project,<sup>6</sup> which provides an up to date snapshot of power sector reform globally based on numerous indicators on the power sector structure and institutional arrangements in 2015. A second important source of data is the World Bank’s Private Participation in Infrastructure database,<sup>7</sup> which records all developing country transactions involving the private sector going back into the 1990s, and makes it possible to understand how private sector participation has evolved over the same period. Important historic reference points are provided by comparable earlier surveys conducted by Besant‐Jones (2006) and ESMAP (1999).

The paper will first individually examine the diffusion of each of the four dimensions of power sector reform: regulation, restructuring, competition and private sector participation. Along each of these four dimensions, a number of stages of reform are identified, which make it possible to examine diffusion trends over time as well as the geographic patterns of uptake. The prevalence of power sector reform in developing countries is compared to that in developed countries over the same time frame.

The final section of the paper turns to drawing out the main conclusions and insights from looking across experiences on all four dimensions of reform. The ways in which different types of reforms are packaged

> 1 Gassner, K., A. Popov, and N. Pushak. 2008a. “Does the private sector deliver on its promises? Evidence from a global study in water and electricity”. _Gridlines 44512_ . PPIAF, The World Bank, Washington D.C.

> 2 Nagayama, H. 2010. “Impacts on investments, and transmission/distribution loss through power sector reforms”. _Energy Policy_ , 38(7), 3453‐3467.

> 3 Erdogdu, E. 2014. “Investment, security of supply and sustainability in the aftermath of three decades of power sector reform”. _Renewable and Sustainable Energy Reviews_ , 31, 1‐8.

> 4 Jamasb, T., R. Nepal, G Timilsina, and M. Toman. 2014. Energy Sector Reform, Economic Efficiency and Poverty Reduction, Discussion Papers Series 529, School of Economics, University of Queensland, Australia.

> 5 Urpelainen, J., & Yang, J. 2017. Policy Reform and the Problem of Private Investment: Evidence from the Power Sector. _Journal of Policy Analysis and Management_ , 36(1), 38‐64.

> _6 http://rise.esmap.org/_

> _7 https://ppi.worldbank.org/_

5
and sequenced and their relative prevalence and momentum are carefully considered. Finally, a simple Power Sector Reform Index is introduced as a convenient device for summarizing the extent of power sector reform in each country. The index takes an unweighted average of a country’s score on an interval of 0 to 100 for each of the four dimensions of power sector reform.<sup>8</sup> Once again, the index is descriptive rather than normative in nature. A higher score simply denotes that more reform measures were taken, but is not necessarily intended to convey a superior power sector architecture or performance.

Throughout the paper, the sensitivity of reform experiences to initial country characteristics – as of 1995 – is systematically examined. Statistical tests of differences in values between the chosen country groupings outlined below are based on N‐1 two‐proportion tests for binary variables and ANOVA tests for continuous variables. In the case of more than 2 groups pair‐wise tests were carried out, and all pairwise significant variables received the marker. The country characteristics include country income group<sup>9</sup> , power system size<sup>10</sup> , fragility status<sup>11</sup> , and oil exporting status<sup>12</sup> , as well as the political economy characteristics<sup>13</sup> of the country.

Income group is known to affect many aspects of a country’s economy. In this case, income group is relevant for a number of reasons. It will affect the purchasing power of the population and the prospects for recovering the costs of power supply, which is often an objective of regulation as well as a prerequisite for other reforms such as private sector participation and competition.

Oil exporting countries, due to their abundance of domestic hydrocarbon wealth, are often inclined to subsidize the power sector, sometimes quite substantially. This, in turn, makes it difficult to introduce reforms related to cost recovery, and hence regulation, private sector participation and ultimately competition.

Power system size is expected to be an important factor in restructuring and competition reforms. Effective power market competition is only possible when there are a significant number of generators in the market that are able to act as alternative suppliers of power. The sector has traditionally been characterized by large scale economies in power generation, implying that only larger power systems are able to support the requisite number of generators operating beyond minimum efficient scale; although this reality is shifting with the advent of smaller scale and more modular renewable energy technologies. Furthermore, even when an adequate number of generators can be supported by the market, there may be technological characteristics (e.g. nuclear power) or transmission constraints that prevent generation plants from really competing with each other. Thus, the larger the system becomes, the less likely that such constraints can present an effective limit on competition.

Fragile and conflict‐affected states face particular challenges in adopting the ambitious institutional reforms entailed by power sector reform; in particular, their weak governance and institutional capacity combined with their risky policy environments make it challenging to attract private sector participation.

> 8 Details on the construction of the Index can be found in Box 3, Chapter 7.

> _9 World Development Indicators, World Bank_

> _10 Electricity Data, U.S. Energy Information Administration_

> _11 Polity IV Indicator, Center for Systemic Peace_

> _12 Global Energy Statistic Yearbook 2017, Enerdata_

> _13 Center for Systemic Peace and World Governance Indicators, World Bank_

6
Political economy has an important influence on the feasibility of different types of reforms. There is a wide array of variables that can be used to convey the political characteristics of a country. Two in particular are considered here.

One relevant dimension of political economy is the rule of law, which captures the extent to which the legal framework in a country is followed and effectively enforced. It is evidently an important prerequisite for the success of measures such as regulation, private sector participation and competition. In particular, it measures the perceived extent to which citizens abide by government laws, the quality of property rights, the level of confidence in the judicial system, and the perceived likelihood of crime. Countries with better scores on the rule of law should find it easier to adopt the power sector reform agenda.

Another relevant dimension of political economy is the degree of competition among the country’s political elite. At one end of the spectrum, some countries are described as dominant in that their power structure is concentrated around a single dominant individual or group that exercises power in a top down hierarchical manner. Such countries may be able to implement reforms very decisively when they are in the interest of the dominant power group, or conversely may be able to block it completely when interests do not align. At the other end of the spectrum, some countries are described as having a competitive power structure, indicating that there are multiple poles of power or competing groups of elites. Such countries may be more open to electricity sector reforms that essentially distribute political power more widely across the sector, for example by restructuring companies, opening to international private investors or establishing competitive markets. On the other hand, the competitive nature of their political processes may make it more difficult to reach consensus regarding the implementation of reform. The expected impact of political competition on the ease of power sector reform is therefore much more ambiguous than for the rule of law.

# **3. Regulatory Reform**

Regulatory reform is defined as the establishment of an autonomous entity with responsibility for regulatory oversight and with some role in decision‐making (Figure 3.1). In any power sector, there are policy‐making, regulatory and service provision functions to be fulfilled. In simple terms, policy‐making involves charting the strategic direction for the sector, regulation involves overseeing the sector to ensure that the strategic direction is followed and enforced, while service provision involves the actual implementation of that strategic direction. Traditionally, all three functions have often been combined, and mutually confounded, within the line ministry. However, with widespread corporatization of the service provider to form an enterprise distinct from the line ministry, as well as the growing delegation of these activities to the private sector, the need for a clearer regulatory function has been felt. A widely adopted model, drawing heavily on Anglo‐Saxon experience, has been to create a regulatory entity dedicated to this purpose. Independence is considered important to isolate the regulator and ultimately the service‐provider from short term opportunistic political interference that may jeopardize the achievement of the long‐run strategic direction for the sector. Independence, though always relative, has been defined in terms of an institutional existence, governance structure, and budget line that are separate from the line ministry itself. However, in practice, genuine independence has proved difficult to achieve in many political systems and cultures, because governments often find it difficult to relinquish their discretionary powers to control important sources of political patronage such as electricity tariffs, power sector investment plans, and utility employment. The roles of the regulator include setting tariffs 7
to recover efficient costs, monitoring and enforcing quality of service standards, and overseeing market entry.

**Figure 3.1: Definition of regulatory reform**

|**Model**<br>**classification**|**Defining characteristics**|
|---|---|
|1. No regulator|There is no entity separate from the line ministry responsible for<br>regulatory oversight of the power utility (‐ies)|
|2. Regulatory entity|A regulatory entity has been created that exists outside of the line<br>ministry and has clearly defined regulatory responsibilities and some<br>degree of decision‐making autonomy|

Regulatory entities have diffused rapidly across the developing world, yet are still not as prevalent as in the developed world. Regulatory entities existed only in a handful of countries up until the year 1995 (Figure 3.2). During the decade 1995‐2005, there was remarkably rapid diffusion of regulatory entities with about 40 percent of developing countries adopting the reform during this period. Uptake continued during the subsequent decade 2005‐2015 though at a much slower pace, with an additional 20 percent of developing countries establishing a regulatory entity. As of 2015, 72 percent of developing countries have a regulatory entity, making this by far the most popular and widely adopted of the four major policy recommendations of the Washington consensus. Nevertheless, this still falls considerably short of the 91 percent prevalence of regulatory entities in the developed world (Figure 3.3).

**Figure 3.2: Percentage of developing countries establishing regulatory entities over time**

<!-- Start of picture text --> 100%<br>80%<br>60%<br>40%<br>20%<br>0%<br>1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014<br><!-- End of picture text --> Source: Own elaboration based on RISE 2015 database and independent research

**Figure 3.3: Comparison of developed and developing countries on extent of regulatory reform, 2015**

|Percentage of countries|Developed countries|Developing countries|
|---|---|---|
|With regulatory entity|91|72|
|Without regulatory entity|9|28|
||100|100|

8
<!-- Start of picture text --> 100%<br>90%<br>BOM<br>rite)<br>60%<br>50%<br><!-- End of picture text --> <!-- Start of picture text --> 40%<br>30%<br>20%<br>10%<br>O%<br>1979-1992 1994 1995 1996 1997 1998 3861999 #2000 2001 2002 2003 2004 #2005 2006 2007 2009 «2010 2011 2014<br>——East Asia & Pacific ——Europe & Central Asia ——Latin America & Caribbean — Middle East & North Africa ——=South Asia ————Sub-Saharan Africa<br><!-- End of picture text -->
<!-- Start of picture text --> — “ “if Z , ud J, z é<br>/ ie | '<br><!-- End of picture text -->

<!-- Start of picture text --> ‘ - asbad<br>* f y 2 x<br>f | | |<br>|sae@ BRD 43170 | 2016 Independent<br>eeJs map was produc: 2017° aRegulator: ,<br>Cartographyink Group.ChetThe boundaries,teWorld No regulatory entity ;<br>colors,sther formationdenominationsshownand ot an, HERR Fegulatory entityit existsi % ki<br>‘mapthe doWorldnot Bankimply, Group,on theany part of ee no data y ‘<br>judgment on the legal status of iw<br>or‘any acceptanceterritory, orof such any endorsement boundaries.<br><!-- End of picture text -->
There are some notable examples of countries that have eschewed regulatory entities. The map identifies those countries that stand out as non‐adopters in each of the regions (Figure 3.5). Within Latin America, Bolivia and the República Bolivariana de Venezuela stand out as countries that do not have regulatory entities; although in Bolivia’s case this represents a policy reversal. Other notable standouts are the countries of Central Africa and Central Asia, as well as Afghanistan, the Islamic Republic of Iran and Indonesia.

The penetration of regulatory reforms is particularly high in upper‐middle‐income countries, as well as in larger systems and certain regions (Figure 3.6). Regulatory entities are universal in upper‐middle‐income countries, and significantly higher than in the low‐income group. By far the largest variation in the prevalence of regulatory entities is across geographic regions, ranging from around 40 percent to 80 percent in different regions. In particular, differences are statistically significant between the Middle East & North Africa and Latin America & Caribbean (at the 10% level), South Asia region and Sub‐Saharan Africa (at the 5% level).

# **4. Restructuring Reform**

Restructuring reform is defined as movement along a spectrum towards full vertical and horizontal unbundling of the sector. The starting point for restructuring reform is typically a vertically integrated national monopoly utility, and the theoretical endpoint a fully restructured sector entailing vertical unbundling of generation, transmission and distribution, as well as horizontal unbundling of the generation and distribution tiers to create multiple companies operating in parallel.

The theoretical rationale for such restructuring is that it paves the way for competition. First, vertical unbundling aims at removing any conflict of interest that may arise when a single utility has more than one function along the electricity supply chain. For example, a transmission company that also engages in generation may have the incentive to prioritize grid access for its own generation capacity as opposed to that of competitors. Second, horizontal unbundling aims at reducing the concentration of market power, particularly relevant for generation. For example, a country that has five or six generation companies of even size is likely to experience stronger competitive pressure in generation than a country that has one large and one small generation company only. However, in countries where the scope for genuine competition may be severely constrained by the scale or technical characteristics of the power sector, the case for unbundling as an enabler of competition may not be compelling. In addition, there may be other reasons to pursue vertical unbundling, related to promoting efficiency gains through greater specialization or improved transparency and accountability of management along the electricity supply chain. It is also sometimes argued that horizontal unbundling can help regulators to compare efficiency across companies. Nevertheless, unbundling is quite a complex process whose costs need to be carefully weighed against the expected benefits, particularly in countries where systems are small and there is a serious risk of losing scale economies, and/or managerial capacity to lead multiple enterprises may be limited.

11
**Figure 4.1: Definition of stages of restructuring reform**

|**Model**<br>**classification**|**Defining characteristics**|
|---|---|
|1. Vertically<br>Integrated|Generation, transmission and distribution are undertaken by a single<br>vertically integrated entity|
|2. Partial vertical<br>unbundling|Either generation has been separated while transmission and<br>distribution remain combined, or distribution has been separated<br>while generation and transmission remain combined|
|3. Full vertical<br>unbundling|Generation, transmission and distribution have each been separated<br>from each other.|
|4. Full vertical and<br>horizontal<br>unbundling|Generation, transmission and distribution have each been separated<br>from each other, and furthermore generation and/or distribution<br>tiers have been restructured into multiple entities.|

In practice, restructuring may happen in a number of phases and take a variety of forms. Hence the survey distinguishes between partial vertical unbundling that entails splitting the vertical supply chain into just two independent entities – which may leave transmission either with generation or with distribution – full vertical unbundling that entails splitting the vertical supply chain into three independent entities – for generation, transmission and distribution – and horizontal unbundling to create multiple entities in the generation and distribution segments. It is also important to clarify that there are degrees of unbundling, usually starting with accounting separation, and going on to encompass functional separation into distinct management areas, legal separation into distinct companies, and ownership separation so that the different companies also have distinct owners. In some countries, for example, utilities are legally unbundled only to be retained under the ownership of a single state‐owned holding company, which tends to undermine the impact of the restructuring exercise. For the purposes of the taxonomy used in this paper, unbundling must go as far as legal unbundling in order to be counted at all.

12
<!-- Start of picture text --> 100%<br>90%<br>80%<br>70%<br>60%<br>50%<br><!-- End of picture text --> <!-- Start of picture text --> 40%<br>30%<br>20%<br>10%<br>0%<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>@ Fully vertically and horizontally unbundled = @ Fully vertically unbundled = TM@ Partially verticallyunbundied = @ Vertically integrated<br><!-- End of picture text -->
**Figure 4.3: Comparison of developed and developing countries regarding vertical unbundling, 2015**

|Percentage of countries|Developed<br>countries|Developing<br>countries|
|---|---|---|
|<br>Verticallyintegrated**|26|57|
|Some degree of vertical unbundling of which:**|74|43|
|<br>Partial vertical unbundling|4|11|
|<br>Full vertical unbundling**|26|14|
|<br>Full vertical unbundling plus horizontal unbundlingin G or D**|43|18|
||100|100|

Source: Own elaboration based on RISE 2015 database ****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level The timing and extent of sector restructuring differs significantly across regions<sup>14</sup> (Figure 4.4). Two regions – Latin America & Caribbean and Europe & Central Asia – were early adopters with some 60 percent of their countries having unbundled to some degree as early as the year 2000, and no further action since that date. Countries that have pursued unbundling have at least introduced full vertical unbundling, and a significant minority of 20‐30 percent of countries in these regions have full vertical and horizontal unbundling. While the process of unbundling started later and moved more slowly in the East Asia Pacific region, by 2015 as many as 80 percent of countries had undertaken some degree of unbundling, and as many as 40 percent had full vertical and horizontal unbundling. However, a substantial share of countries has remained at the stage of partial vertical unbundling. By contrast, in South Asia, fewer than half of the countries have embarked on sector unbundling and there has been no further uptake of restructuring reforms since the early 2000s. A similar pattern is evident in the Middle East and North Africa, where barely a third of the countries have undertaken unbundling. In Sub‐Saharan Africa, vertically integrated monopolies remain the norm in over 80 percent of the countries. Interestingly, the East Asia and Pacific region (and to a much lesser extent Sub‐Saharan Africa) is the only one where momentum on restructuring reforms has actually increased over the last decade 2005‐2015. In all other regions, there has been barely any action on restructuring reforms since the early 2000s.

