EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

Box A.6: Fiji – A Model of Electricity Rehabilitation
Fiji’s electricity is supplied by a wholly government owned entity, the Fiji
Electricity Authority (FEA). The FEA is a vertically integrated generation,
transmission, and distribution and supply entity established by statute in 1966.
The Government appoints the Authority members, and apart from fixing the
tariffs and determining major policy (such as dividend and rural electrification
policy), the FEA now has independence on all operational and financial matters.
Prior to 2000, FEA faced significant problems …
From 1997 to 2000, the FEA faced significant problems. The organization moved
from a profitable to an unprofitable trading entity, while electricity demand was
increasing rapidly. The government faced a number of emerging capacity and
efficiency problems at a time when the Fijian economy was in poor shape.
a board with commercial independence and experience was appointed …
In 2001, a new Board was appointed with members who had extensive private
sector experience, and a commercial focus to the management of the business of
the Authority. The FEA was given three years to restructure and return the
business to profitability. In the light of subsequent events, this focus was crucial
to managing a major set of concurrent problems in 2002 and 2003.
and major business like reforms were implemented …
The major steps in the reform process were:
Improve efficiency and reduce costs of production
Reduce system losses
Raise productivity of labor and capital inputs
Change accounting practices for accurate recording
- Introduce private sector operators
- Manage risk pro-actively
- Plan for demand growth
Significant gains were made in 3 years, both financially and operationally…
Impressive progress was made between 2001 and 2003. US$35m in costs were
carved out (of a business with annual revenues of US$70m); staff numbers were
halved; system losses were reduced from 18 to 10 percent; more efficient diesel
generators were installed; surplus assets were sold; crucial engineering
maintenance raised operating efficiencies; and collection efficiencies produced
one time and permanent increases in revenue.
outsourcing to the private sector was a key ingredient to success …
Outsourced operator management contracts were let to the private sector for the
operation of FEA’s larger diesel generation plants. A 20 year Energy Conversion
Agreement was signed with an American company and a joint venture
partnership with an Australian company is being adopted to develop major
renewable (hydro and wind) generation projects.
which helped FEA to cope with a primary energy crisis.
The reform process coincided with a major capacity crisis in 2002-03. Two very
low rainfall years slashed hydro generation capacity, and extensive and expensive
use of diesel plant had to fill the supply gap, at a time when electricity demand
from a recovering economy was growing rapidly.
FEA managed the crisis well, although the government did provide significant
assistance in the form of a US$4m grant, and the provision of guarantee and
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