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afrol News, 2 July - A new study by the UN agency World Resources Institute (WRI) reviews the private sector participation in Ivorian electricity provision. Although reform towards privatisation started early, it has ended up in "confusion", the study concludes. The private sector has been participating in the electricity sector for twelve years and has plaid a major role in securing stable supply since the energy crisis in 1983-84, the report concludes. The WRI study, titled 'Power Politics: Equity and Environment in Electricity Reform', reviews the reforms of the electricity sector in a number of countries and also sums up the private sector participation in electricity provision in Côte d'Ivoire. Between 1960 and 1977, Côte d'Ivoire had experienced vigorous growth, fiscal and macroeconomic stability, and independence from foreign aid, the study says. However, in the late 1970s and early 1980s, a decline in coffee and cocoa commodity prices led to a severe economic recession. In response, the government of Côte d'Ivoire had turned to the Bretton Woods institutions (IMF and World Bank) to help stabilise its economy and fund economic recovery. In the electricity sector, external oil price rises combined with drought had produced a crisis in 1983-84. The state-owned electricity company, Energie Electrique de la Côte d'Ivoire (EECI), was buying oil on the international market for thermal generation to make up for the loss of hydroelectric generation. As a result, the state-owned utility's financial situation had become precarious. IMF and World Bank loans, a general economic recovery in the mid to late 1980s - and most important - the discovery and exploitation of oil resources off the coast of Côte d'Ivoire had allowed EECI to regain financial stability by the mid-1980s. In 1990, a shift in power from the ailing President Houphouet-Boigny to a reform-oriented caretaker Prime Minister, Alassane Dramane Ouattara (today's opposition leader), had led to "closer coordination with the Bretton Woods institutions," the study says. The new leadership devalued the currency, reformed the public investment bank, and launched a privatisation program that included the electricity sector. Unlike many other developing country utilities, EECI boasted good technical operation, low system losses, and a high (90 percent) rate of bill collection, except from government agencies. Nonetheless, in August 1990 the government decided to invite in the private sector, and by November 1990, EECI's transmission and distribution assets were effectively transferred to the private operator Companie Ivoirienne d'Electricité (CIE). Almost simultaneously, the government had approved a contract with an independent power producer to build and operate a thermal power plant. Approval of this plant had, in part, been "motivated by short-term political interest — to avoid electricity shortages in the run-up to elections," the WRI study concludes. "Significantly, in a major concession to investors, the government decided to provide fuel to new independent power producers at no cost." No regulatory reforms had preceded privatisation, "but there was a subsequent flurry of regulatory activity." A number of new institutions were set up, including bodies to supervise EECI, address financial issues, address engineering issues, develop a national policy for electricity, and promote rural electrification. However, there had been a "simultaneous reshuffling of responsibilities, often with overlapping jurisdictions," the report says. "As a result, regulation, planning, and policymaking within the sector became increasingly duplicative and unclear." One observer, quoted in the WRI study, noted; "Each private operator can literally pick the government body with which it is comfortable in order to solve its problem with the lowest possible risk." As a result of "the existing confusion," a new round of reforms was now "in the cards that will aim to reorganise the system from a vertically integrated monopoly to an unbundled system," the report claims. "However, the government is locked into the existing agreement with CIE, which expires in 2005 and poses problems for any future reform." Pointing to the Côte d'Ivoire example, the report suggests the use of management contracts - potentially extending to outright distribution concessions - which would make concessionaires responsible for ongoing investments. It also urges the introduction of transparent regulation, noting that nonenforceable performance contracts have proved largely unsuccessful; suggests consideration of decentralised community-based distribution; and favours reform of purchase tariffs. Sources: Based on WRI and afrol archives
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