The detailed geographic patterns are somewhat different for restructuring than for regulation (Figure 4.5). As before, Afghanistan, the Islamic Republic of Iran, Indonesia, and the República Bolivariana de Venezuela stand out as countries that have eschewed reform. However, in addition, so have the majority of countries in Africa, whose systems are likely in many cases too small to make unbundling a relevant option.

> 14 Specifically, with respect to vertical integration/some degree of vertical unbundling the differences are statistically significant between Sub‐Saharan Africa and Europe & Central Asia, East Asia & Pacific and Latin America & Caribbean respectively. The percentage of countries that have fully vertically unbundled varies significantly between Europe & Central Asia and Sub‐Saharan Africa. The differences are statistically significant for Sub‐Saharan Africa and East Asia & Pacific, Latin America & Caribbean and Middle East & North Africa, as well as for East Asia & Pacific and Middle East & North Africa with respect to full vertical unbundling. Partial vertical unbundling does not vary to statistically significant degrees across regions.

14
<!-- Start of picture text --> 100% 100%<br>7% 90%<br>80% 80%<br>70% 70%<br>60% 60m<br>sone som<br>40% 40%<br>30% 0%<br>20% 20%<br>10% 10%<br>TM om<br>{5 1996 1587 1s 1989 2000 2OGE 2OI2 2005 2004 BOIS 2OG6 2OOF 2008 AAG BOLD AIA aoe 21s Boks Boks 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>15 Fully vortically and horizontally unbundled a Fully vertically unbundled 1 Fully vertically and horizontally unbundled @ Fully vertically unbundled<br>1 Partially vertically unbundled Vertically integrated mPertiady vertically unbundied Vertically integrated<br>100% 100%<br>90% 90%<br>806 g0%<br>70% 7%<br>60% erm<br>asi 50%<br>acre 40%<br>30% sone<br>om 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 os<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2012 2013 2014 2015<br>SePartiallyFatby verticallyverticallyanPartiallyFatby verticallyverticallyanFatby verticallyverticallyan verticallyverticallyanverticallyanan unbundledhorganmally unburaieslhorganmally unburaiesl unburaiesl Vertically@ Pally vertically integr w@ Pally vertically integr w integr w w a tkk e dndledndled =Partially Fully: verticallyvertically-Partially Fully: verticallyvertically- Fully: verticallyvertically-: verticallyvertically- verticallyvertically-vertically-- and horizortallyunbundled horizortallyunbundledunbundled unbundled ©mm VerticallyFully vertically— integratedunbundledFully vertically— integratedunbundled vertically— integratedunbundled— integratedunbundled integratedunbundledunbundled<br><!-- End of picture text --> <!-- Start of picture text --> 100% 100%<br>90% 90%<br>806 g0%<br>70% 7%<br>60% erm<br>asi 50%<br>acre 40%<br>30% sone<br>om 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 os<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2012 2013 2014 2015<br>SePartiallyFatby verticallyverticallyanPartiallyFatby verticallyverticallyanFatby verticallyverticallyan verticallyverticallyanverticallyanan unbundledhorganmally unburaieslhorganmally unburaiesl unburaiesl Vertically@ Pally vertically integr w@ Pally vertically integr w integr w w a tkk e dndledndled =Partially Fully: verticallyvertically-Partially Fully: verticallyvertically- Fully: verticallyvertically-: verticallyvertically- verticallyvertically-vertically-- and horizortallyunbundled horizortallyunbundledunbundled unbundled ©mm VerticallyFully vertically— integratedunbundledFully vertically— integratedunbundled vertically— integratedunbundled— integratedunbundled integratedunbundledunbundled<br><!-- End of picture text --> <!-- Start of picture text --> 100%<br>5%<br>80%<br>70%<br>60%<br>50%<br>4o%<br>30%<br>20%<br>10%<br>on<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>Fully verticallyand horizentally unbundled m Fully vertically unbundled<br>mw Partially vertically unbundled e Vertically imegrated<br><!-- End of picture text --> <!-- Start of picture text --> 100%<br>90%<br>80%<br>70%<br>6%<br>50%<br>40%<br>30%<br>20%<br>10%<br>o%<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>Fully verticallyand horizontally unbundled m Fully vertically unbundled<br>© Partially vertically unbundied Vertically integrated<br><!-- End of picture text -->
<!-- Start of picture text --> ng: ate ; - me he an.<br>b “i — a ae i.<br>a Cy ai<br>: . “ t<br>@ aon , Y Score Unbandliag:<br>ropa. +4) STEER aI<br>This age mad seedaced bythe Yeotically iniegrated<br>Frerysobresaacareneeritioiaamis al ny || Partially veracally unbuacled : r<br>eel— ey os eredseth HE Felty verily abuncted- i i<br>he Mask Dash Harman,<br>Duahpreredseg horvabony. en thex ayJere! aiden uw aed . . nadaka } :<br>so emcmyrhin off each bere<br><!-- End of picture text -->
**Figure 4.6: Prevalence of restructuring reform measures across country groupings**

|Percentage of|Vertically|Some degree of||Of which:|||
|---|---|---|---|---|---|---|
|countries adopted as<br>of 2015|integrated|vertical<br>unbundling|Partial<br>vertical<br>unbundling|Full vertical<br>unbundling|Full vertical<br>and<br>horizontal||
||||||unbundling||
|**By incomegroup**|||||||
|LIC|60**|40**|13|4|23*|100|
|LMIC|50|50|11|7|32|100|
|UMIC|33**|67**|17|0|50*|100|
|**By system size**|||||||
|<1GW|69**|31**|10|3|18*|100|
|1‐5GW|50|50|10|5|35*|100|
|5‐10GW|20**|80**|20|0|60*|100|
|10‐20GW|67**|33**|11|11|11**|100|
|>20GW|23**|77**|23|8|46*|100|
|**By political economy **<br>|||||||
|Dominant|55|45|18*|3|24**|100|
|Intermediate|52|48|18*|6|24|100|
|Competitive|44|56|4*|4|48**|100|
|**By rule of law**|||||||
|High rule of law|61|39|0*|8|31|100|
|Low rule of law|54|46|15*|4|27|100|
|**By fragility status**|||||||
|FCS|50|50|17|2|31|100|
|Non‐FCS|58|42|9|7|26|100|
|**By oil‐exporting statu**|**s**||||||
|Importer|36**|64**|15|7|42|100|
|Exporter|50**|50**|19|6|25|100|
|**Total**|**57**|**43**|**11**|**14**|**18**|**100**|

Source: Own elaboration based on RISE 2015 database ****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level Once embarked on a restructuring reform, only about half the countries seem likely to pursue it to the fullest extent of vertical and horizontal unbundling. Figure 4.7 illustrates the evolution of countries adopting different degrees of restructuring in 2005 and looking at the extent of their further progress on restructuring reform ten years later, by 2015. Just over half the countries simply retained a vertically integrated structure over this period with no movement on reform. Among those embarking on restructuring reform since 2005, about half went all the way to full vertical and horizontal unbundling, while the other half remained in an intermediate stage. None of the countries that had undertaken partial vertical unbundling by 2005 took this any further during the following decade. By contrast, the majority of countries that had reached full vertical unbundling in 2005 went on to introduce horizontal unbundling during the following decade. The evidence suggests that taking preliminary steps towards unbundling is no guarantee that the process will be completed. However, countries are unlikely to undo restructuring 17
reforms once these have been undertaken: only 2 percent of countries indicate a policy reversal in the lower triangular portion of the table. In particular, Kazakhstan went from being fully vertically and horizontally unbundled in 2005 to just fully vertically unbundled in 2015, while the República Bolivariana de Venezuela’s level of unbundling changed from fully vertically unbundled to vertically integrated in that time period.

**Figure 4.7: Evolution of restructuring reforms from 2005 to 2015**<sup>**15**</sup>

**2015 State of Restructuring**

|Percentage<br>of countries|Vertically<br>integrated|Partial vertical<br>unbundling|Full vertical<br>unbundling|Full vertical and<br>horizontal unbundling||
|---|---|---|---|---|---|
|**uring**<br>Vertically<br>integrated|54.5**|4.5|2.3|6.8|68.2|
|**of Restruct**<br>Partial<br>vertical<br>unbundling|0.0*|8.0|0.0|0.0|8.0|
|**05 State**<br>Full vertical<br>unbundling|1.1**|0.0|3.4|9.1|13.6|
|**20**<br>Full vertical<br>and<br>horizontal<br>unbundling|0.0**|0.0|1.1|9.1|10.2|
||55.7|12.5|6.8|25.0|100.0|

- Differences are statistically significant at the 10% level

Countries that have proceeded to the final stages of restructuring reform did so rapidly (Figure 4.8). A large majority (78 percent) of the 14 countries that were fully vertically and horizontally unbundled as of 2015 completed the process within five years of embarking on restructuring reforms. In almost three‐ quarters of these cases, countries skipped partial vertical unbundling and proceeded directly to full vertical and horizontal unbundling. At the other extreme, 14 percent took over 10 years to reach full vertical and horizontal unbundling.

> 15For each row, the 2015 share of countries in each of the column categories is compared. A single significance marker in a row shows that the particular share was statistically significantly different from all other values in the row. More than one marker highlights all the values that were statistically significantly different from one another.

18
<!-- Start of picture text --> 100%<br>90% | Ecuador Ghana<br>Nicaragua Nigeria<br>830% Peru Romania<br>Russian Federation<br>70% Ukraine<br><!-- End of picture text -->

<!-- Start of picture text --> 60% 57%<br>50% Bangladesh<br>Brazil<br>40% Dominican<br>Republic<br>30%<br><!-- End of picture text --> <!-- Start of picture text --> 21%<br>=e<br>10% 7% 7% 7%<br>os [I A sl<br>less than 1 2toS Sto 10 10to 15 >15<br><!-- End of picture text -->
**Figure 5.1: Definition of stages of competition reform**

|**Model**<br>**classification**|**Sector structure characteristics**|
|---|---|
|1. Monopoly|A single company has responsibility for generation, transmission,<br>distribution and retail sales|
|2. Independent<br>Power Producers|As above, but in addition private independent power producers (IPPs)<br>are allowed to compete for the right to generate power|
|3. Single Buyer<br>Model|A single wholesale power trader, which may be: (i) a transmission<br>entity, (ii) a distribution entity or (iii) a combined transmission and<br>distribution/retail entity, as long as it has no direct interest in<br>generation. The single wholesale power trader purchases power from<br>all generators, and sells to all distributors as well as any large<br>wholesale customers.|
|4. Bilateral<br>contracting with<br>Third Party Access|A transmission operator or some other entity acts as a single buyer of<br>power for the majority of retail customers, while allowing large<br>customers to purchase power directly from various generators, by<br>wheeling power through the grid on a non‐discriminatory basis|
|5. Wholesale<br>market<br>competition|Power market of multiple generation companies selling directly to<br>multiple distribution companies and other large customers,<br>supported by an independent system operator and market operator.<br>Small customers can buy only from their local distributor.|
|6. Retail market<br>competition|As above, but allowing all customers – large and small – to purchase<br>power directly from retail companies, entailing prior vertical<br>unbundling of distribution and retail companies, with distribution<br>companies providing open access wheeling services to numerous<br>power retailers|

Competition reform is defined as movement along a spectrum from complete monopoly to full retail competition and takes place in a number of distinct stages (Figure 5.1). The first reform step involves opening competition for the right to build and operate new generation plants supported by long term power purchase agreements with the monopoly utility. The second stage involves the creation of a single buyer entity that has a monopoly on the sale of power to end users, but which a number of generation companies compete to supply. The only real difference between this and the earlier stage is that the single buyer model typically involves a prior restructuring exercise to separate generation from transmission and distribution, so that the single buyer avoids the conflict of interest entailed by holding its own generation assets. The third stage, which should be preceded by full vertical unbundling of the power sector, allows direct bilateral contracting of power between generators and large customers (such as distribution companies or major industries), and is made possible by the principle of non‐discriminatory Third Party Access to the national grid. The fourth stage moves beyond bilateral contracting by creating a wholesale power market or exchange that typically allows both spot purchases and longer term contracts, and may 20
<!-- Start of picture text --> 100%<br>90%<br>80%<br>70%<br>60%<br><!-- End of picture text --> <!-- Start of picture text --> 50%<br>40%<br>30%<br>20%<br><!-- End of picture text --> <!-- Start of picture text --> 10%<br>0%<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>= Retail market competition = Wholesale market competition<br>@ Bilateral contracting with Third Party Access @ Single Buyer Model<br>@ Independent Power Producers & Monopoly<br><!-- End of picture text -->
were quite evenly divided between Independent Power Producers, the Single Buyer Model and various forms of competition in the market. Of these, wholesale power markets are the most prevalent and can be found in more than 10 percent of countries.

Nonetheless, power sector competition has spread far wider and gone much deeper in the developed world than in the developing world (Figure 5.3). Whereas about 70 percent of developing countries have implemented some degree of competition, this falls well short of the developed world where competition is almost universal, affecting 96 percent of countries (Figure 5.3). Not only is competition more widespread in the developed world, but it has also been introduced in more advanced forms. The percentage of developed countries with some form of power market, at almost 80 percent, is around four times as high as the percentage of developing countries, which stands at just 20 percent. While the proportion of developed countries practicing more modest forms of competition, such as Independent Power Producers and the Single Buyer Model, is only 17 percent, the share is more than twice as high among developing countries at 41 percent. One possible interpretation is that developing countries are simply moving more slowly in implementing power sector reforms. An alternative view is that they have settled into an intermediate stage of reform, without any interest in going further.

The vast majority of developed countries that have introduced full retail competition are EU members and their evolution towards power markets is driven by EU Directives. Indeed, the only developed countries outside of the EU membership that have established full retail competition for electricity have been Australia, Canada, the Russian Federation, Switzerland and the United States. In the developing world, there are just a dozen countries that have introduced retail competition for electricity; although this may not always be fully operative. They are concentrated in Latin America (Argentina, Brazil, Chile, Guatemala, Peru) and Eastern Europe (Kazakhstan, Romania, Russia, Turkey, Ukraine), as well as Asia (India, Philippines).

**Figure 5.3: Comparison of developed and developing countries regarding extent of competition as of 2015**

|Percentage of countries|Developed countries|Developing countries|
|---|---|---|
|Monopoly**|4|30|
|Some degree of competition of which:|96|70|
|<br>Independent Power Producers|13|22|
|<br>Single Buyer Model*|4|19|
|<br>Bilateral contracting with Third Party Access|0|6|
|<br>Wholesale market competition|13|8|
|<br>Retail market competition**|66|15|
||100|100|

Source: Own elaboration based on RISE 2015 database

****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level

By far the earliest and deepest efforts to introduce competition occurred in Latin America & Caribbean as well as Europe, where a majority of countries currently have power markets (Figure 5.4). In these regions, the vast majority of countries had already begun the journey towards competition as of 2005, with close to half of the countries in both regions already having established a power market. During the decade 22
2005 to 2015, the share of countries with power markets in both regions rose slightly towards 60 percent; and in the case of Europe & Central Asia the form of competition shifted in many countries from wholesale to retail, reflecting adoption of European Union policy frameworks. Despite the predominance of power markets in these regions, there still remain a solid core of around 30 percent of countries that have remained at the earlier stages of competition with a Single Buyer Model or simply allowing Independent Power Producers. While a significant minority, 22 percent, of countries in Europe & Central Asia retained a monopolistic sector in 2015, there are no remaining monopolies in Latin America & Caribbean.

