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

A.2.2 Institutional Arrangements
The electricity sector in the Pacific region is dominated by government departments or
corporatized state owned utilities that are, in general, in regulated monopolies, as shown in
Table A.3
Within the Pacific, Fiji and Vanuatu are the best performing utilities, each with different
institutional arrangements. It is worth examining the reasons for their relative success:
Like many other electricity utilities in the Pacific, the Fiji Electricity Authority
(FEA) is a corporatized state owned monopoly, which has not been formally
regulated to date (FEA’s rehabilitation is described in Box A.6). Two critical
factors contribute to this utility’s success: The Government supported a Board
that was commercially independent, and the utility’s Chairman and senior
management team are exceptionally driven and have employed sound
management practices. This example demonstrates that Pacific countries can
achieve improved performance through effective public sector reform
However, the potential for state intervention remains (there is nothing in place in
Fiji to stop the government from intervening in the utility performance and
targets, as it has done in other state owned corporations like Airports Fiji
Limited), and should these good managers leave, it is uncertain whether good
performance would be sustained, or whether the utility would revert to the level
of performance seen in other corporatized utilities
Vanuatu’s electricity is owned and operated by the private firm UNELCO, under
a concession contract with the Government. Among the Pacific utilities it
performs best on quality of service indicators, well on labor productivity and has
the lowest levels of system loss. UNELCO’s tariffs are relatively high, which
reflects the fact that it recovers full costs through the tariff, including financing
investment. On this basis, it is comparable with other full cost recovery systems in
some comparator countries like Dominica in the Caribbean. Tariffs are lower than
those in Tonga, where the utility is also privately owned and operated
Private participation in generation has been implemented in the Pacific. Fiji, Palau
and Federated States of Micronesia. These three countries have some of the
lowest electricity tariffs in the region. Private operators have also indicated
interest in generation in Kiribati (see Box A.7). Provided contracts are wellstructured,
private operators have the incentive to run electricity generation assets
as efficiently as possible.
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