Challenges Of Power Sector Reform

By DONNA STAUFFER

The SARI/Energy initiative was developed in recognition that South Asian countries need both energy and private investment to accelerate economic growth and improve the lives of their growing populations. Abundant energy resources exist in the region, but developing, distributing, and utilizing them efficiently and in ways that do not degrade the environment require cooperation and trade among the countries of South Asia. Developed in close consultation with the governments of the region, the SARI/Energy Program has been designed to foster greater sharing of information and lessons learned among the South Asian countries in order to capitalize on the opportunities for mutually beneficial cooperation and collaboration in the energy sector. This should result in economic benefits to all of the inhabitants of South Asia.

The three primary objectives of SARI/Energy are : 1) to improve the institutional capacity to make decisions on sustainable energy development; 2) to promote private sector participation and investment in, and civil society support for, energy development; and 3) to create and/or strengthen regional forums, networks, and associations for cooperation and advocacy on energy development.

In order to meet the above objectives, SARI/Energy is implemented through technical assistance, training, and partnership programs with the focus in the following five key areas : 1. Regional Energy Trade and Exchange 2. Regulatory and Tariff Policy Reforms 3. Private Sector Involvement 4. Rural Energy Supply 5. Energy Efficiency.

Nexant, Inc., which is organizing this event, is responsible for the provision of technical assistance.  It is a plain fact that for the sound operation of an electric system the following key elements must be present :

a) The utility must operate on a sound commercial basis, with full cost recovery for the services it provides to consumers. b) The consumers must recognize the electricity is not a free good, and that they must pay for what they consume. c) The government, operating, through it6s regulatory structure, must endorse an appropriate cost-recovery tariff structure, as well as provide funs directly to the utility to cover the costs of providing subsidies to the socially needy.

Without these elements in place, it will be impossible for the utility to provide reliable electricity services to its coustomers or to meet the commitments of the government to the needy. However, it is also a reality that most electric utilities in the region cannot meet these important performance criteria. Sector reform is generally instituted to address these issues.

This seminar will focus on policy, technical and institutional issues related to power sector reform from the perspective of various stakeholders. It is hoped that, at the end of the seminar the participants, and particularly policymakers, will have a better understanding of the impact of reform on sector performance, and on the overall economy. The seminar will also provide a forum for discussing all aspects of the sector confident that the experience the experts from other countries in the region and elsewhere will share during the course of this seminar will be very useful for Nepal's experts and policymakers in charting a course of action for Nepal.

This seminar is particularly timely, since HMGN has recently shown a renewed commitment to developing the energy sector by issuing a new Hydropower Development Policy. This Policy clearly indicates the government's commitment to make the sector more efficient and conducive for private investment through appropriate reforms. It is my hope that this seminar will do three things : 1) engage senior power sector officials, policymakers and other key stakeholders in a meaningful dialogue on power sector reform issues, 2) identify the opportunities and priorities for reform, and 3) come up with a workable road map for implementing the power sector reforms envisaged in the Hydropower policy.

I know that each of you has come to this seminar committed to contributing to the best of your ability to moving the process of power sector reform in Nepal forward, so that one day in the not too distant future, al of Nepal's citizens will have access to reliable and affordable electricity. That is indeed a challenge!

(Excerpts of opening remarks by Stauffer, who is associated with USAID/Nepal, at the Nepal Power Sector Reform Seminar held recently in capital)