Across Asia, the decade 2005 to 2015 was one of deepening competition in the electricity sector, but with a marked preference for intermediate models rather than full power markets (Figure 5.4). While a majority of countries in South Asia and East Asia Pacific had already begun the competition process by 2005, in almost all cases this had only involved the first stage of Independent Power Producers. During the following decade, there was strong uptake of the Single Buyer Model in about 30 to 50 percent of Asian countries. Overall, as of 2015, about 70 percent of Asian countries are practicing some intermediate form of competition including Independent Power Producers, Single Buyer Model and Third Party Access. Only a minority of countries, less than 30 percent, have gone as far as introducing power markets. Monopolies remain rare in East Asia Pacific, but are still quite prevalent in South Asia.

The story is very different for Africa and the Middle East (Figure 5.4). Neither of these regions has any wholesale power markets. In the Middle East, about 75 percent of countries had undertaken early stages of competition as of 2005, with a preference for Independent Power Producers and the Single Buyer Model. The only further movement on competition that has taken place in any Middle Eastern country during the subsequent decade 2005 to 2015 has been the adoption of bilateral contracting in several countries. Sub‐Saharan Africa began in 2005 with a monopolistic power sector in around 75 percent of countries. In the following ten years, the prevalence of monopolistic sectors has dropped markedly towards 50 percent. Among African countries adopting competition, the vast majority have only moved as far as introducing Independent Power Producers, with much more limited adoption of the Single Buyer Model.

23
<!-- Start of picture text --> 100% 100%<br>9086 90%<br>0% 80%<br>70% 70%<br>60% 60%<br>50% 50%<br>40% 40%<br>30% 30%<br>20% 20%<br>10% 10%<br>0% O%<br>PIP EE SEPPL EFEEE LEPPOSPP SF PEF EEEFI FE ESF EFFI FFPPP?<br>@ Retail market competition | Wholesale market competition = Retail market competition TM Wholesale market competition<br>Bilateral contracting with Third Party Access m Single Buyer Model @ Bilateral contracting with Third Party Access @ Single Buyer Model<br>1m Independent Power Producers m Monopoly B Independent Power Producers & Monopoly<br><!-- End of picture text -->

<!-- Start of picture text --> 100% 100%<br>9086 90%<br>30% 80%<br>7O% 70%<br>6% 60%<br>50% 50%<br>4086 40%<br>30% 30%<br>20% 20%<br>10% 10%<br>us 0%<br>& &£ &£££*=£= aeces a£se se- & s e & a s4 s se = ros resa s Ss<br>im Retail market competition m Wholesale market competition m Retail market competition 1 Wholesale market competition<br>im Bilateral contracting with Third Party Access m Single Buyer Model & Bilateral contracting with Third Party Access m Single Buyer Model<br>m Independent Power Producers = Monopely & Independent Power Producers ® Monopoly<br>Oe<br>100% 100%<br>50% 90%<br>BOs 80%<br>70% 70%<br>60% 60%<br>50% SO%<br>40% 40%<br>3086 30%<br>20% 20%<br>10% 10%<br>0% 0%<br>PILI LPL EEELLIELE ELLISII FS? PE IPLSL- =Ses£ <&=oss--<br>@ Retad market competition @ Wholesale market competition @ Retail market competition @ Wholesale market competition<br>© Bilateral contracting with Third Party Access m@ Single Buyer Model @ Bilateral contracting with Third Party Access m Single Buyer Model<br>M Independent Power Producers |= Monopoly § Independent Power Producers ® Monopoly<br><!-- End of picture text -->
<!-- Start of picture text --> mt Ae To.<br>p ‘Seles )<br>4. =f :<br>’ ee ite,<br>i So . ; mn indasl be<br>- ofAQ d awe i ¥ . Me ay« "|<br>; #<br>: ;t — ay le - or.4 rt<br>ve “7 |<br>Fe — ; |<br>5<br>aft Index Suna:<br>& , o Monopolybis<br>pee‘ o<br>Thisraay mas perdiaceal ly-the Sight Bayer Medel<br>achcade,iaeee deaaraleadbonafirsny Lin alraf tsal Higy (RRBR (ergotestes Contract:baer<br>tha Hilertat Bina Gorm, ag “a<br>ptgereeed en Lei gpa! ad ft Te dale<br>aga apearanseave, atayjaaraah bean:el<br><!-- End of picture text -->
Almost half of developing countries halted power sector competition during the decade 2005 to 2015. In order to understand the extent to which there continues to be momentum around competition in the power sector, Figure 5.7 plots the extent of competition in 2005 against the extent of competition in 2015. A first group of countries – located along the diagonal of the matrix – and comprising nearly half of all countries in the sample adopted no additional reform on competition between 2005 and 2015. It is striking that almost all these countries stopped at the very early stages: either with a monopoly or with Independent Power Producers.

**Figure 5.6: Prevalence of competition reform measures across country groupings**

|Percentage of<br>countries<br>adopted as of|Monopoly|Independent<br>Power<br>Producers|Single<br>Buyer<br>Model|Bilateral<br>contracting<br>with Third|Wholesale<br>market<br>competition|Retail<br>market<br>competition||
|---|---|---|---|---|---|---|---|
|2015||||PartyAccess||||
|**By incomegroup**||||||||
|LIC|33*|29*|23|9|4**|2|100|
|LMIC|25*|11*|14|4|24**|22|100|
|UMIC|0*|17|17|0|27**|39|100|
|**By system size**||||||||
|<1GW|43*|30*|15*|5*|5|2|100|
|1‐5GW|15*|25|30*|15*|10|5|100|
|5‐10GW|20|0*|40*|0*|0|40|100|
|10‐20GW|33*|11|22|11|11|12|100|
|>20GW|8*|8*|8*|0*|25|51|100|
|**By political econo**|**my**|||||||
|Dominant|24|29|32**|8|3*|4|100|
|Intermediate|24|18|24**|6|12|16|100|
|Competitive|22|17|4**|4|17*|36|100|
|**By rule of law**||||||||
|High rule of law|31|0**|31|8|0|30|100|
|Low rule of law|28|26**|18|7|9|12|100|
|**By fragility status**||||||||
|Non‐FCS|29|28*|16|4|9|14|100|
|FCS|28|14*|23|10|7|6|100|
|**By oil exporting s**|**tatus**|||||||
|Exporter|20|25|13|6|19|17|100|
|Importer|12|22|22|12|17|15|100|
|**Total**|**30**|**22**|**19**|**6**|**8**|**15**|**100**|

Source: Own elaboration based on RISE 2015 database ****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level 26
Some 40 percent of developing countries continued to pursue competition measures during the last decade. A second group of countries – placed in the upper triangle of the matrix – and representing 43 percent of all countries in the sample continued to pursue competition taking one or more reform steps between 2005 and 2015. About half of these countries took only one reform step at the early stages of the process, moving either from Monopoly to Independent Power Producers or from Independent Power Producers to the Single Buyer Model. However, countries that had already launched significant reforms on competition by 2005 had generally completed the process and gone all the way to retail competition by 2015.

Only a handful of countries reversed competition measures. A third group of countries – located in the lower triangle of the matrix – and consisting in less than 8 percent of all countries in the sample had reversed competition reforms between 1995 and 2005. There are in fact only three countries in this category: Albania, Bolivia and Burkina Faso.

**Figure 5.7: Evolution of competition reforms from 2005 to 2015**

# **2015 Sector Structure**

|Percentage<br>of countries|Monopoly|Independe<br>nt Power<br>Producers|Single<br>Buyer<br>Model|Bilateral<br>contracting<br>with Third<br>Party Access|Wholesale<br>market<br>competition|Retail market<br>competition||
|---|---|---|---|---|---|---|---|
|Monopoly|22.5**|12.4|4.5**|1.1**|1.1**|0.0**|41.6|
|**ture**<br>Independent<br>Power<br>Producers|2.2|12.4*|3.4|3.4|1.1|1.1|23.6|
|**tor Struc**<br>Single Buyer<br>Model|0.0|1.1|4.5|0.0|0.0|2.2|7.9|
|**2005 Sec**<br>Bilateral<br>contracting<br>with Third<br>Party Access|0.0|0.0|0.0|0.0|1.1|2.2|3.4|
|Wholesale<br>market<br>competition|0.0|0.0|0.0|0.0|2.2|9.0|11.2|
|Retail market<br>competition|0.0|0.0|0.0|0.0|4.5|7.9|12.4|
||24.7|25.8|12.4|4.5|10.1|22.5|100.0|

***** Differences are statistically significant at the 10% level

27
<!-- Start of picture text --> 100%<br>90%<br>Argentina;<br>80% Chile<br>Colombia<br>70% Czech Republic<br><!-- End of picture text --> <!-- Start of picture text --> Kazakhstan<br>60% Peru<br>Russia<br>50%<br>40% 39% Guatemala — india China<br>30% Nicaragua razi Philippines Ecuad o r<br><!-- End of picture text --> <!-- Start of picture text --> Republic<br>20% 17% 17% 17%<br>11%<br>-0% a<br>less than 1 2toS 5to 10 10to 15 >15<br><!-- End of picture text -->
Private sector participation can be implemented to varying degrees along a number of dimensions. First, the _scope_ of private sector participation varies according to the extent of the electricity supply chain affected. Private sector participation may initially be undertaken only in one segment of the electricity supply chain, often generation, but not necessarily in another, such as distribution. Eventually, the private sector may be brought in along the entire electricity supply chain. The analysis here will distinguish between these three cases (Figure 6.1). Second, private sector participation may affect some companies in a particular supply segment, but not all. For example, a country may privatize two of its generation plants, but leave the other three under public ownership. The _coverage_ of private sector participation may be gauged for generation according to the percentage of generation capacity that is under private control, and for distribution by the percentage of distribution companies that are under private control. The index does not include transmission, because there is no clear policy prescription in favor of private sector participation, given that the grid is the ultimate natural monopoly and provides many public good services to the system. Box 1 proposes a way of integrating information on both dimensions of private sector participation into an index that provides a measure for the extent of private sector participation in a country. (The index does not, however, consider the instrument used for private sector participation, despite the fact that contractual forms such as concessions arguably represent a lesser degree of private sector participation than full divestiture.)

**Figure 6.1: Definition of scope of private sector participation reform**

|**Model classification**|**Sector structure characteristics**|
|---|---|
|1. Public ownership|All generation and distribution companies are under public<br>ownership and management|
|2A. Some degree of private<br>sector participation in<br>generation only|At least one generation company has been privatized, or there is<br>at least one public‐private partnership for power generation,<br>typically an Independent Power Producer. The precise extent of<br>private sector participation in generation can be gauged by<br>calculating the share of installed generation capacity that is under<br>private control.But there is no private sector participation in<br>distribution.|
|2B. Some degree of private<br>sector participation in<br>distribution only|At least one distribution company has been privatized, or there is<br>at least one public‐private partnership for power distribution,<br>typically a management contract or concession. The precise<br>extent of private sector participation in distribution can be<br>gauged by calculating the percentage of distribution companies in<br>the country that are under private control.Butthere is no private<br>sector participation in generation.|
|3. Some degree of private<br>sector participation in both<br>generation and distribution|At least one generation companyandat least one distribution<br>company has been privatized or has some form of private sector<br>participation.|

Preferred modalities of private sector participation vary significantly across the electricity supply chain. This varies from 14 percent in transmission to 63 percent in generation, with distribution falling in between at 40 percent. Almost all modalities of private sector participation – including management 29
contracts, concessions, Greenfield contracts and divestitures – have been applied to all segments of the energy supply chain; however, their relative prevalence differs significantly. For generation, Greenfield contracts for Independent Power Projects are more than twice as likely to be adopted as divestitures or concessions, while management contracts are barely used at all. For distribution, divestitures and concessions are significantly more prevalent than management or Greenfield contracts. For transmission, divestitures, concessions and Greenfield contracts have been used to a similar extent, while management contracts are rarely adopted.

**Figure 6.2: Prevalence of different forms of private sector participation along the electricity supply**

**chain**

|**Percentage of countries**<br>**with**|**Generation**|**Transmission**|**Distribution**|**Any of**<br>**These**|
|---|---|---|---|---|
|Management contracts|2|0*|8*|10|
|Concessions|18**|5**|16|39|
|Greenfield contracts<br>(BOT/BOO)|57**|9**|3**|69|
|Divestiture|29**|7**|25**|61|
|Anyof These|63|14|40|70|

Source: Own elaboration based on World Bank’s Private Participation in Infrastructure 1990‐2015 databases

****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level

# **Box 1: Index for measuring the extent of private sector participation reform in a country**

Since there are multiple dimensions to private sector participation reforms, an index is needed to aggregate over all of these dimensions and get a comparative measure of the extent of reform effort in any given country. The table below explains how the scores would be created for the two dimensions of private sector participation reform, namely: scope or how much of the electricity supply chain is affected and coverage or what share of business units at each stage of the electricity supply chain are affected.

|Scope<br><br>50 percent weighting for private sector activity in generation (G)<br><br>50percent for distribution forprivate sector activityin distribution(D)|
|---|
|Coverage<br>(c)<br><br>Percentage of generation capacity with private sector participation<br><br>Percentage of distribution utilities withprivate sectorparticipation|
|Based on these ratings, a summary Private Sector Participation Index can be computed for each<br>country and over time, based on the following formula: where_c_represents the share of the segment<br>that is privatized;_G_is the index for generation;_D_is the index for distribution;_i_indexes the country;<br>and_t_the time period. The index ranges from 0 if no private sector participation reform has taken<br>place to 100 if all generation and distribution companies have experienced private sector<br>participation.<br>������� ������ ������������� ��������0.5 ∗�<sup>�</sup>��� 0.5 ∗�<sup>�</sup>��|

30
<!-- Start of picture text --> 100%<br>90%<br>80%<br>70%<br>60%<br>50%<br>40%<br><!-- End of picture text --> <!-- Start of picture text --> 30%<br>20%<br>10%<br>0%<br>S Ra S e ”. sPFS; s =s s Ss eo Pre s ”<br>mPsPinG&D TMPSPinDonly mTMPSPinGonly MTMNoPSP<br><!-- End of picture text -->
<!-- Start of picture text --> 50<br>45<br>40<br>35<br><!-- End of picture text --> <!-- Start of picture text --> 30<br>25<br>20<br>15<br><!-- End of picture text --> <!-- Start of picture text --> 10<br>5<br>0<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>== Generation PSP Index over time Distribution PSP Index over time == Aggregate PSP Index over time<br><!-- End of picture text -->
<!-- Start of picture text --> 100%<br>90%<br>80%<br>70%<br><!-- End of picture text --> <!-- Start of picture text --> 60%<br>50%<br>40%<br>30%<br><!-- End of picture text --> <!-- Start of picture text --> 0% — [|<br>- TE all i<br>0-25% 26-50% 51-75% 76-100%<br>TMGeneration Distribution<br><!-- End of picture text -->
<!-- Start of picture text --> 100 100<br>90 30<br>a0 80<br>70 70<br>60 60<br>50 50<br>40 40 ee<br>30 30 <<<br>20 20<br>10<br>10<br>0<br>o<br>&caer &£ssss 7= &s 7 $ sss PssPg sra I& &&Sr eeseoeSsPP?<br>—Generation PSP Index © —=Distribution PSP Index —=—Aggregate PSP index —<<Generation PSP Index —=——Distribution PSP index ——=Aggregate PSP Index<br><!-- End of picture text --> <!-- Start of picture text --> a O<br>100 100<br>90 90<br>80 80<br>70 70<br>60 60<br>50 50<br>40 40<br>: <aoT TT °<br>20 ae 20<br>10 10<br>o 0<br>PIEDPP SSP I LSPPEP SPP PS PS PS? PLP I IFIP EPP PP FFF_S SFPPPPP PS?<br>—<Generation PSP Index —<<=Distribution PSP Index ——=Aggregate PSP Index ——Generation PSP Index ———=Distribution PSP Index ——=Agpregate PSP Index<br>Ce<br>100 100<br>90 90<br>80 80<br>70 70<br>60 60<br>sO 50<br>40 40<br>30 30<br>20 ee<br>10 20 nn<br>10 ne<br>° oO<br>ca ca cacoee cacoeecoeeeee &oeoe ag&& eo =.ee eeos?os? rsig ea # S$FIP ILS SCsS PPPsSg?gg?<br>——Generation PSP index index —=——Distribution PSP index ——Aggregate PSP Index Generation PSP Index —sDistribution PSP Index -—=Aggregate PSP Index<br><!-- End of picture text --> <!-- Start of picture text --> Ce<br>100<br>90<br>80<br>70<br>60<br>sO<br>40<br>30<br>20<br>10<br>°<br>ca ca cacoee cacoeecoeeeee &oeoe ag&& eo =.ee eeos?os? rsig<br>——Generation PSP index index —=——Distribution PSP index ——Aggregate PSP Index<br><!-- End of picture text -->
Private sector participation in transmission has been much more limited. Finally, private sector participation in transmission was adopted early in Latin America and had reached 40 percent of countries by 2005, where it has subsequently remained. Starting about five years later than Latin America, South Asia, particularly India, has also seen significant experimentation with private sector participation in transmission. In particular, majority concessions and Greenfield contracts have occurred in Argentina, Bolivia, Brazil, Cambodia, Chile, India, Peru and the Philippines. Minority divestitures and Greenfield contracts have taken place in Bangladesh, Brazil, Colombia, India, Romania and Zambia. In other regions, the level of interest has been much lower and much later, and almost nonexistent in Sub‐Saharan Africa and the Middle East and North Africa.

