Power sector liberalization in developing countries

Based on extensive experience of the US Agency for International Development (USAID) with power sector liberalization in developing countries over the past decade, it has become clear that liberalization is a powerful tool for helping achieve sustainable and environmentally sound social and economic development. The basic driving forces for liberalization are: The need for additional energy to support sustainable economic and social development; the lack of public sector financial resources for system improvement; the inefficiency of existing power generation, transmission, distribution and end use; and the poor environmental performance of public sector power utilities. Power sector liberalization has brought the benefits of greater efficiency in the power sector, increased investment, more economic pricing, greater independence from political interference, increased competition and dampening of tariff increase, and better environmental protection. Care needs to be taken, however, to insure that progress in the areas of energy efficiency, renewable energy, and rural electrification are not compromised in the drive to liberalize. USAID firmly believes that power sector liberalization offers a fundamental opportunity to all countries to improve the sustainable supply and use of energy for productive purposes for this and future generations. All nations should seriously consider energy sector liberalization and one or more of the various approaches