The future direction of electricity reform in APEC economies

A 2003 study of Electricity Supply Industry (ESI) reform experience in the 21 Asia-Pacific Economic Cooperation (APEC) economies emphasised that the overriding principle of ESI reform must be to maintain the security and stability of the entire power system. This is what differentiates ESI reform from reform of other industries. For all economies, particularly developing economies, attracting private investment in the ESI is a vital ongoing need. However, since the mid-1990s, private investors have become more risk-averse. Today, it is less safe for governments to assume that their 'reformed' electricity sectors will attract the requisite level of private investment. The APEC study found that competitive electricity markets are unsuited to developing economies in the early stages of reform. However, enterprise level reforms can produce major gains by commercialising and corporatising electricity utilities and by providing them with economic incentives to operate to high technical and commercial standards. The APEC study also emphasised that governments must remain responsible for the outcomes of ESI reform irrespective of any changes in industry structure and ownership. This is a fundamental responsibility which cannot be left to a regulator.