There is a clear geographic concentration of countries that introduced private sector participation in both generation and distribution segments. These include much of South America, Europe & Central Asia, South Asia and East Asia Pacific. Sub‐Saharan Africa is the region with the highest prevalence of countries that either did not embark on private sector participation or did so only for distribution or (more commonly) the generation segment. In South East Asia, also, private sector participation has been concentrated in the generation segment in all countries except for the Philippines.

Uptake in private sector participation varies significantly with important country characteristics (Figure 6.9). Lower income groups and smaller systems are almost half as likely as their counterparts to embark on any form of private sector participation. When looking at the nature of private sector participation, again larger power systems and higher income countries score higher on the distribution index, while in the generation segment countries at the ends of the political economy spectrum achieve higher scores than more intermediate systems. Surprisingly, fragile states were associated with greater percentages of private sector participation in the power sector than non‐fragile countries, suggesting that overall fragility has not significantly prevented the participation of the private sector in generation.

More than any other reform, private sector participation has proved to be subject to significant reversals, particularly in the distribution segment. Private sector participation in the power sector has been particularly affected by cancellations and reversals triggered either by government or by the private sector itself. Cancellations have affected 40 transactions in 20 developing countries. These reversals have been particularly prevalent in the distribution segment and in the first decade of reform. The largest absolute number of reversals took place in Latin America, but the failure rate has been highest in Sub‐Saharan Africa (see Box 2 and Annex 2 for further details).

35
<!-- Start of picture text --> o_o al a ote ae ae a re re<br>r<br>rb<br>:a<br>[SESE@ | CHEMsam ARR | MNT 7/ c Indesete Store:: :<br>Fryirene saene: ey edadre || = bh E : ;<br>alpen Een any a ;<br>angfe omgehinni arraytheeifayeg!sctala afdba enninmrloy! os . —— F<br><!-- End of picture text -->
**Figure 6.9: Average Private Sector Participation Index by country grouping as of 2015**

|Percentage of countries<br>with/Private Sector|No PSP|Generation<br>PSP Index|Distribution PSP<br>Index|Aggregate PSP<br>Index|
|---|---|---|---|---|
|Participation Index|||||
|**By incomegroup**<br>|||||
|LIC|37*|32|16**|24*|
|LMIC|21*|34|35**|34*|
|UMIC|0*|50|43**|47*|
|**By power system size**|||||
|<1GW|45*|29|17*|23|
|1‐5GW|20*|41|22*|31|
|5‐10GW|20*|47|33*|40|
|10‐20GW|11*|32|19*|26|
|>20GW|15*|31|49*|40|
|**By political economy**<br>|||||
|Dominant|26|37*|18|27|
|Intermediate|24|33*|26|30|
|Competitive|22|35*|32|34|
|**By rule of law**|||||
|High rule of law|31|39|38|38|
|Low rule of law|30|32|21|27|
|**By fragility status**|||||
|FCS|30|39*|24|31|
|Non‐FCS|29|27*|23|25|
|**By oil exporting status**<br>|||||
|Importer|25|33|27|35|
|Exporter|15|44|37|35|
|**Total**|**31**|**33**|**24**|**19**|

Source: Own elaboration based on RISE 2015, Platts and PPI 1990‐2015 databases

****** Differences are statistically significant at the 5% level

***** Differences are statistically significant at the 10% level

In nearly half of all 20 countries that introduced private sector participation, at least 50 percent of their generation and distribution segments spent less than 5 years on the process (Figure 6.10). Another 40 percent of countries took between 5‐10 years while only 15 percent took longer than 10 years. The time lapse involved in fully implementing private sector participation seems to be considerably shorter than that found for market competition.

37
<!-- Start of picture text --> 100%<br>China<br>30% Chile<br>a0% Colombia<br>Céte d'Ivoire<br>70% Guatemala<br><!-- End of picture text --> <!-- Start of picture text --> 60% Arevanin Argentina iy Saari<br>50% JordanCameroon PeruRussiseein Philippines<br>somoo Senegal Federation 40%<br>Uganda Vanuatu<br>30% 25% India<br><!-- End of picture text --> <!-- Start of picture text --> 20% Turkey<br>20% Honduras<br>10%<br>10%- |5% [J<br>less than 1 2toS 5to10 10to 15 >15<br><!-- End of picture text -->
<!-- Start of picture text --> a<br>8<br>?<br>6<br>5<br>4<br>2<br>a | | | [ | | | [ |<br>1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>mEnactment m Failure<br>70%<br>Ox<br>50%<br>40%<br>30%<br>20%<br>- | | [<br>0% i<br>ito3 4to6 7tod 10 to 12 itis<br>Allregions Europe &CentralAsia @LatinAmerica& Caribbean wm SouthAsia wm Sub-Saharan Africa<br><!-- End of picture text -->
<!-- Start of picture text --> 6h 036 O96.0% my 280% ow<br>096<br>MW Connections Nr of transactions<br>@ East Asia & Pacific = Europe & Central Asia = Latin America & Caribbean<br>= Middle East & North Africa ® South Asia = Sub-Saharan Africa<br>60%<br>50%<br>40%<br>30%<br>20%<br>0% G = aa<br>Management Lease Contracts © Concessions Divestitures Overall PSP IPPs<br>Contracts Distribution<br>w Sub-Saharan Africa. m Other Developing Regions<br><!-- End of picture text -->
# **7. The Overall Reform Picture**

The time has come to draw together the analysis of the four strands of reform to look at the overall reform picture. The discussion so far has looked individually at the diffusion of the four main power sector reform measures recommended by the “Washington consensus”: regulation, restructuring, competition and private sector participation. This final section draws these four separate strands of analysis together and distills the overall conclusions that emerge from the analysis, stated in the form of a series of concluding messages. Please note that the full set of information on the uptake of reforms in each country covered can be found in Annex 1.

# **A. Developing country power sector reform lags substantially behind the developed world, where full reform is far from being universal**

Since the beginning of the power sector reform process in the early 1990s, developed countries have systematically evolved much further towards the fullest extent of reform across almost all dimensions (Figure 7.1). The developed world is ahead both in the _breadth_ of reform, which is to say the percentage of countries embarking on at least some degree of reform, and the _depth_ of reform, which is to say the percentage of countries attaining the most complete stage of reform. In terms of the breadth of reform, both for restructuring and competition, the share of countries embarking on these reform processes is about 30 percentage points higher in developed countries than in the developing world. In terms of the depth of reform, the share of developed countries establishing regulatory agencies and completing the full vertical and horizontal unbundling process is about 20 percentage points ahead of developing countries. The contrast is even more pronounced in the case of power markets, where developed countries are about 70 percentage points ahead of the developing world.

The one exception to this pattern is private sector participation, where the prevalence is similar in developing and developed countries, although the depth has gone further in the latter. About 70 percent of countries in _both_ the developed and developing worlds have undertaken some degree of private sector participation in either their generation or distribution segments, while about 40 percent of countries in _both_ the developed and developing worlds have a private sector presence in both their generation and distribution segments. However, as noted in Section 6, the extent of private sector participation for those countries that have embarked upon it is markedly higher among developed countries than for developing countries, with OECD countries receiving a score of 50 out of 100 in the Private Sector Participation Index for generation, while the equivalent score for developing countries is only 33.

This overall pattern of results is particularly striking for a number of reasons. First, it shows that despite the more challenging investment climate, developing countries have still been able to attract significant levels of private sector participation. Second, it indicates that private sector operation of the power sector is far from being the universal norm, even in the developed world. Third, it is interesting that despite the continued strong presence of public sector operators, and the fact that only about half of the developed countries have power sectors that are fully unbundled, the developed world has nonetheless reached a very high degree of adoption of power markets, which are to a large extent premised on a privatized and unbundled sector structure.

41
**Figure 7.1 Prevalence of the full extent of power sector reforms across developed and developing countries**<sup>**16**</sup>

|Percentage of<br>countries|Some degre<br>Developing<br>countries|e of reform<br>Developed<br>countries|Full exten<br>Developing<br>countries|t of reform<br>Developed<br>countries|
|---|---|---|---|---|
|Regulation|Na.|Na.|72|91|
|Restructuring|44**|79**|20**|44**|
|Competition|69**|96**|7**|78**|
|Private sector<br>participation|70|61|39|39|

Source: Own elaboration based on RISE 2015 and PPI 1990‐2015 databases

****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level

# **B. Developing country power sector reform has been running out of steam over the last decade**

The pace of reform, which was particularly rapid during the decade 1995‐2005, has slowed considerably during the decade 2005‐15. The time series analysis identified 1990 as the baseline year after which earlier reforms in Chile and the United Kingdom began to spread to other parts of the developing world. During the period 1990‐95, early reformers experimented primarily with contract‐based forms of private sector participation in generation and, to a lesser extent distribution. Divestitures were relatively rare and less than 10 percent of countries had established a regulatory entity by 1995. During the decade 1995 to 2005, there was rapid diffusion of many of the key reform measures, including establishment of regulatory entities, as well as private sector participation or divestiture of generation and distribution. Since 2005, the uptake of these measures slowed down considerably, with the main action during that last decade consisting in the creation of regulatory entities.

These patterns are clearly identifiable when comparing the percentage of countries that adopted certain standard reform measures in the decade 1995‐2005 with the percentage of countries that did so during the decade 2005‐2015 (Figure 7.2). Along many (though not all) dimensions of reform (including establishment of regulatory agencies and wholesale markets, as well as private sector participation along the energy supply chain), the percentage of countries taking such measures during the earlier decade was significantly higher than during the more recent period; and almost all of these differences are highly statistically significant. This pattern of slowing reform can also be seen graphically in Figures 7.3 and 7.4, which further illustrate that the slowing pace of reform does not reflect saturation, since even the most prevalent reform measures have in no case been adopted in more than 70 percent of developing countries suggesting there would be room for further uptake should additional countries so choose.

> 16 “Some degree” of reform is defined as at least partial vertical unbundling, at least introduction of Independent Power Producers, and at least some degree of private sector participation in either generation or distribution. “Full extent” of reform is defined as establishment of a regulator, full vertical and horizontal unbundling, creation of a power market and some degree of private sector participation both for generation and distribution.

42
**Figure 7.2: Comparing speed of diffusion of power sector reform measures across decades**

||Percentage of countries implementing reforms in time<br>period:|1995‐05|2005‐15<sup>17</sup>|
|---|---|---|---|
|Regulation|Creation of regulatoryentity ******|43|18|
|Restructuring|At least some degree of restructuring (at least partial<br>vertical unbundling)*|33|17|
||Partial vertical unbundling|5|4|
||Full vertical unbundling*|20|7|
||Full vertical unbundlingand horizontal unbundling|8|6|
|Competition|At least some degree of competition(at least IPPs)*|41|33|
||Adoption of Monopoly+ IPPs|15|15|
||Adoption of Single Buyer Model*|11|4|
||Adoption of Third PartyAccess|5|5|
||Creation of wholesalepower market******|8|6|
||Creation of retailpower market|2|3|
|Private Sector|Private Sector Participation ingeneration******|34|8|
|Participation|Private Sector Participation in distribution******|19|7|
||Divestiture ofgeneration companies******|17|4|
||Divestiture of distribution companies******|12|4|
||Private Sector Participation in transmission|6|7|
||Divestiture of transmission companies|4|1|

Source: Own elaboration based on RISE 2015 and World Bank PPI 1990‐2015 databases ****** Differences are statistically significant at the 5% level ***** Differences are statistically significant at the 10% level

> 17 The denominator for these percentages excludes those countries that had already implemented the respective reform in the 1995‐2005 period.

43
<!-- Start of picture text --> 100%<br>50%<br>60%<br>70%<br>60%<br>50%<br>40%<br><!-- End of picture text --> <!-- Start of picture text --> 30%<br>20%<br>10%<br>0%<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.<br>—— Full degree of competition (Retail electricity market)<br>—=—Full degree of restructuring (Vertical and horizontal unbundling)<br>——Full degree of private sector participation (PSP in generation and distribution)<br>== Establishment of regulator<br><!-- End of picture text --> <!-- Start of picture text --> 100%<br>90%<br>80%<br>70%<br>60%<br>50%<br>40%<br><!-- End of picture text --> <!-- Start of picture text --> 30%<br>20%<br>10%<br>0%<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>=——‘Some degree of competition (At least Independent Power Producers)<br>——‘Some degree of restructuring (At least partially unbundled)<br>=——Some degree of private sector participation (PSP of at least generation or distribution)<br>—— Establishment of regulator<br><!-- End of picture text -->
Disaggregating the data further shows that, across the board, there are pervasive plateau effects. That is to say that once a certain level of penetration is reached for a particular type of reform in a particular region it simply seems to settle at that level for a number of years. This suggests that all the countries interested in reforming in that region have already done so. The level at which the plateau is reached differs across regions and according to the reform measure involved. In general, in Latin America the plateau is reached at the level of at least 80 percent of countries, while in less reform‐oriented regions such as Sub‐Saharan Africa and the Middle East, the plateau is reached at 40 percent of countries or less depending on the measure.

While a majority of developing countries have taken some measures related to restructuring, competition and private sector participation in their power sectors, only a minority of them have actually gone all the way on any of the dimensions of reform (Figure 7.5). While 70 percent of countries have taken at least one step towards competition, only 20 percent have succeeded in implementing a power market. And while 44 percent of countries have undertaken some measure of restructuring, only 20 percent have completed the full vertical and horizontal unbundling of the sector. As a result, the prevalence of countries with some intermediate stage of reform is much higher than the prevalence of countries that have reformed fully.

**Figure 7.5: Prevalence of differing degrees of power sector reform across developing countries**

|Percentage of countries|Some degree of reform|Full extent of reform||
|---|---|---|---|
|Restructuring|52||20|
|Competition|70||20|
|Private sectorparticipation|74||40|

Source: Own elaboration based on World Bank RISE 2015 and World Bank’s PPI 1990‐2015 databases

# **C. Some elements of the power sector reform agenda have proven far more popular than others**

While the various measures associated with the 1990s power sector reform model were originally conceived as a package, it is clear that developing countries have been quite selective in their adoption of these reforms. Some elements of the package have proved much more popular than others. Broadly, the different reform measures can be divided into three groups according to their level of popularity (Figure 7.6).

The most popular group of measures are applied by a majority of 60 to 70 percent of developing countries. Foremost among these is the creation of a regulatory entity. This measure is relatively straightforward in political terms, because it entails adding a new element to the sector rather than changing what is already there. While a regulatory entity could in principle represent a challenge to the political hegemony of the sector, in practice regulators have not always been given sufficient powers to provide such contestability. The next most widespread reform measure was private sector participation in generation, most often through BOTs or Independent Power Projects, although in many cases also through divestiture. Private sector participation in generation has proved less challenging to implement, in part because it can often be applied to new plants, thereby avoiding the need to change institutions that already exist; but also because it involves low levels of employment, is relatively straightforward to operate, is far removed from the customer interface, and lends itself to a simple ring‐fenced power purchase arrangement, either with a utility which may already be creditworthy or one whose creditworthiness can be enhanced through some form of state guarantee. Despite the high uptake of these policies, it is relevant to note that a full 45
third of developing countries, have not been willing or able to undertake even these relatively tractable measures during the 20‐year period that they have been widely put forward in policy circles.

