Operations Concessions for Electricity Distribution

Overview & Synopsis

In the 1990s, the World Bank and other development financiers supported a power sector reform framework emphasizing restructuring or unbundling of utilities, creation of regulators, private sector participation (both in terms of financing and managing the operations of power networks and utilities), and the establishment of competitive power markets. These reforms aimed to create commercially viable power utilities, without the continuing need for government ownership and financial support. Private sector participation (PSP) can be an effective component of power sector performance improvement when used to address some of the common challenges faced by state-owned utilities. This paper presents a primer on the operations concession model and how it has been deployed in developing countries. The paper is targeted primarily at governments, financiers, lawyers, advisors, and other practitioners undertaking or considering PSP transactions in the power distribution sector in developing countries. The paper aims to provide a unifying language and framework for stakeholders to conceptualize this less common approach to PSP and takes stock of past experiences and lessons learned.