Key drivers of improved access— service through networks

EN ER G Y ER V IC ES FO R TH E W O R LD ‘S PO O R Electricity reform is based on the premise that market mechanisms supply electricity much more efficiently than central planning can.1 But how will the poor, who have the least purchasing power, fare in a competitive electricity market? Will those without access continue to be denied it as electricity supply changes from a public service to a profit-seeking business? And will the poor who have access suddenly find it unaffordable? One response to these general concerns is that a wellfunctioning power sector is crucial to macroeconomic stability and growth. It is precisely because poorly run, state-owned electric utilities have been such an impediment to growth that so many countries are trying to reform them. For those who believe that the best way to make the poor richer is to make everybody richer, that is how electricity reform helps the poor. However, this chapter concentrates on the microeconomic effects: whether reform will make electricity cheaper for the poor who already have access to it, and provide it to those who do not. It analyzes the fundamental costs of generating electricity and distributing it through a grid to rural and poor populations. It describes how electricity reform and technological developments have reduced these costs in recent years and discusses institutional arrangements to ensure that lower costs are passed to customers. It examines whether reform will increase access to electricity for poor households and comments on policies to further the interests of the poor in the context of electricity reform.