The second group of measures are applied by approximately half of developing countries. These include vertical unbundling of the power utility and private sector participation in distribution. Both of these represent a higher degree of disruption to the status quo. In the case of unbundling, the incumbent utility has to be restructured into multiple entities with consequent governance and human resource challenges. In the case of distribution private sector participation, the degree of political sensitivity is quite high since it involves changing the point of interface with the public, and likely imposing stronger payment discipline and higher tariffs, as well as reforming the practices of a larger workforce.

The least popular group of measures are applied by up to 20 percent of developing countries only. It makes sense that the creation of power markets would fall into this group, since its establishment is only relevant in larger power systems, is contingent on the prior adoption of many of the other reform measures, and entails relinquishing a high degree of state influence over the sector. The comparative rarity of private sector participation in transmission partly reflects that this was never in any case a strong policy prescription of the reform model, due to the many public good functions provided by the power grid. Finally, management contracts have not been widely adopted in the power sector, with the exception of Sub‐Saharan Africa where experience has been mixed. While they are relatively easy to introduce from a political and technical standpoint, the resulting impacts have been quite limited.

**Figure 7.6: Prevalence of different types of power sector reform measures in the developing world**

|Percentage of developingcountries with...||
|---|---|
|A regulatoryentity|72|
|Some use of BOT/BOO contracts|69|
|Some form ofprivate sectorparticipation ingeneration|63|
|Some use of divestiture|61|
|Some degree of vertical unbundling|44|
|Some form ofprivateparticipation in distribution|44|
|Some use of concession contracts|39|
|A competitivepower market|20|
|Horizontal unbundlingin addition to vertical unbundling|20|
|A Single Buyer Model|18|
|Some form ofprivate sectorparticipation in transmission|14|
|Some use of management contracts|10|

Source: Own elaboration based on RISE 2015 and PPI 1990‐2015 databases

# **D. Developing countries packaged power sector reforms in ways unrelated to the original logic**

Power sector reform measures were originally conceived as a coherent and inter‐related package, and it was envisaged that they would be implemented according to a certain logical sequence. Regulation would typically be the starting point, so that the rules and incentives of the sector would be clearly specified, before any changes were made to the institutional actors. This would be followed by unbundling to create the desired sector architecture, which once completed would pave the way for potential changes in ownership. Given that the distribution segment represents the beginning of the payment chain for electricity, it was generally thought that it made sense to begin private sector participation with distribution, so as to improve the operational performance and commercial viability of the sector, and 46
generate a solid revenue stream that would then provide the basis for remunerating private sector participation in the generation sector. Only after all these elements were in place would it make sense to move towards a wholesale power market, which relies on a multiplicity of actors and a strong set of commercial incentives that would be achieved by prior unbundling and private sector participation measures. However, earlier stages of competition could be introduced along the way, with IPPs being feasible even prior to unbundling and single buyer or third‐party access arrangements becoming feasible following unbundling.

The analysis suggests that overall about one‐third of developing countries have not observed this packaging. Rather they have adopted different dimensions of reform unevenly and leading to imbalances in their sector structures.

As has been noted, the implementation of reforms was quite selective, and this selectivity was not always informed by taking into account synergies between different combinations of reforms. The following figures 7.7‐7.11 cross‐tabulate the pattern of uptake for the different dimensions of reform and analyze their mutual coherence. Three situations are possible. In the first case, reforms proceed _pari passu_ along the different dimensions and a coherent outcome is achieved; these cases are located in the upper right triangle of the matrix. In the second case, reforms are out of balance in such a way that one dimension of reform has gone further ahead than is really warranted by achievements along a related dimension; these are located along the diagonal. In the third case, reforms are out of balance in such a way that one dimension of reform has not gone far enough to support the extent of reform already enacted on a different dimension; these cases are in the lower triangle of the matrix.

In the case of competition, effective reform entails that competition be preceded by certain other reforms. These include: (i) vertical unbundling that separated out naturally monopolistic elements from those that were potentially competitive; (ii) private sector participation that introduced commercial orientation among the potentially competing players in generation; and (iii) regulation to ensure that these players would continue to act in the public interest.

A first pairwise comparison looks at the balance between competition and restructuring measures (Figure 7.7). The analysis finds that about 15 percent of countries have gone further with competition than their degree of reform on unbundling would prepare them for. As an example, almost 10 percent of countries have introduced power markets before completing sector unbundling. At the same time, a further 15 percent are in the opposite situation of having got further ahead with sector restructuring than they are with their market competition process. As an example, just over 10 percent of countries have effected full vertical and horizontal unbundling of the sector, but still practice a Single Buyer Model when they look structurally prepared for a power market.

A second pairwise comparison looks at the balance between competition and private sector participation measures (Figure 7.8). In this case, about 25 percent of countries have their competition reforms lagging their reform on private sector participation. For example, almost 17 percent of countries have introduced private sector participation in both generation and distribution, yet have not taken their competition measures any further than allowing Independent Power Producers. At the other end of the spectrum, about 7 percent of countries have taken competition further than their degree of private participation would tend to support.

47
A third pairwise comparison looks at the balance between restructuring and private sector participation measures (Figure 7.9). In 24 percent of countries private sector participation has gone ahead of restructuring reforms. For example, almost 11 percent of countries have private sector participation in a utility that remains vertically integrated. By contrast, only about 6 percent of countries seem to have introduced reform on competition without taking parallel measures to incorporate the private sector.

In the case of regulation (Figure 7.10, 7.11), strictly speaking a regulatory entity is not essential when the sector is organized as a publicly‐owned vertically‐integrated monopoly. This is because the whole rationale for state ownership is to act in the public interest and there are no wider market relations to be regulated. Moreover, with both the regulator and the public utility reporting directly to the line ministry, it can be difficult for the regulator to exercise authority. Nonetheless, 13 percent of developing countries find themselves in the situation of having created regulators when their utility remains an integrated state‐owned monopoly. On the other hand, it is critical to have a regulator once private ownership or operation has been introduced to any part of the sector, and as the reforms of competition continue. However, 13 percent of developing countries find themselves in the situation of lacking regulatory entities despite introducing private sector participation, while 12 percent of developing countries lack regulatory entities despite having commenced along the competition process.

**Figure 7.7 – 7.11: Coherence between various reform measures**

**7.7 Competition and restructuring reform**

|Percentage of<br>countries|Vertically<br>integrated|Partially<br>vertically<br>unbundled|Fully vertically<br>unbundled|Fully vertically<br>and<br>horizontally<br>unbundled|Total|
|---|---|---|---|---|---|
|Monopoly|28.2**|2.4**|0.0|0.0**|30.6|
|IPPs|22.4**|2.4|1.2|1.2**|27.1|
|Single Buyer<br>Model|2.4|5.9|0.0|10.6|18.8|
|Bilateral<br>Contracting<br>with TPA|0.0|0.0|1.2|2.4|3.5|
|Wholesale<br>market<br>competition|1.2|2.4|0.0|1.2|4.7|
|Retail market<br>competition|1.2|7.1|1.2|5.9|15.3|
|Total|55.3|20.0|3.5|21.2|100.0|

48
# **7.8 Competition and private sector participation reform**

|Percentage<br>of<br>countries|Monopoly|IPPs|Single<br>Buyer<br>Model|Bilateral<br>Contracting<br>with TPA|Wholesale<br>Competition|Retail<br>Competition|Total|
|---|---|---|---|---|---|---|---|
|Public|24.7|0.0|2.4|1.2|0.0|0.0|28.2|
|PSP in|3.5|14.1|11.8|0.0|2.4|1.2|32.9|
|Generation<br>Only||||||||
|PSP in<br>Generation<br>and<br>Distribution|0.0|16.5|4.7|2.4|2.4|14.1|40.0|
|Total|28.2|30.6|18.8|3.5|4.7|15.3|100.0|

# **7.9 Restructuring and private sector participation reform**

|Percentage of<br>countries|Vertically<br>integrated|Partially<br>vertically<br>unbundled|Fully vertically<br>unbundled|Fully vertically<br>and<br>horizontally<br>unbundled|Total|
|---|---|---|---|---|---|
|Public|22.9**|2.4*|1.2*|2.4*|28.9|
|PSP in<br>Generation Only|21.7**|4.8*|1.2*|6.0*|33.7|
|PSP in<br>Generation and<br>Distribution|10.8|13.3|1.2|13.3|38.6|
|Total|55.4|20.5|3.6|21.7|100.0|

# **7.10 Regulation and private sector participation reform**

|Percentage of countries|No regulator|Regulator|Total|
|---|---|---|---|
|Public|16.4|12.5|28.9|
|PSP in Generation only**|6.8|25.0|31.8|
|PSP in Distribution only|0.9|1.1|1.9|
|PSP in Generation and Distribution**|5.0|33.7|38.6|
|Total|27.7|72.3|100.0|

49
# **7.11 Regulation and competition reform**

|Percentage of countries|No regulator|Regulator|Total|
|---|---|---|---|
|Monopoly|15.9|13.6|29.5|
|Independent Power Producer**|7.2|22.3|29.5|
|Single Buyer Model*|2.3|15.9|18.2|
|Bilateral contracting + TPA|0.0|3.4|3.4|
|Wholesale market competition|0.0|4.5|4.5|
|Retail market competition*|2.3|12.5|14.8|
|Total|27.7|72.3|100.0|

****** Differences are statistically significant at the 5% level

***** Differences are statistically significant at the 10% level

# **E. Developing countries sequenced power sector reforms in ways unrelated to the original logic**

The anomalies in reform packaging observed above suggest that developing countries may not have been sequencing reform according to the original concept. This typically counseled introducing regulation prior to undertaking any private sector participation in either generation or distribution, so that the framework for oversight of the private company was established ahead of any transaction. This is logical since the quality of the regulatory framework could be expected to affect the overall value of the private sector participation transaction. In addition, the conceptual framework suggests that it makes most economic and financial sense to introduce the private sector into distribution ahead of generation. The reason is that improving the commercial and financial performance of the distribution sector is usually the only way to ensure the financial solvency of the entire electricity supply chain, since cash flows originate with customers at the retail end and are passed up the chain to eventually finance investments in the generation sector. By commencing private sector participation at the distribution end, a strong cash flow would be generated facilitating subsequent private finance of generation. Nevertheless, in practice, distribution private sector participation tends to be more difficult than generation both politically and in terms of attracting market interest.

An analysis of the prevalence of different sequences of reform measures sheds light on this issue (Figure 7.12). What is clearest is that there is no dominant sequence of reform measures that has been followed across countries; rather all possible permutations can be found. Overall, 34 percent of countries introduced regulation before undertaking any private sector participation in generation or distribution, but were outnumbered by the 52 percent of countries that did things the other way around. Similarly, some 20 percent of countries introduced private sector participation into distribution ahead of generation, but were greatly outnumbered by the 40 percent of countries that started with generation instead.

50
**Figure 7.12: Overview of sequence of reform measures on 4 dimensions of reform**

|Percentage of countries introducing|First|Second|Third|Last|Not at all|
|---|---|---|---|---|---|
|Regulation|34|17|6|15|28|
|Restructuring (At least partial vertical<br>unbundling|17|19|9|7|48|
|Competition (At least wholesale<br>competition)|2|3|5|10|80|
|Private sector participation in<br>generation|35|17|2|8|38|
|Private sector participation in<br>distribution|17|8|3|16|56|

- **F. Developing country power sector reform is stuck at an intermediate stage in many cases, and announced reforms are not always fully implemented**

To get an overall picture of the extent of the reform status in each country, an aggregated Power Sector Reform Index is constructed. This is based on a simple scoring methodology detailed in Box 3, giving each country a single score on a scale of 0 to 100. _It is important to reiterate that the index is intended to be descriptive, that is documenting the diffusion and uptake of reforms, rather than normative, that is evaluating countries according to how far they have gone in adopting reforms._ Countries may have perfectly good reasons for not pursuing reforms that may not be applicable to their circumstances. For example, a wholesale electricity market would not make sense for a small island state. Individual country scores for 88 developing countries are reported in Figure 7.14 and range all the way from 0 to 100. Aggregate scores are reported over time in Figure 7.13, which highlights the slowdown in the adoption of reforms after 2000.

The index identifies five developing countries (or about 6 percent of the total) that have not taken any measures towards power sector reform. They tend to be conflict affected states mainly in Africa, such as Eritrea, Guinea, Liberia, Solomon Islands and South Sudan.

At the other extreme are the 5 countries with scores above 90 percent. They are mainly large middle‐ income countries in Latin America & Caribbean, notably Argentina, Guatemala, Peru, the Philippines and Turkey.

Overall, the median score on the power sector reform index is just short of halfway at 43, and three‐ quarters of developing countries score below 72 on the index. This illustrates clearly how the bulk of developing countries find themselves at the early or intermediate stage of the power sector reform agenda.

Developed countries on average score higher on the reform index than developing ones (Figure 7.16). It is instructive to compare the frequency distribution of reform scores between developed and developing countries. The distribution for the developed countries has a strong modal value in the 80‐90 bracket, unlike the distribution for developing countries which is relatively flat. The median score for the 20 developed countries at 77 is accordingly significantly higher than the corresponding score of 37 for the 88 developing countries. Nevertheless, it is also striking that there are stark outliers in the developed country group, with Kuwait and Japan scoring under 40 on the index.

51
Countries that score high values on the index undertook reforms at differing speeds (Figure 7.17). To understand the time periods needed to accomplish major reforms, attention is confined to those countries that completed the bulk of the reform agenda by introducing a regulatory entity, undertaking full vertical and horizontal unbundling, introducing a wholesale power market and privatizing at least 50 percent of their generation and distribution sectors. Of the relatively small group of 8 in this category, reforms in Latin America were enacted relatively rapidly in no more than five years, with Peru taking 3 years, Argentina 4 years, and Guatemala 5 years. Reforms in the Europe and Asia region took substantially longer, in the 10‐20 year range: 12 years in Turkey, 13 years in India, 15 years in the Philippines, 16 years in Romania, and 18 years in Ukraine.

For a sample of 15 case study countries, an Announced Reform Index is computed by recalculating the Power Sector Reform Index based on official announcements or policy commitments rather than actual policy enactments. The results in Box 4 reveal varying gaps between a country’s reform announcements and delivery. In some cases, reforms can be delayed for several years, and the divergence between announced reforms and those actually implemented can amount to as much as 50 points on the reform index. Political regime changes, union opposition and disputes among private players are some of the reasons for the observed discrepancy.

# **Box 3: Power Sector Reform Index**

In order to aggregate across the four dimensions of power sector reform considered in this study, a simple Power Sector Reform Index is constructed. The index gives each country a score on an interval of 0 to 100 on each dimension of power sector reform. The scores are based on giving equal weight to each step on each dimension of the reform continuum (see tabulation below). The average of the four 0‐100 scores is used to provide an overall summary of the extent of reform, although it would also be feasible to weight the four differently according to their relative difficulty and importance.

|**Regulation**|No re<br>|gulator<br>= 0||Regulat<br>= 100|or<br>|
|---|---|---|---|---|---|
|**Restructuring**|Vertically<br>integrated<br>= 0|Partial v<br>unbun<br>= 3|ertical<br>dling<br>3<br>Full<br>unb<br>|vertical<br>undling<br>= 67<br>|Vertical &<br>horizontal<br>unbundling= 100|
|**Competition**|Monopoly<br>= 0|IPPs<br>= 25|Single Buyer<br>Model<br>= 50|Bilateral<br>Contracts<br>= 75|Competitive<br>market<br>= 100|
|**Private Sector**<br>**Participation**|0.5*(Percentag<br>0.5*(Percentag|e of genera<br>e of distrib|tion capacity with<br>+<br>ution utilities with|private secto<br> private sector|r participation)<br> participation)|

52
# **Box 4: Delivering on Reform Announcements**

Announced reforms are by no means always implemented, and adoption can occur significantly delayed after the passing of a law or a formal official commitment to implement reforms. Reasons for such delays include political regime changes, union opposition to reforms and disagreements between parties or private consortiums. A detailed comparison between reforms announced and reforms actually enacted for 15 country cases over a 25‐year period helps to shed light on two issues: first, the extent to which countries enact sudden ‘big bang’ reforms versus gradual or incremental reforms over time; and second, the extent to which countries follow through on implementation of reform announcements.

