EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf
EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf
EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf
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A.2.2 Institutional Arrangements<br />
<strong>The</strong> electricity sector in the <strong>Pacific</strong> region is dominated by government departments or<br />
corporatized state owned utilities that are, in general, in regulated monopolies, as shown in<br />
Table A.3<br />
Within the <strong>Pacific</strong>, Fiji and Vanuatu are the best performing utilities, each with different<br />
institutional arrangements. It is worth examining the reasons for their relative success:<br />
Like many other electricity utilities in the <strong>Pacific</strong>, the Fiji Electricity Authority<br />
(FEA) is a corporatized state owned monopoly, which has not been formally<br />
regulated to date (FEA’s rehabilitation is described in Box A.6). Two critical<br />
factors contribute to this utility’s success: <strong>The</strong> Government supported a Board<br />
that was commercially independent, and the utility’s Chairman and senior<br />
management team are exceptionally driven and have employed sound<br />
management practices. This example demonstrates that <strong>Pacific</strong> countries can<br />
achieve improved performance through effective public sector reform<br />
However, the potential for state intervention remains (there is nothing in place in<br />
Fiji to stop the government from intervening in the utility performance and<br />
targets, as it has done in other state owned corporations like Airports Fiji<br />
Limited), and should these good managers leave, it is uncertain whether good<br />
performance would be sustained, or whether the utility would revert to the level<br />
of performance seen in other corporatized utilities<br />
Vanuatu’s electricity is owned and operated by the private firm UNELCO, under<br />
a concession contract with the Government. Among the <strong>Pacific</strong> utilities it<br />
performs best on quality of service indicators, well on labor productivity and has<br />
the lowest levels of system loss. UNELCO’s tariffs are relatively high, which<br />
reflects the fact that it recovers full costs through the tariff, including financing<br />
investment. On this basis, it is comparable with other full cost recovery systems in<br />
some comparator countries like Dominica in the Caribbean. Tariffs are lower than<br />
those in Tonga, where the utility is also privately owned and operated<br />
Private participation in generation has been implemented in the <strong>Pacific</strong>. Fiji, Palau<br />
and Federated States of Micronesia. <strong>The</strong>se three countries have some of the<br />
lowest electricity tariffs in the region. Private operators have also indicated<br />
interest in generation in Kiribati (see Box A.7). Provided contracts are wellstructured,<br />
private operators have the incentive to run electricity generation assets<br />
as efficiently as possible.<br />
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