Analytical Framework Nils-Henrik M. von der Fehr and Jaime MillĂĄn
his chapter presents an analytical framework for uncovering the sustainability of electricity market reforms and suggesting improvements in cases where there are threats to sustainability. The approach identifies implicit and explicit policy objectives and constraints and discusses their overall and relative importance; analyzes how the existing regime (including planned reforms) takes objectives and constraints into account and identifies major threats to reform sustainability; and suggests and discusses adjustments and developments that will improve reform sustainability. While each of the above elements may be treated separately in principle (the approach followed in this chapter), the interaction of objectives and constraints with reforms must be analyzed as a whole. Reforms occur amid the interaction of current and emerging interests; understanding this dichotomy is essential to evaluating sustainability of the process. Accomplishing the first two tasks requires a diagnostic study of the country and sector prior to and during reforms, using available materials and evidence. The third task requires more creativity because it involves not only identifying and screening alternative measures, but also making a coherent proposal for their implementation. For analytical purposes, one may postulate that the overall objectives in service provision are the same before and after reform: Delivering electricity the population requires in a financially, economically, socially, politically, and environmentally sustainable way. Success of the model adopted by the earlier paradigm—measured in terms of achieving these
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CHAPTER ONE