Pakistan is an example of a country that undertook a comprehensive package of reforms, although these were implemented only after some delay. Full reforms on restructuring, private sector participation and establishment of a regulatory entity were announced in 1992, yet – as a result of political regime changes – only a fraction of the announced measures had actually been implemented four years later. This delay was followed by a period of bold reforms, with the power sector reform index increasing from 10 to 69 within a six‐year period. However, since the introduction of private sector participation in distribution in 2005, no further reforms were enacted (other than increases in private sector participation in generation). In particular, announced reforms on unbundling K‐Electric and expanding private sector participation to other distribution utilities have not been followed through.

# **Reforms announced and implemented in Pakistan**

<!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>Competition Sub‐Index PSP Sub‐Index Regulation Sub‐Index Restructuring Sub‐Index<br>Promised Competition Promised PSP Promised Regulation Promised Restructuring<br><!-- End of picture text --> On the other end of the spectrum, Senegal’s reform has been much more gradual and falls substantially short of what was originally announced. Reforms began with some Independent Power Projects in the late 1990s, followed by the establishment of a regulatory agency in 1998. Private sector participation in the power utility, Senelec, was reversed after two years in 2001 following union opposition to reforms and a change of government, and a second attempt to concession the company proved unsuccessful. Further, reforms for vertically unbundling Senelec that had been passed by law in 1998, have yet to be implemented. As of 2015, Senegal’s score on the power sector reform index was 56, whereas if it had implemented all the announced reforms the score would have been 93.

53
<!-- Start of picture text --> Box 4 continued:<br><!-- End of picture text --> <!-- Start of picture text --> Reforms announced and implemented in Senegal<br><!-- End of picture text --> Overall, looking across the 15 case study countries, by 2015 the gap between announcement and delivery of reforms led to Power Sector Reform Index scores that were between 10 and 50 points below where they would have been had all announced reforms been fully implemented. The smallest gaps were found in Ukraine, Peru and Uganda, while the largest gaps were found in Tajikistan and Tanzania.

**Reforms announced and implemented in 15 case study countries**

<!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>2015 Delivered Reform Score 2015 Promised Reform score<br><!-- End of picture text --> Source: Elaboration based on PPI 1990‐2015 database, RISE and Rethinking Power Sector Reform Data 54
<!-- Start of picture text --> 50<br>45<br>40<br>35<br><!-- End of picture text --> <!-- Start of picture text --> 30<br>25<br>20<br>15<br><!-- End of picture text --> <!-- Start of picture text --> 10<br>5<br>0<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>@ Regulation Index @ Restructuring Index = Competition Index ® Private Sector Participation Index<br><!-- End of picture text -->
<!-- Start of picture text --> ee Kyrgyz Republic ey<br>CS a Zimbabwe<br>Philippines Le Zan.<br>ates South Attic:<br>CC Togo<br>he Nepal<br>Nicarag Clivia<br>ona as Vaan<br>Ck ai aTS Rwands<br><!-- End of picture text --> <!-- Start of picture text --> a Taz<br>Dominican Republic Morocco<br>Xoey se<br>C22 TS Burkina kao<br>20 Myana<br>a el<br>Ecuador bund<br>Cbnbh. Maui?<br>hh es bau<br>hile Uzbekistan<br><!-- End of picture text --> <!-- Start of picture text --> pa Ce<br>Oa Maa<br>Bangladesh LTTE con, ie<br>Russian Federation [ii Central African Republic<br>Vania rh<br>Senegal laoPDR<br>Viena Iran, Islamic Rep.<br>Malaysi2 a re Sonia<br>Kazakhstan is Tajikistan =<br><!-- End of picture text --> <!-- Start of picture text --> Céte doje Indonesia<br>Gn Haiti<br>S|| Tunisia<br>Mexico Srilanka<br>Paksta) es Korea, Rep. @<br>AE __ Afghanistan §<br>Honduras Lebanon |<br>Venezuela, i Yemen, Rep. |<br>Qn Maldives<br><!-- End of picture text -->

<!-- Start of picture text --> Thailand Congo, Dem. Rep.<br>Mozambique es South Sudan<br>Sierra leone Es Solomon tslands<br>Egypt, Arab Rep, ey Liberia<br>Monga Guinea<br>thins Eritrea<br>0 20 40 60 80 100 0 20 40 60 80 100<br>@ Regulation Index @ Restructuring Index @ Regulation Index g@ Restructuring Index<br>| Competition Index @ Private Sector Participation Index = Competition Index @ Private Sector Participation Index<br><!-- End of picture text -->
<!-- Start of picture text --> EL uw, fe Eeia z.. - wt he . .. nam<br>aay Nhgener as A — ; = =<br>rloo go PPETa FO7 = x na * . oh , .<br>F “ 4 vd E or: ) ,<br>' > Ac, | Gt i<br>Soe 7 —— at 7 hy<br>> F | | i a q &<br>Caskmeee| abanGrou =<br>sh Giemayedy atThe afbrmarnkinb, Te nb . yoes i: F‘<br>ealPegtreletteryig dave,on athe aeratedaryegonalacnebade ofrel - a :al<br>ar eaepelaaradaf adel baamierian.<br><!-- End of picture text -->
<!-- Start of picture text --> 50%<br>45%<br>40%<br>35%<br>30%<br>25%<br><!-- End of picture text --> <!-- Start of picture text --> 15%<br>10%<br>0%<br>5% Hl ie -f GG Gl Hn ie OG OE<br>Oto10 10 to 20 20 to 30 30 to 40 40 to 50 50 to 60 60 to 70 70 to 80 80 to 90 >90<br>@ OECDs ® Developing countries<br><!-- End of picture text --> <!-- Start of picture text --> 0 2 4 6 8 10 12 14 16 18 20<br>reru<br>Ageia<br>Guatemala<br>Turkey ery<br><!-- End of picture text --> <!-- Start of picture text --> {ca<br>Philippines<br>Romania<br>kre<br><!-- End of picture text -->
# **G. The uptake of reforms is substantially affected by country characteristics**

The uptake of various different sector reform measures is closely related to the characteristics of countries, in terms of their geography, income level, power system size, and political economy. As a general rule, reform uptake is much stronger in Latin America and Caribbean and Europe and Central Asia, than it is in the Middle East and Africa. There is typically also a strong positive effect between a country’s income group and the prevalence of reform, and an even stronger positive effect with the physical size of the power system. There is some weaker evidence that oil importers go further with their reforms than oil exporters. In terms of political variables, uptake of all reforms but competition increase for a political system that is based on competition between multiple poles of power rather than one that is dominantly hierarchical. The size and statistical significance of these effects vary according to the dimension of reform (Figure 7.18).

In the case of regulation, the effects are quite small, perhaps reflecting the fact that regulation is a relatively easy reform to adopt. The strongest and only statistically significant differences observed are income groups. In particular, the prevalence of regulatory agencies is highest for the upper‐middle‐ income group. Furthermore, the leading geographic group, Latin America and Caribbean, was 48 percentage points more likely to have introduced reforms on regulation that the lagging group, the Middle East and North Africa. Interestingly, region does not have a statistically significant influence on the prevalence of regulation.

In the case of restructuring, there are some very large effects, particularly across regions, and according to income group, power system size and net oil trade status. The gap on unbundling between the leading region, Europe and Central Asia, and the lagging region, Sub‐Saharan Africa, is as much as 60 percentage points, and statistically significant. Moreover, being a higher income country, an oil importing state, or a country with a large power system above 10 gigawatts, can all add between 14 and 46 percentage points to the probability of unbundling the power sector.

In the case of competition, the largest statistically significant differential is again across geographic regions. The gap between the leading region, Latin America and Caribbean, and the lagging region, Middle East and North Africa, is as much as 74 percentage points. It is also striking that countries with competitive political systems are not necessarily more likely to countenance competitive power markets. Being a country with a large power system adds around 50 percentage points to the likelihood of undertaking power system competition. The size effect is particularly stark in the case of wholesale power markets. There are simply no cases of countries with national power systems under a gigawatt of capacity having adopted wholesale power markets; which makes sense given that their systems are too small to support enough generators for a competitive market to be meaningful. Among countries with large systems in excess of 10 gigawatts, around 50 percent have a wholesale power market, and this is more than twice the ratio for smaller systems in the one to five gigawatt range.

In the case of private sector participation, the gap between the leading region, Latin America and Caribbean, and the lagging region, Sub‐Saharan Africa, is 43 percentage points. Countries in higher income groupings are more likely to have private sector participation by a differential of 23 percentage points. Again, being a country with a large power system also adds around 30 percentage points to the likelihood of undertaking power system private sector participation. By and large there are no signs of convergence between countries in different size groupings. Thus, the differences in the uptake of private sector participation in these countries are becoming increasingly pronounced over time. Countries with system 59
sizes above a gigawatt are twice as likely to have private sector participation in generation as those with smaller systems. In the case of distribution, the threshold is higher and it is only in systems larger than five gigawatts that the probability of private sector participation doubles relative to countries with smaller system sizes.

Such pronounced differences in reform uptake across country groupings over a 20‐year period of intensive policy effort suggest that country characteristics seriously constrain the applicability of the standard power sector reform model in certain environments. The fact that regional variations are the largest of any observed suggests that either some of the other effects are aggregated and accentuated by geography (for example, the concentration of small, low‐income, fragile countries in Africa) or that there are some additional region‐specific drivers that are not being picked up elsewhere, including perhaps “bandwagon” or “domino” effects within regions. On just about every type of reform measure, Latin America has been the pioneering region, while the Middle East and North Africa region has systematically lagged on reform (Figure 7.19). For other regions, however, the pattern tends to vary depending on the nature of the reform measure.

Finally, Figure 7.20 reports the average Power Sector Reform index score for countries of different characteristics. This confirms the picture that came through in the analysis of the individual dimensions of reform. Countries with higher income levels and large power systems score approximately twice as high on the Power Sector Reform Index as the rest, more competitive political economies and higher degrees of rule of law co‐move with slightly higher scores on the Index. A similar discrepancy is observed between countries in Latin America and Caribbean and those in the Middle East & North Africa.

**Figure 7.18: Summary of how country characteristics influence uptake of reform measures**<sup>**19**</sup>

|Percentage point difference<br>between lowest and highest<br>adoption rates|Regulation|Restructuring|Competition|Private sector<br>participation|
|---|---|---|---|---|
|Acrossgeographic regions|48|60**|74**|43|
|Increasingincomegroup|31**|27**|33*|23*|
|Increasing power system size|9|46**|35*|30*|
|Non‐fragile state|8|12|1|(6)|
|Oil importer|9|14**|(8)|0|
|Increasingrule of law|(7)|(7)|3|11|
|Increasingly competitive<br>political system|15|11|(2)|7|

****** Differences are statistically significant at the 5 level

***** Differences are statistically significant at the 10 level

> 19 Tests are between the two extreme categories in each country grouping.

60
<!-- Start of picture text --> 100<br>90<br>80<br>70<br><!-- End of picture text --> <!-- Start of picture text --> 60<br>50<br>40<br>30<br><!-- End of picture text --> <!-- Start of picture text --> 10<br>0<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br>=——East Asia & Pacific —— Europe & Central Asia == Latin America & Caribbean<br>———= Middle East & North Africa South Asia =—— Sub-Saharan Africa<br><!-- End of picture text -->
<!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>. . . . .<br>Low<br> income Lower middle income Upper middle income<br><!-- End of picture text --> <!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br><1GW 1-10GW >10 GW<br><!-- End of picture text --> <!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>Non-Fragile Fragile<br><!-- End of picture text --> <!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>oo a<br>Middle East & Sub-Saharan East Asia & South Asia Europe & — Latin America<br>North Africa Africa Pacific Central Asia & Caribbean<br><!-- End of picture text --> <!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>LY)<br>Low High<br><!-- End of picture text --> <!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>Dominant intermediate Competitive<br><!-- End of picture text -->
# **8. Conclusion**

Some 25 years have elapsed since the Washington Consensus on power sector reform began to promote among developing countries a reform agenda. This agenda encompassed the establishment of regulatory entities, the vertical and horizontal unbundling of vertically integrated national monopoly utilities, private sector participation in generation and distribution, and the introduction of competitive markets for power generation. Exploiting a unique new data set on the timing and scope of power sector reforms adopted by 88 countries across the developing world, this paper seeks to improve our understanding of the uptake, diffusion, duration, packaging and sequencing of power sector reforms, and the extent to which they were affected by the economic and political characteristics of the countries concerned.

Overall, power sector reform in the developing world lags far behind what was implemented in the developed world during the same time period. The median score for OECD countries on a Power Sector Reform Index developed in this paper was 77, compared to 37 for developing countries. Closer inspection shows that the most significant differences lie in the area of vertical and horizontal unbundling, which is twice as common in OECD as in developing countries, as well as implementation of wholesale power markets, which is ten times more likely in OECD than developing countries. Nonetheless, even among OECD countries that have introduced wholesale power markets, no country has fully privatized its sector. Moreover, 17 percent of the OECD countries that introduced a wholesale power market did so without fully vertically unbundling their power sectors; this percentage was twice as high for developing countries that reached the same stage of competition.

The paper finds that following rapid diffusion during the decade 1995‐2005 the spread of power sector reforms slowed significantly in the subsequent decade 2005‐2015, on almost every dimension of reform. The overall score for the Power Sector Reform Index in developing countries climbed 23 points from 12 to 35 in 1995‐2005, but only 8 points to 43 in 2015. The slowdown is particularly evident in terms of the number of countries establishing regulatory entities or conducting private sector participation in generation or distribution in the later decade.

The one reform that does seem to have been almost universally adopted in the developing world by 2015 was the introduction of Independent Power Producers in the generation segment. This has now been done in 96 percent of developing countries. However, most other reforms come nowhere close to having been so widely adopted. For example, only 72 percent of developing countries had established a regulatory entity by 2015, only 44 percent had undertaken vertical unbundling, and a mere 7 percent had established a wholesale power market. Overall, 12 percent of developing countries in 2015 were still operating with vertically integrated state‐owned monopoly enterprises.

Only a small minority of developing countries were able to fully implement the reform model as originally conceived. A mere half dozen developing countries (Argentina, Guatemala, India, Peru, the Philippines and Turkey) scored above 90 percent on the Power Sector Reform Index, indicating that almost all possible reform measures were taken. The time taken to implement such an extensive program of reform has varied widely across countries, and was typically much faster in Latin America than elsewhere, ranging from only 3 years in Peru to around 15 years in the Philippines.

Yet for the majority of countries, reforms were only selectively adopted, often according to ease of implementation, and reform programs often stagnated midway. A third to half of developing countries 63
find themselves in such an intermediate stage of reform, having partially implemented reforms in some areas but not in others, and in many cases reforms have been halted for over a decade. A number of countries have even experienced reform reversals undoing private sector participations in 18 countries, competition measures in three countries, and utility restructuring measures in two countries.

Furthermore, reforms have sometimes been packaged and sequenced in ways unrelated to the original logic. For example, 25 percent of developing countries have allowed for private sector participation without following through on competition, while another 15 percent have gone further on competition than their sector restructuring efforts would prepare them for. Some 13 percent of developing countries have created regulatory entities without having introduced private sector participation to their utilities, while a similar share find themselves in the opposite situation. While the principles of reform suggest that distribution private sector participation should precede the private sector participation in generation, the percentage of countries doing so was about the same as those that began by privatizing generation.

