During the 1990s, the conventional wisdom about the electricity sector -public ownership and integrated utilities -was challenged by a new model of private ownership and unbundled utilities. Debates about the viability, applicability, and feasibility of market-led electricity reforms continue today. Nonetheless, at the turn of the new century, countries around the world are taking tentative steps toward this new approach.

These shifts in the electricity sector have not occurred in isolation. The new model is part of a broader thrust toward the promotion of markets, a growing role for private capital, and global economic integration. These themes place electricity sector reforms squarely within larger processes of economic globalization and the debates about its merits and costs.

Electricity sector reforms and the financial flows they attract have serious implications -potentially both positive and negative -for long-term sustainable development goals. A sector designed to ensure access to electricity for all could bring considerable social benefits, including opportunities for education, better health and nutrition, and entrepreneurship. A sector designed with environmental considerations in mind could significantly mitigate the build-up of global and local pollutants. Failure to address these social and environmental concerns -collectively "public benefits"-could undermine progress toward sustainable development.

Decisions made now about the institutional structure and functioning of the electricity sector will shape social and environmental outcomes for decades to come. Whether market-led or not, reforms will best support sustainable development outcomes when they are explicitly designed to do so.

The central question for this study is: How can the process of reforming the electricity sector support rather than hinder promotion of sustainable development outcomes? We approach this question by examining the process and politics of reform in six countries in the developing world and economies in transition - Argentina, Bulgaria, Ghana, India, Indonesia, and South Africa. These countries were selected to ensure a mix across early and late reformers, large and small countries, and to provide a geographic spread. To answer the central question, each country study asks:

• What were the drivers of reform in the electricity sector?

• What political interests were at stake in reform of the sector, and how did they shape the reform process?

• What role did the World Bank and other international donor agencies play in electricity sector reforms?

• How and by whom were social and environmental concerns addressed in the process of designing electricity reforms, and with what outcomes?

Each country study was conducted as a collaborative exercise between the World Resources Institute and a research partner from the country studied. Specific issues in a small number of additional countries were briefly examined to supplement the main case studies. Our methods were semi-structured interviews with key informants from government agencies, civil society, the private sector, and international agencies -all conducted on a not-for-attribution basis to encourage candor. This information was supplemented by official government and donor agency reports, other secondary materials, and media reports.

Electricity sector reform and a sustainable development agenda

Reform of the electricity sector is on the agenda in much of the developing world and in transition economies. Diminished barriers to private capital flows, technological change in power generation technologies, and ambitious early experiments with institutional restructuring in Chile and the United Kingdom have stimulated reform efforts around the world. In developing and transition economies, a World Bank policy of conditioning loans on institutional restructuring provided a further impetus to reform. By 1998,of a sample of 115 developing-countries, 33 percent had passed new electricity laws, 29 percent had established an independent regulator, and 40 percent had allowed the entry of privately owned independent power producers (IPPs) (Bacon, 1999).

The approach to reform will determine whether it supports or undermines sustainable development. Electricity restructuring will influence important social concerns such as access to price, quality of service, and labor impacts. In a restructured electricity market, price signals and a profit motive alone will be insufficient to ensure that social goals in the sector are met. (See Box.)

Electricity reform will also shape the future environmental profile of the sector. Market incentives for economic efficiency will likely result in greater environmental efficiency in the short run. However, reforms may not help realize a clean energy future in the absence of explicit planning mechanisms that factor in environmental benefits and costs. Electricity restructuring also provides a rare opportunity to spur the transition to a "micropower" future based on small-scale distributed generation. To do so, reform designers will have to be attentive to the environmental implications of economic regulatory decisions in order to provide a level playing field and ensure that reforms do not reduce opportunities for end-use energy efficiency.