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II. Privatization Process: Making Privatization Work - Key Issues & Approaches |
With all the factors discussed above in mind, certain specific steps have emerged as most likely to achieve success. This section discusses what these steps are, why they are taken, and how they are advanced.
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D. Re-aggregation |
Creation of a competitive market begins with the unbundling of the vertically integrated monopoly, creation of the new market for buying and selling electricity and then selling unbundled components. While some re-aggregation of the unbundled components after sale is not necessarily harmful, countries must be careful not to allow investors to abuse a monopoly position by maintaining a sound regulatory approach.
Even in a natural monopoly setting, breaking up assets can make sense. For example, an argument can be make in of having multiple distribution companies, even though distribution wires are natural monopolies, in order to set comparison benchmarks. While Distribution Company #1 may have an exclusive franchise over the northern part of a country, and circumstances may differ from region to region, having separate distribution companies for the eastern, southern and/or western parts of the country can allow for at least some general performance comparisons. Comparison with operations in neighboring countries may also be useful.
In the end, the particular bundle of assets sold in one package and the re-aggregation allowed is a function of the specific circumstances of the sale and the country. For example, the country may simply be too small to make multiple distribution companies feasible. Or, the alternative of precluding an investor that has already bought assets from purchasing another set of assets may be worse than such re-aggregation.
Consideration needs to be given as well to the potential negative impact of aggregation on competition in regional electricity markets. As electricity exports and imports expand over time and regional electricity markets emerge, cross-ownership of generation and distribution may lead to resistance to importation of cheaper electricity.
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Source: |
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Table
of contents |
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I. Power Sector Privatization |
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II. Privatization Process |
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Conclusion |
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