Country characteristics such as geography, income group, power system size, and attributes of the political system seem to have had a statistically significant influence on the uptake of reform. One of the largest influences has been system size: countries with installed capacity above 10 GW scored more than twice as high on the reform index as those with systems below 1 GW. Similarly, countries in the middle‐ income bracket, and those with relatively competitive political economies also scored much higher than others. Geographic region was also an important driver, with two distinct groupings. Latin America and the Caribbean stands out as the pioneering region for power sector reform, starting earlier and introducing more reforms than any other. However, over time, Europe and Central Asia has caught up to a substantial extent. On the other hand, Middle East and North Africa, Sub‐Saharan Africa, as well as South Asia and East Asia and Pacific started from further behind and introduced reforms more slowly over the entire period.

Moreover, of the 34 countries (scoring under 33) that are still at an early stage of power sector reform, the vast majority fall into one of the categories of countries facing wider socioeconomic challenges that will make power sector reform challenging: Fragile states (14 cases), small systems (31 cases), low income bracket (16 cases), or weak rule of law (32 cases). 16 of these countries are in Sub‐Saharan Africa. In fact, there is not a single large stable middle‐income country in this group. This raises questions about the applicability of the classic power sector reform agenda in those countries that currently remain most in need of sector reform.

In summary, these patterns of uptake of power sector reform illustrate that while the Washington consensus reforms have become commonplace across the OECD, they remain very challenging to implement in their entirety in a developing country environment. Policy prescriptions for power sector reform diffused rapidly around the world during the decade 1995‐2005 and experienced significant uptake in stable middle‐income countries characterized by large power systems. However, even among this group, only a handful of countries were able to fully implement the reform model as originally envisaged, and typically over a lengthy period. A much larger group of countries implemented reforms selectively (typically emphasizing regulation and IPPs) and often ended up at an intermediate stage of reform, often without the impetus to introduce further reform. In addition, a significant minority of countries barely got started with reform and do not appear to present suitable conditions for doing so.

64
**Annex 1A: Overview of Developing Country Level Scores in the Power Sector Reform Index, 1990–2015**

|**Country**|**Sc**|**ores Over**|**Time**||**Scores on**|**Different Dimensions of Re**|**form, 2015**|
|---|---|---|---|---|---|---|---|
||**1995**|**2005**|**2015**|**Regulation**|**Restructuring**|**Competition**|**Private sector**<br>**participation**|
|**Afghanistan**|0|0|1|0|0|0|1|
|**Algeria**|0|63|51|25|12.5|12.5|1|
|**Angola**|0|0|57|25|25|6.25|1|
|**Argentina**|99|99|96|25|25|25|21|
|**Armenia**|34|81|74|25|25|12.5|11|
|**Bangladesh**|16|79|70|25|25|12.5|7|
|**Belarus**|0|31|25|25|0|0|0|
|**Benin**|0|0|25|25|0|0|0|
|**Bolivia**|2|10|34|0|0|25|9|
|**Brazil**|16|95|81|25|25|25|6|
|**Burkina Faso**|0|8|31|25|0|6.25|0|
|**Burundi**|0|0|25|25|0|0|0|
|**Cambodia**|0|41|43|25|0|6.25|12|
|**Cameroon**|3|37|56|25|0|6.25|25|
|**Central African**|0|31|25|25|0|0|0|
|**Republic**||||||||
|**Chad**|3|3|13|0|0|0|13|
|**Chile**|53|69|75|25|25|0|25|
|**China**|32|66|76|25|12.5|25|14|
|**Colombia**|80|82|77|25|12.5|25|14|
|**Congo, Dem. Rep.**|0|0|0|0|0|0|0|
|**Congo, Rep.**|0|31|25|25|0|0|0|
|**Côte d'Ivoire**|14|45|56|25|0|6.25|25|
|**Dominican Republic**|17|96|82|25|25|25|7|
|**Ecuador**|16|79|77|25|25|25|2|
|**Egypt, Arab Rep.**|0|47|38|25|0|12.5|1|
|**Eritrea**|0|0|0|0|0|0|0|
|**Ethiopia**|0|0|38|25|12.5|0|0|
|**Ghana**|0|39|72|25|25|18.75|3|
|**Guatemala**|17|98|92|25|25|25|17|
|**Guinea**|0|0|0|0|0|0|0|
|**Haiti**|0|1|9|0|0|6.25|3|
|**Honduras**|40|42|45|25|0|6.25|14|
|**India**|17|96|89|25|25|25|14|
|**Indonesia**|8|8|10|0|0|6.25|3|
|**Iran, Islamic Rep.**|16|16|15|0|0|12.5|2|
|**Jordan**|4|82|85|25|25|12.5|22|
|**Kazakhstan**|17|65|59|0|25|25|9|
|**Kenya**|0|32|54|25|12.5|12.5|4|
|**Korea, Rep.**|0|0|2|0|0|0|2|
|**Kyrgyz Republic**|16|47|38|0|25|12.5|0|
|**Lao PDR**|16|17|23|0|0|12.5|11|
|**Lebanon**|0|0|1|0|0|0|1|
|**Liberia**|0|0|0|0|0|0|0|
|**Madagascar**|0|31|34|25|0|6.25|3|
|**Malawi**|0|0|25|25|0|0|0|
|**Malaysia**|33|65|60|25|12.5|12.5|10|
|**Maldives**|0|0|0|0|0|0|0|
|**Mali**|0|32|33|25|0|6.25|2|
|**Mauritania**|0|31|25|25|0|0|0|
|**Mexico**|31|40|53|25|0|25|3|
|**Mongolia**|0|47|38|25|0|12.5|1|

65
|**Country**|**Sc**|**ores Over**|**Time**||**Scores on**|**Different Dimensions of Re**|**form, 2015**|
|---|---|---|---|---|---|---|---|
||**1995**|**2005**|**2015**|**Regulation**|**Restructuring**|**Competition**|**Private sector**<br>**participation**|
|**Morocco**|1|19|33|0|0|18.75|15|
|**Mozambique**|3|34|42|25|0|6.25|11|
|**Myanmar**|0|0|29|0|12.5|12.5|4|
|**Nepal**|31|33|35|0|12.5|12.5|10|
|**Nicaragua**|48|81|87|25|25|25|12|
|**Niger**|0|31|25|25|0|0|0|
|**Nigeria**|1|40|81|25|25|12.5|18|
|**Pakistan**|9|56|52|25|0|18.75|8|
|**Peru**|65|97|91|25|25|25|16|
|**Philippines**|11|90|93|25|25|25|18|
|**Poland**|1|64|80|25|25|25|5|
|**Romania**|0|96|87|25|25|25|12|
|**Russian Federation**|3|3|64|0|25|25|14|
|**Rwanda**|0|31|34|25|0|6.25|3|
|**Senegal**|3|50|63|25|0|18.75|19|
|**Sierra Leone**|0|0|42|25|12.5|0|5|
|**Solomon Islands**|0|0|0|0|0|0|0|
|**Somalia**|3|3|13|0|0|0|13|
|**South Africa**|32|32|36|25|0|6.25|5|
|**South Sudan**|0|0|0|0|0|0|0|
|**Sri Lanka**|0|1|3|0|0|0|3|
|**Sudan**|0|1|26|25|0|0|1|
|**Tajikistan**|0|1|13|0|0|6.25|6|
|**Tanzania**|8|40|34|25|0|6.25|3|
|**Thailand**|16|16|43|25|0|12.5|5|
|**Togo **|0|31|36|25|0|6.25|4|
|**Tunisia**|0|8|8|0|0|6.25|1|
|**Turkey**|17|97|95|25|25|25|20|
|**Uganda**|3|82|80|25|25|12.5|17|
|**Ukraine**|79|96|86|25|25|25|11|
|**Uzbekistan**|0|31|25|0|25|0|0|
|**Vanuatu**|22|22|63|25|0|12.5|25|
|**Venezuela, RB**|16|48|44|0|25|12.5|6|
|**Vietnam**|0|55|61|25|12.5|18.75|4|
|**Yemen, Rep. **|0|0|0|0|0|0|0|
|**Zambia**|0|33|37|25|0|6.25|5|
|**Zimbabwe**|3|34|37|25|0|0|12|

66
**Annex 1B: Overview of Adoption of Washington Consensus Reforms in the Power Sector, 1990 – 2015**

|**Country**<sup>**20**</sup>|**Year of**<br>**establishment**<br>**of regulatory**<br>**entity**|**Restructuring timeline**|**Competition timeline**|**Year of**<br>**1st IPP**|**Private**<br>**generation share**<br>**(% of installed**<br>**capacity)**|**Years of private sector participation in**<br>**distribution/transmission companies (nr**<br>**of companies)**|
|---|---|---|---|---|---|---|
|**Afghanistan**|‐<sup>21</sup>|‐|‐|‐|9.5|‐|
|**Algeria**|2002|Partial vertical unbundlingin 2002|Single Buyer model since 2001|2004|9.6|‐|
|**Angola**|2007|Full vertical unbundlingin 2014|Monopoly plus IPPs model since 2015|‐|9.0|‐|
|**Argentina**|1992|Full vertical unbundlingin 1995|Retail Competition model since 1995|1992|69.3|1993(1),1995(4),1996(4),1997(2)|
|**Armenia**|1997|Partial vertical unbundling in 1995<br>Full vertical unbundlingin 1997|Single Buyer model since 1995|‐|68.5|2002 (1)|
|**Bangladesh**|2003|Full vertical and horizontal<br>unbundlingin 1996|Single Buyer model since 1995|1997|42.2|2006 (1)|
|**Belarus**|2000|Horizontal unbundlingin 1997|‐|‐|0.1|1995(1),2000(1)|
|**Benin**|2009|‐|‐|‐|0.0|‐|
|**Bolivia**|‐|‐|Monopoly plus IPPs model since 1998<br>Wholesale Competition model since 1996|1998|41.5|1995 (1), 2000 (1)|
|**Brazil**|1997|Horizontal unbundling in 1995<br>Full vertical unbundlingin 1998|Single Buyer model in 1995<br>Wholesale Competition model since 1998|1993|44.1|‐|
|**Burkina Faso**|2010|‐|Monopoly plus IPPs model since 1998|1998|0.8|2001(1)|
|**Burundi**|2011|‐|‐|‐|0.4|‐|
|**Cambodia**|2001|‐|Monopoly plus IPPs model since 1997|1997|94.9|‐|
|**Cameroon**|1998|‐|Monopoly plus IPPs model since 2009|‐|99.2|1993(1),1998(1)|
|**Central African**<br>**Republic**|2005|‐|‐|‐|0.0|1996 (1), 1997 (2), 1998 (1), 2006 (1)|
|**Chad**|‐|‐|‐|‐|100.0|‐|
|**Chile**|1978|Horizontal unbundling in 1982<br>Partial vertical unbundling in 1995<br>Full vertical unbundlingin 2000|‐|1992|99.5|1993 (1), 1998 (1)|
|**China**|2003|Partial vertical unbundling in 1995<br>Horizontal unbundlingin 2003|Single Buyer model since 1995|1992|36.8|1990 (1)|
|**Colombia**|1992|Partial vertical unbundlingin 1995|Wholesale Competition model since 1995|1993|69.2|1996(1),1997(2),1998(1),2006(1)|
|**Congo, Dem. Rep. **|‐|‐|‐|‐|0.0|‐|
|**Congo, Rep. **|2003|‐|‐|‐|0.0|‐|
|**Côte d'Ivoire**|1998|‐|Monopoly plus IPPs model since 1995|1994|100.0|1990(1)|

20 For a full list of the market players (regulatory entity, wholesale market and transmission system operators) please refer to the RISE project on rise.esmap.org 21 “‐“ denotes no reform 67
|**Country**<sup>**20**</sup>|**Year of**<br>**establishment**<br>**of regulatory**<br>**entity**|**Restructuring timeline**|**Competition timeline**|**Year of**<br>**1st IPP**|**Private**<br>**generation share**<br>**(% of installed**<br>**capacity)**|**Years of private sector participation in**<br>**distribution/transmission companies (nr**<br>**of companies)**|
|---|---|---|---|---|---|---|
|**Dominican Republic**|1998|Partial vertical and horizontal<br>unbundling in 1998<br>Full vertical unbundlingin 2001|Single Buyer model in 1995<br>Wholesale Competition model since 2001|1994|59.1|1998 (1), 1999 (1)|
|**Ecuador**|1998|Full vertical and horizontal<br>unbundlingin 1998|Single Buyer model in 1995<br>Wholesale Competition model since 2015|1992|19.8|‐|
|**Egypt, Arab Rep.**|1997|Horizontal unbundling in 2000|Monopoly plus IPPs model in 1999<br>Single Buyer model since 2000|1999|6.6|‐|
|**Eritrea**|‐|‐|‐|‐|0.0|2003(1)|
|**Ethiopia**|2014|Partial vertical unbundling in 2013|‐|‐|2.2|1993 (1), 1995 (5), 2001 (1), 2003 (1) 2006<br>(1)|
|**Ghana**|2000|Full vertical and horizontal<br>unbundlingin 2008|Monopoly plus IPPs model in 1999<br>Bilateral Contracts model since 2008|1999|22.4|1995 (1), 1997 (1), 1998 (1)|
|**Guatemala**|1996|Full vertical unbundling in 1997|Single Buyer model in 1995<br>Wholesale Competition model since 1998|1994|68.9|1998 (1), 1999 (1)|
|**Guinea**|‐|‐|‐|‐|0.0|‐|
|**Haiti**|‐|‐|Monopoly plus IPPs model since 1995|2009|25.1|‐|
|**Honduras**|1995|‐|Monopoly plus IPPs model since 1995|1994|60.3|2003(1)|
|**India**|1998|Full vertical unbundling in 2003|Single Buyer model in 1995<br>Bilateral Contracts model in 2003<br>Wholesale Competition model since 2003|1991|33.3|1993 (1), 1995 (5), 2001 (1), 2003 (1) 2006<br>(1)|
|**Indonesia**|‐|‐|Monopoly plus IPPs model since 1995|1992|26.8|‐|
|**Iran, Islamic Rep. **|‐|‐|Single Buyer model since 1995|2004|17.4|‐|
|**Jordan**|2002|Full vertical unbundling in 1998<br>Horizontal unbundlingin 2007|Single Buyer model since 1998|2007|77.2|2008 (2)|
|**Kazakhstan**|‐|Full vertical and horizontal<br>unbundlingin 1998|Single Buyer model in 1995<br>Wholesale Competition model since 1998|‐|34.9|1995 (1), 1997 (1), 1998 (1)|
|**Kenya**|2006|Horizontal unbundling in 1996<br>Partial vertical unbundlingin 1997|Monopoly plus IPPs model in 1996<br>Single Buyer model since 1997|1996|31.3|‐|
|**Korea, Rep. **|‐|‐|‐|‐|19.3|‐|
|**Kyrgyz Republic**|‐|Full vertical unbundlingin 2001|Single Buyer model since 1995|‐|0.0|‐|
|**Lao PDR**|‐|Horizontal unbundlingin 2015|Single Buyer model since 1995|1996|86.3|‐|
|**Lebanon**|‐|‐|‐|‐|6.9|2003(1)|
|**Liberia**|‐|‐|‐|‐|0.0|2000(1)|
|**Madagascar**|1999|‐|Monopoly plus IPPs model since 2007|2007|23.3|‐|
|**Malawi**|2007|‐|‐|‐|0.0|‐|
|**Malaysia**|2001|Partial vertical unbundlingin 1995|Single Buyer model since 1995|1993|57.9|2005(1)|
|**Maldives**|‐|‐|‐|‐|1.3|1994(2),1995(1),1996(1),1997(1)|

