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Power sector regulatory reform in transition economies: Progress and lessons learned

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  • David Kennedy

    (European Bank of Reconstruction and Development)

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    Abstract

    Regulatory reform in the power sector of most transition economies has progressed. Regulatory independence, however, is still limited with direct (statutory) and indirect political input influencing decision making. Further reform is required to secure power tariff increases and private sector participation. Both should improve sector performance, notwithstanding current market sentiment towards the sector and the region. This paper discusses the advances made in regulatory reform, with a focus on end user regulation rather than network access. It suggests that regulatory rules, enforceable in an independent forum such as international arbitration, should be written into contracts to ensure investor security. However, arbitration should not be seen as a substitute for strong government commitment to the reform process. Tariff mechanisms from western Europe or North America, if adopted into contracts, should also be adapted to reflect the specific characteristics of transition economies. For example, poor payments discipline and exchange rate risk are significant problems in CIS countries. Going forward, the challenge in all transition economies will be to strengthen regulatory independence and mechanism design. And, perhaps most importantly, implementation must be enhanced to improve sector performance.

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    File URL: http://www.ebrd.com/downloads/research/economics/workingpapers/wp0078.pdf
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    Bibliographic Info

    Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 78.

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    Length: 23 pages
    Date of creation: Feb 2003
    Date of revision:
    Handle: RePEc:ebd:wpaper:78

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    Related research

    Keywords: Power sector; regulation;

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    References

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    1. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
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    Cited by:
    1. Pradeep Mitra & Marcelo Selowsky & Juan Zalduendo, 2010. "Turmoil at Twenty : Recession, Recovery, and Reform in Central and Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 2682, October.
    2. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming the power sector in transition: Do institutions matter?," Energy Economics, Elsevier, vol. 34(5), pages 1675-1682.
    3. Cubbin, J. & Stern, J., 2004. "Regulatory effectiveness: the impact of good regulatory governance on electricity industry capacity and efficiency in developing countries," Working Papers 04/04, Department of Economics, City University London.
    4. Stern, Jon & Cubbin, John, 2005. "Regulatory effectiveness : the impact of regulation and regulatory governance arrangements on electricity industry outcomes," Policy Research Working Paper Series 3536, The World Bank.
    5. Stern, J. & Cubbin, J., 2004. "Regulatory effectiveness: the impact of regulation and regulatory governance arrangements on electricity industry outcomes: a review paper," Working Papers 04/01, Department of Economics, City University London.

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