Chapter 4: Power’s Promise: Electricity Reforms in Eastern Europe and Central Asia
J. A. Lampietti, S. G. Banerjee, J. Ebinger, M. Shkaratan, G. Sargsyan, I. Klytchnikova and K. Van den Berg Energy sector reforms remain among the most controversial development issues in transition economies, as these countries continue to tread the path toward sustainable growth. The legacy of central planning left the electricity sector highly centralized, vertically integrated, and often inefficient and deeply in debt. Falling service quality, continuing lack of investment, and persistent sector deficits made the reforms urgent in the Eastern Europe and Central Asia (ECA) region. International financial institutions have spent millions of dollars on power sector reforms in these economies, but a number of such operations are now in difficulty with controversies, delays, and opposition surrounding them. This immediately begs the question: What are the outcomes, particularly the social and environmental effects or the ‘cost’ of reform? Using data compiled from a number of sources including local consultant reports, reviews of project documents, Household Budget Surveys (HBS), and Living Standards Measurement Study (LSMS) surveys, this chapter takes a closer look at the unintended consequences of reform. The transition economies in this study – Armenia, Azerbaijan, Georgia, Hungary, Kazakhstan, Moldova, and Poland – started reforming their electricity sectors in the 1990s. Caution is required in drawing conclusions because reforms are a dynamic process and the countries examined are at different points in the reform process. Of course, it has to be kept in mind that most of the CIS economies became countries only at the beginning of the decade and tasks...
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