68
|**Country**<sup>**20**</sup>|**Year of**<br>**establishment**<br>**of regulatory**<br>**entity**|**Restructuring timeline**|**Competition timeline**|**Year of**<br>**1st IPP**|**Private**<br>**generation share**<br>**(% of installed**<br>**capacity)**|**Years of private sector participation in**<br>**distribution/transmission companies (nr**<br>**of companies)**|
|---|---|---|---|---|---|---|
|**Mali**|2000|‐|Monopoly plus IPPs model since 2014|‐|16.5|1995(1),2003(1)|
|**Mauritania**|2001|‐|‐|‐|0.1|‐|
|**Mexico**|1995|‐|Monopoly plus IPPs model in 1998<br>Wholesale Competition model since 2013|1998|25.3|2005 (3)|
|**Mongolia**|2001|‐|Single Buyer model since 2001|2012|4.8|1993(14),2007(6)|
|**Morocco**|‐|‐|Single Buyer model in 1997<br>Bilateral Contracts model since 2008|1997|36.8|1997 (1), 1998 (1), 2001 (2)|
|**Mozambique**|2004|Horizontal unbundlingin 1998|Monopoly plus IPPs model since 2014|2014|88.6|2010(1)|
|**Myanmar**|‐|Partial vertical and horizontal<br>unbundlingin 2006|Single Buyer model since 2006|2006|29.5|‐|
|**Nepal**|‐|Partial vertical unbundlingin 1995|Single Buyer model since 1995|1994|28.5|2003(1)|
|**Nicaragua**|1979|Full vertical and horizontal<br>unbundlingin 1999|Single Buyer model since 1995|1996|49.2|1995 (1)|
|**Niger**|1999|‐|‐|‐|0.0|‐|
|**Nigeria**|2005|Full vertical unbundling in 2010<br>Full horizontal unbundlingin 2013|Monopoly plus IPPs model in 2001<br>Single Buyer model since 2010|2001|47.7|2013 (11)|
|**Pakistan**|1997|‐|Monopoly plus IPPs model in 1995<br>Single Buyer model in 1997<br>Bilateral Contracts model since 2002|1992|49.6|2005 (1)|
|**Peru**|1996|Full vertical and horizontal<br>unbundlingin 1995|Wholesale Competition model since 1995|1996|80.3|2002 (1)|
|**Philippines**|2001|Full vertical unbundling in 2001|Monopoly plus IPPs model in 1995<br>Single Buyer model in 2001<br>Bilateral Contracts model in 2004<br>Wholesale Competition model in 2006<br>Retail Competition model since 2006|1992|79.9|2003 (1)|
|**Poland**|1997|Horizontal unbundling in 1997<br>Full vertical unbundlingin 2013|Wholesale Competition model since 1995|‐|36.7|‐|
|**Romania**|2000|Full vertical and horizontal<br>unbundling in 2000|Monopoly plus IPPs model in 1997<br>Bilateral Contracts model in 1998<br>Wholesale Competition model in 2000<br>Retail Competition model since 2007|2009|14.8|2005 (3)|
|**Russian Federation**|‐|Horizontal unbundling in 2005<br>Full vertical unbundlingin 2006|Wholesale Competition model since 2006|‐|19.2|1996 (1), 2009 (3), 2010 (5), 2011 (1), 2013<br>(9)|
|**Rwanda**|2001|‐|Monopoly plus IPPs model since 2010|2010|22.4|2003(2),2005(1)|

69
|**Country**<sup>**20**</sup>|**Year of**<br>**establishment**<br>**of regulatory**<br>**entity**|**Restructuring timeline**|**Competition timeline**|**Year of**<br>**1st IPP**|**Private**<br>**generation share**<br>**(% of installed**<br>**capacity)**|**Years of private sector participation in**<br>**distribution/transmission companies (nr**<br>**of companies)**|
|---|---|---|---|---|---|---|
|**Senegal**|1998|‐|Monopoly plus IPPs model in 1997<br>Single Buyer model in 1998<br>Bilateral Contracts model since 2012|1997|100.0|2010 (1)|
|**Sierra Leone**|2011|Partial vertical unbundlingin 2011|‐|‐|37.5|1994(1)|
|**Solomon Islands**|‐|‐|‐|‐|0.0|1998(1)|
|**Somalia**|‐|‐|‐|‐|5.2|‐|
|**South Africa**|1994|Horizontal unbundlingin 1995|Monopoly plus IPPs model since 2006|2006|4.2|1995(1)|
|**South Sudan**|‐|‐|‐|‐|0.0|1997(1)|
|**Sri Lanka**|2002|‐|‐|1995|25.0|‐|
|**Sudan**|2011|‐|‐|‐|7.6|‐|
|**Tajikistan**|‐|Horizontal unbundlingin 2002|Monopoly plus IPPs model in 2006|2006|16.9|2002(1)|
|**Tanzania**|2001|‐|Monopoly plus IPPs model in 1995|1994|21.3|‐|
|**Thailand**|2007|‐|Single Buyer model in 1995|1993|43.7|‐|
|**Togo **|2000|‐|Monopoly plus IPPs model in 2008|2008|34.7|‐|
|**Tunisia**|‐|‐|Monopoly plus IPPs model in 1999|1999|10.1|‐|
|**Turkey**|2001|Full vertical unbundling in 2001|Single Buyer model in 1995<br>Retail Competition model in 2001|1990|66.8|1996 (1), 2009 (3), 2010 (5), 2011 (1), 2013<br>(9)|
|**Uganda**|1999|Full vertical unbundling in 2001|Monopoly plus IPPs model in 1999<br>Single Buyer model in 2001|2007|63.0|2003 (2), 2005 (1)|
|**Ukraine**|1994|Full vertical and horizontal<br>unbundling in 1995|Single Buyer model in 1995<br>Wholesale Competition model in 1996<br>Retail Competition model in 2010|2011|12.7|1998 (6), 2001 (6), 2006 (1), 2008 (1), 2010<br>(3)|
|**Uzbekistan**|‐|Full vertical unbundlingin 2001|‐|‐|0.0|‐|
|**Vanuatu**|2007|Horizontal unbundlingin 2011|Single Buyer model in 1995|2009|100.0|1994(1)|
|**Venezuela, RB**|‐|Full vertical unbundling in 1996,<br>reversed in 2007|Single Buyer model in 1995|‐|0.9|1998 (1)|
|**Vietnam**|2005|Partial vertical unbundling in 2005<br>Horizontal unbundling in 2010|Monopoly plus IPPs model in 1998<br>Single Buyer model in 2009<br>Bilateral Contracts model in 2015|1997|34.1|‐|
|**Yemen, Rep. **|‐|‐|‐|‐|3.5|‐|
|**Zambia**|1997|‐|Monopoly plus IPPs model in 2013|‐|9.8|1997(1)|
|**Zimbabwe**|2003|Horizontal unbundlingin 2015|‐|‐|99.2|‐|

70
**Annex 2: Overview of Cases of Failed Private Sector Participation in the Power Sector, 1990 ‐ 2015**

|**Country**|**Date of Policy**|**Company**<br>**name(s)**|**Contract type**|**Sub‐sector**|**Scope of PSP**|**Scope unit**|**Date of PSP**<br>**Reversal**|**Form of**<br>**reversal**|**Terminating**<br>**party**|**Description**|
|---|---|---|---|---|---|---|---|---|---|---|
|**Albania**|1996|Elbasan<br>Distribution<br>Company|Divestiture|Distribution|41|Nr of<br>connections<br>(1000s)|2003|Na.|Na.|In 2003 the<br>private sector<br>participation in<br>these<br>distribution|
||1996|Shkodra<br>Distribution<br>Company|Divestiture|Distribution|38|Nr of<br>connections<br>(1000s)|2003|Na.|Na.|companies in<br>1996 was<br>reversed.|
||1996|Vlore<br>Distribution<br>Company|Divestiture|Distribution|33|Nr of<br>connections<br>(1000s)|2003|Na.|Na.||
|**Argentina**|1996|Empresa de<br>Distribucion de<br>Electricidad de<br>Entre Rios SA|Concession|Distribution|217|Nr of<br>connections<br>(1000s)|2003|Private sector<br>abandonment|Investor|In 2003, the<br>private sector<br>abandoned<br>their<br>investment in<br>the distribution<br>company<br>following a<br>devaluation of<br>the peso and<br>resulting loss of<br>financial<br>equilibrium|
||1996|Empresa de<br>Energia de|Concession|Distribution|63|Nr of<br>connections|2008|Na.|Na.|The province of<br>Catamarca|
|||Catamarca||||(1000s)||||nationalized<br>Edecat in<br>October of<br>2008.|
|**Bolivia**|1995|Empresa de Luz<br>y Fuerza<br>Electrica<br>Cochabamba SA|Divestiture|Distribution|135|Nr of<br>connections<br>(1000s)|2010|Nationalization|Government|In 2010 the<br>distribution<br>company was<br>nationalized as|
||1995|Empresa Valle<br>Hermoso SA|Divestiture|Generation|289|MW|2010|Renationalizatio<br>n|Government|part of a series<br>of|
||1995|Empresa Corani<br>SA|Divestiture|Generation|126|MW|2010|Renationalizatio<br>n|Government|nationalizations<br>ofpublic|

71
|**Country**|**Date of Policy**|**Company**<br>**name(s)**|**Contract type**|**Sub‐sector**|**Scope of PSP**|**Scope unit**|**Date of PSP**<br>**Reversal**|**Form of**<br>**reversal**|**Terminating**<br>**party**|**Description**|
|---|---|---|---|---|---|---|---|---|---|---|
||1995|Empresa<br>Guaracachi SA|Divestiture|Generation|216|MW|2010|Renationalizatio<br>n|Government|infrastructure<br>providers,<br>following a<br>change of<br>government<br>and resulting<br>ideological<br>shift.|
|**Brazil**|2011|Jose de Alencar<br>Thermal Power<br>Plant|Greenfield|Generation|300|MW|2011/2012|Private sector<br>abandonment|Investor|In 2012 Bertin<br>Energia<br>returned its|
||2011|Cacimbaes<br>Thermal Power<br>Plant|Greenfield|Generation|127|MW|2011/2012|Private sector<br>abandonment|Investor|concessions of<br>separate power<br>plants to the|
||1998|Uruguaiana<br>Combined‐Cycle<br>Power Plant|Greenfield|Generation|639|MW|2011/2012|Private sector<br>abandonment|Investor|government.|
||1999|Rio Negro<br>Power Plant|Greenfield|Generation|158|MW|2008|Na.|Na.|Na.|
|**Cabo Verde**|1999|Electra|Divestiture|Generation,<br>transmission &<br>distribution|35|Nr of<br>connections<br>(1000s)|2006|Private sector<br>abandonment|Investor|In 2006,<br>EDP/AdP<br>abandoned its<br>investment in<br>Electra,<br>following which<br>the company<br>was<br>recapitalized,<br>with the<br>government<br>buying back 51<br>of the<br>company's<br>shares.|
|**Comoros**|1998|Comorienne de<br>l'eau et de<br>l'electricite|Concession|Generation,<br>transmission &<br>distribution|16|MW|2001|Renationalizatio<br>n|Na.|Cancelled due<br>to<br>disagreements<br>over illegal<br>connections|

72
|**Country**|**Date of Policy**|**Company**<br>**name(s)**|**Contract type**|**Sub‐sector**|**Scope of PSP**|**Scope unit**|**Date of PSP**<br>**Reversal**|**Form of**<br>**reversal**|**Terminating**<br>**party**|**Description**<br>and fuel<br>purchasing|
|---|---|---|---|---|---|---|---|---|---|---|
|**Dominican**<br>**Republic**|1999|Empresa de<br>Distribucion<br>Norte (Ede‐<br>Norte)|Divestiture|Distribution|Na.|Na.|2003|Renationalizatio<br>n|Government|EdeNorte and<br>Edesur were re‐<br>nationalized in<br>2004 following|
||1999|Empresa de<br>Distribucion Sur<br>(Ede‐Sur)|Divestiture|Distribution|Na.|Na.|2003|Renationalizatio<br>n|Government|unresolved<br>disputes<br>between the<br>regulator and<br>the company.|
|**Ecuador**|2006|CATEG<br>Management<br>Contract|Management<br>contract|Generation &<br>Distribution|400|Nr of<br>connections<br>(1000s)|2007|Cancelled<br>contract|Na.|Na.|
|**Gambia, The**|1993|SOGEA Rueil‐<br>Malmaison;<br>Management<br>Services<br>Gambia|Lease contract|Generation,<br>transmission &<br>distribution|Na.|Na.|1995|Cancelled<br>contract|Public|Management<br>Services<br>Gambia's<br>management<br>contract was<br>terminated by<br>the government<br>in 1995.|
|**Guinea**|1995|Na.|Na.|Na.|Na.|Na.|2000|Cancelled<br>contract|Both|Na.|
|**India**|1996|Dabhol LNG‐<br>Fired Power<br>Plant|Greenfield|Generation|1444|MW|2001|Private sector<br>abandonment|Both|Ownership of<br>the power plant<br>was transferred<br>to Ratnagiri Gas<br>and Power<br>following<br>disputes over<br>the power<br>purchase<br>agreement<br>terms.|

73
|**Country**|**Date of Policy**|**Company**<br>**name(s)**|**Contract type**|**Sub‐sector**|**Scope of PSP**|**Scope unit**|**Date of PSP**<br>**Reversal**|**Form of**<br>**reversal**|**Terminating**<br>**party**|**Description**|
|---|---|---|---|---|---|---|---|---|---|---|
||1999|Central<br>Electricity<br>Supply<br>Company of<br>Orissa (CESCO)|Divestiture|Distribution|Na.|Na.|2001|Renationalizatio<br>n|Government|CESCO was<br>renationalized<br>by the<br>government<br>following<br>financial<br>difficulties.|
|**Kazakhstan**|1996|Almaty Power<br>Consolidated|Divestiture|Generation|1307|MW|2000|Na.|Na.|Planning<br>difficulties<br>resulted in the<br>nationalization<br>of the<br>generation<br>asset in 2000.|
||1997|Petropavlovska<br>ya Tets‐2|Divestiture|Generation|Na.|Na.|1998|Na.|Na.|Na.|
|**Mali**|2000|EDM|Concession|Generation,<br>transmission &<br>distribution|Na.|Nr of<br>connections<br>(1000s)|2005|Renationalizatio<br>n|Government|The concession<br>contract was<br>terminated due<br>to<br>disagreements<br>over tariffs and<br>investment<br>plans.|
|**Peru**|1998|Electro Norte|Divestiture|Distribution|140|Nr of<br>connections<br>(1000s)|2001|Renationalizatio<br>n|Government|Following<br>disputes over<br>management|
||1998|Electro<br>Noroeste|Divestiture|Distribution|159|Nr of<br>connections<br>(1000s)|2002|Renationalizatio<br>n|Government|fees the<br>government<br>and private|
||1998|Electro Norte<br>Medio|Divestiture|Distribution|140|Nr of<br>connections<br>(1000s)|2002|Renationalizatio<br>n|Government|investors<br>reached a<br>settlement to|
||1998|Electro Centro|Divestiture|Distribution|231|Nr of<br>connections<br>(1000s)|2002|Renationalizatio<br>n|Government|return the<br>distribution<br>companies to<br>public<br>ownership.|
|**Russian**<br>**Federation**|2002|Tatenergo|Management<br>contract|Generation|24|MW|2004|Na.|Na.|Na.|

74
|**Country**|**Date of Policy**|**Company**<br>**name(s)**|**Contract type**|**Sub‐sector**|**Scope of PSP**|**Scope unit**|**Date of PSP**<br>**Reversal**|**Form of**<br>**reversal**|**Terminating**<br>**party**|**Description**|
|---|---|---|---|---|---|---|---|---|---|---|
||2003|Tomsk<br>Municipal<br>UtilityComplex|Lease contract|Distribution|488|Nr of<br>connections<br>(1000s)|2007|Na.|Na.|Na.|
|**Senegal**|1999|Societe<br>Nationale<br>d'Electricite du<br>Senegal<br>(SENELEC)|Concession|Generation,<br>transmission &<br>distribution|300|MW|2000|Share buyback|Government|In September<br>2001, there was<br>a change in<br>government<br>and ideological<br>shift resulting in<br>the buyback of<br>shares to<br>renationalize<br>SENELEC.|
|**Togo**|2000|Togo Electricite<br>(CEET)|Concession|Generation &<br>Distribution|Na.|Na.|2006|Contract<br>cancellation|Public|CEET's<br>concession was<br>cancelled in<br>2006 by the<br>government<br>following<br>disputes over<br>the<br>concessionaire’<br>s investments.|
|**Venezuela, RB**|1998|Sistema<br>Electrico de<br>Nueva Esparta<br>(SENECA)|Divestiture|Generation|Na.|Na.|2007|Renationalizatio<br>n|Investor|SENECA was<br>nationalized in<br>2007, with the<br>88 share of the<br>private owners<br>were<br>transferred to<br>state‐owned<br>entities.|

75