Recommendations: toward a progressive politics of electricity sector reform

Integrating environmental and social benefits into electricity sector reforms in developing and transition economies will continue to be a daunting challenge. Not only are reforms technically complex, but the combination of macroeconomic crisis, entrenched political interests, and centrality of costs often crowd out attention to environmental and social factors. However, the country studies do offer insights into how reforms are currently shaped, and therefore into how attention to concerns of equity and sustainability can be reinserted into the reform process.

1. Frame reforms around the goals to be achieved in the sector. A narrow focus on institutional restructuring driven by financial concerns is too restrictive to accommodate a public benefits agenda. To build a framework that includes such an agenda requires an articulation of the services that a reformed sector is intended to provide and the means by which it should do so. While donor agencies often play a central role in initiating reform, they must step back during the process of defining goals to allow a nationally-driven vision of reform to emerge.

2.Structure finance around reform goals, rather than reform goals around finance. Reform processes have catered to a need to attract private capital. Since sustainable development may not always be aligned with short-term profit motives, reform processes must move beyond the imperative of attracting capital. While this may seem a far-fetched notion in capital-constrained developing countries, the time may now be opportune to change the terms on which private capital enters a country. Efforts to attract capital through risk mitigation and tariff increases have not won popular backing, and as a result have not been politically sustainable. A broader vision of reform and a public consensus supporting that vision could lower these risks. Private capital may be willing to accept more realistic financial returns, if they are combined with less risk. Political legitimacy in a reform program, tied to some innovation in mechanisms for raising finance, may be a more promising route than tailoring reforms to short-term profit horizons.

3. Support reform processes with a system of sound governance. An open-ended framing of reforms will reflect public concerns only if it is supported by a robust process of debate and discussion. Hence, a third imperative is to embed debate over electricity sector reforms in a sound process of decisionmaking guided by transparency, openness, and participation. Such an approach is more likely to provide the political space for articulation of a range of public concerns than have the closed processes prevalent thus far. It is also more likely to build public consensus in support of reforms, making for a more politically sustainable process.

4. Build political strategies to support attention to a public benefits agenda. It is important that public benefits advocates strengthen political coalitions supporting sustainable development and counter those favoring parochial interests. In particular, the case studies suggest that social concerns carry far more political weight in a national context than do either local or international environmental issues. Efforts to exploit links between social and environmental agendas would likely be a useful political approach.

By focusing on financial health, reforms in the electricity sector have excluded a range of broader concerns also relevant to the public interest. In this study, we have examined the social and environmental concerns at stake in these reforms. We have found that not only are they inadequately addressed, but that socially and environmentally undesirable trajectories can be locked-in through technological, institutional, and financial decisions that constrain future choices. Consequently, social and environmental benefits need to be internalized early in reform decisionmaking.

To do so, the process by which reform goals are defined and reform decisionmaking must change to embrace a more consensus-driven design of reforms. More complex processes bring with them greater risks of capture by special interests and failure due to a cacophony of voices. Yet exclusive reforms of the electricity sector have not incorporated the breadth of interests that deserve a voice and have not yet shown themselves to be sustainable -financially, socially, or environmentally. This study has suggested several reasons to believe that a modified approach guided by a vision of a socially and environmentally sustainable electricity future may yield a more satisfying outcome.

Reference

Bacon, Robert. 1999. Global Energy Sector Reform in Developing Countries: A Scorecard. Report 219/99. Washington, D.C.:ESMAP.