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Regulatory reform and market development in power sectors of transition economies: the case of Kazakhstan

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  • David Kennedy

    (European Bank for Reconstruction and Development)

Abstract

Kazakhstan is at the forefront of power sector reform in the EBRD’s countries of operations. Starting in 1996, a regulator was set up, the industry was unbundled, some distribution and generation companies were privatised, and the large user market was liberalised. A number of reform challenges remain, however, in the areas of privatisation, regulation and competition. This paper proposes that the remaining distribution companies be privatised with a view to raising the level of cash collection. Before this takes place, the industry would benefit from regulatory changes, strengthened independence of the regulator, and modified regulatory rules to improve risk allocations and strengthen incentives. On competition, the paper proposes enhancing the present market arrangements by introducing a balancing pool, and re-balancing transmission tariffs to reflect location marginal costs. Implementation of the proposed changes should yield substantial welfare gains for Kazakhstan. The broad challenges in Kazakhstan are characteristic of those in the sector throughout the region. The case of Kazakhstan shows that any country can embark on radical power sector restructuring irrespective of reform progress in the wider economy.

Suggested Citation

  • David Kennedy, 2000. "Regulatory reform and market development in power sectors of transition economies: the case of Kazakhstan," Working Papers 53, European Bank for Reconstruction and Development, Office of the Chief Economist.
  • Handle: RePEc:ebd:wpaper:53
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    More about this item

    Keywords

    power sector; privatisation; regulation; competition; network pricing;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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