Abstract
Liberalization does not necessarily reduce electricity prices. In the case of directly subsidized systems, the only possible “price” indicator would be the wholesale cost. In countries which introduced competition in generation and implemented the single buyer model, wholesale tariffs or Bulk Supply Tariffs could be the best proxies to measure possible efficiency gains in the sector. The evaluation will also depend on the chosen method of regulation (“rate of return” or “RPI-X”). The second step of this evaluation consists in analysing whether reforms contributed to attracting private investments. The MENA region was able to attract a portion of global private investments, although not as much as other emerging regions (e.g. Latin America). The fuel cost advantage made the region relatively attractive for power developers, but it was not sufficient and not sustainable.
It is clear that deregulation is a high risk choice. Those jurisdictions that have not yet deregulated electricity generation need to think long and hard before they go ahead. Those that have done so need to figure out how to minimize the downside potential of the journey on which they have embarked.
Newbery (2002).
En périodes de crise, le fait d’avoir des acteurs (transport, distribution, commercialisation, production) complètement séparés rend la coordination de la gestion des crises très difficile (“During crises, having completely unbundled actors (transmission, distribution, retail, and generation) makes the coordination of the management of crises very difficult”. Interview des Echos, 3 October 2003).
François Roussely, former President, Electricite de France (EDF).
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- 1.
World Bank proposes other means that could serve to measure the performance of distribution companies.
- 2.
In MENA, most countries have a parliament or a similar form of citizens’ representations. Saudi Arabia and Qatar have unelected “Shoura Council”.
- 3.
John Williamson used the phrase in 1990 “to refer to the lowest common denominator of policy advice being addressed by the Washington-based institutions to Latin American countries as of 1989.”
- 4.
Former vice president and Chief Economist of the World Bank.
- 5.
During the 1940–1950s, marginal cost pricing became the main rule to regulate public utilities and widely advocated by theoretical economists. It took time to notice that the main caveat of the method was the assumption that enterprises were maximizing productive efficiency, and empirical experience supported this view. Then economists started to look for alternative methods that would change the relevant incentives. The privatization and deregulation waves of the 1980s and 1990s provided the impetus for efficiency and innovation and incentive price cap regulation was established in areas where competition was not yet feasible.
- 6.
For more details on Jordan’s electricity tarriff setting, see “Determining of Electricity Tariff in Jordan”, Meqdad QADOUS, Director of Studies and Economic Researches Department, ERC Jordan, Tariff/Pricing Committee Meeting, February 4–5/2008, Budva, Montenegro.
- 7.
Costs include depreciation and Bulk Supply Tariffs but excluding interest, loan arrangement fees, and losses or profits as a result of movements in the value of foreign loans arising from changes in the value of the Jordanian dinar.
- 8.
Averch H, et Johnson LL, Behavior of the firm under regulatory constraint. Am Econ Rev 52(5):1053–1069, December 1962.
- 9.
Competition by statistical comparison.
- 10.
In 2003, the structure of electricity BST charges was reviewed based on the improvement of the cost reflectivity of the SMP charges and the increase of demand charges.
- 11.
CERA’s capital cost index shows that power capital costs nearly doubled between 2000 (100) and 2007 (194). It even exceeded 230 during the summer of 2007. It reaches 171 in 2007 if nuclear is excluded.
- 12.
For example, in 2005, the Saudi Water and Electricity Company (WEC) received only one bid for Shuaiba (900 MW/176 MMgd cogeneration plant) from a local/Malaysian consortium: Acwapower Projects, Tenaga Nasional Berhad and Malakoff Berhad. Some prequalifiers were concerned about investing in an oil-fired (and not gas) IWPP located on the west coast of Saudi Arabia; the others were not able to bid after WEC declined to extend the deadline.
- 13.
See Sect. 3.2 of Chap. 3 for fuel price/volume renegotiations.
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Benali, L. (2019). Evaluation Step 1: Impact on Production Costs (Performance) and Investments (Incentive). In: Electricity-sector Reforms in the MENA Region. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Cham. https://doi.org/10.1007/978-3-319-96268-9_4
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