C L I M AT E C H A N G E A N D T H E W O R L D B A N K G R O U P
Table 4.3: Outcomes of Loans with Electricity Tariff Goals
Country Armenia
Project (year approved)
Tariff outcome of the project
SAC I (1996)
++
SAC II (1998)
Succeeded in raising tariffs from 0.2 to 4.9 cents/kWh, and household col-
SAC III (1999)
lection rate from 10 to 88 percent; implicit subsidies through the water sector remained. Safety nets targeted vulnerable groups. Established quantitative goals for utilities. Improved service (in part due to restart of large nuclear plant).
Côte d’Ivoire
Energy Sector Loan (1990)
– Economically unjustified tariff reduction.
Laos
Provincial Grid Integration (1993)
+ + Tariffs increased 70 percent. No action taken at the time to reduce
Indonesia
Suralaya Thermal Power (1992)
+ / – Automatic tariff adjustment mechanism introduced in 1994 was only
unpaid government bills. partially successful in tracking changes in cost of power generation and was abandoned in the wake of the financial crisis. China
Georgia
Ertan Hydropower Projects (1991, 1995)
+ / – Planned tariff increases related to Ertan generation were inadequate
SN Sichuan Power Transmission Project
and remained below marginal cost, but adjustment of consumer tariffs
(1995); Zhejiang Power Development
in the other two projects was successful—particularly introduction of
Project
time-of-day rates in Zhejiang.
SAC I (1996)
+ + Tariffs raised in three steps from near 0 in 1995 to 3.5 cents in 1997.
SAC II (1998)
Collections rate increase from 10 to 65 percent.
SAC III (1999) Pakistan
SAC I (2001)
+ / – Power tariffs were adjusted as a prior condition of SAC I, but there-
SAC II (2004)
after stalled or reversed; power subsidies constituted 1.6 percent of GDP in 2002/03.
Jordan
ESL (1994)
+ + One-time rationalization of power prices succeeded in bringing them up to long-run marginal cost; however, prices were pegged to oil prices, provided at concessional rates from Iraq.
Bosnia and
EMG Electric Power
+ + Household tariffs raised 20 to 60 percent, but still 40 percent below
Herzegovina
Reconstruction (1997)
long-run marginal cost.
Electric Power Reconstruction II (1998) Honduras Bulgaria
HN Public Sector Modernization SAC
+ / – New tariff structure adopted as a condition of loan, but average
(1996)
rates are low, and subsidies go mostly to the non-poor.
REHAB (1997)
+ + Tariffs were doubled, to 3.3 cents/kWh and adjustments were continued after the loan’s ending.
Note: + + = general tariff increase of more than 10 percent; + = tariff increase of an unspecified percentage less than 10 percent or covering only some residential consumers; – = tariffs decreased during and/or after the project; + / – = mixed or unsustained results.
While generalizations are difficult in this complex area, some lessons emerge. As in other areas of reform, client ownership is a key prerequisite. Engagement is often lacking when subsidies do not cause immediate fiscal stress, as in Price reform goals have the case of implicit subsidies to oil and often been achieved. gas in net exporters. Conversely, fiscal 54
stress, or the prospect of a significant gain (such as accession to the EU), can motivate interest in reform. Cross-sectoral, ministerial-level involvement, including the finance ministry as well as energy agencies, may be an important feature of successful energy reforms. Interactive and clientresponsive policy dialogue over an extended