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Appendix DLessons from Completed Transmission and DistributionProjectsAlthough little evidence is currently available from transmissionand distribution projects approved by the WorldBank over 2003–08, evaluation lessons can be drawn fromprevious Bank projects and reform efforts outside theBank.Review of these projects provides some lessons:Large reductions in technical and nontechnical losses arefeasible but are not always achieved.A $201 million 2000–04 Bank project in Uttar Pradesh,India, was successful in its technical component (increasingcapacity and reducing losses) but unsuccessful in overallpower sector reforms because of a change of government.The project was successful in reducing technical losses,from 41 percent in 2002 to 32.8 percent in 2004 (thoughstill behind a target of 30.4 percent) but unsuccessful atreducing nontechnical losses, which remained at roughly11 percent. The ex ante project rate of return was appraisedat 29 percent, and the ex post rate of return was estimated at18 percent (rising to 25 percent when gains to nonbilledconsumers are included); the shortfall was due to a moreconservative valuation of power.Success depends crucially on local utility implementation,particularly for nontechnical loss reductions. It is difficultto reduce nontechnical losses without a local reform“champion.”A $40 million Bank power sector rehabilitation project inAlbania carried out over 2005–06 demonstrated weak resultsbecause of poor management by local utilities. Theproject was designed to increase use of on-grid power andto reduce transmission and distribution losses and outages.The project failed to achieve sustained target improvementsin loss reductions or bill collection. Total losses fell from44.8 percent in 2001 to 39.7 in 2004, but they increased to41 percent by 2006. Technical gains were difficult to estimateand were offset by increases in nontechnical losses.The economic impact of the project was poor, as expectedincreases in electricity sales did not eventuate.Power sector restructuring alone has not been sufficientto improve transmission and distribution performance incountries with high losses.A reform project in Andhra Pradesh, India, carried out bythe state government (without Bank support) over 2000–03had major success in reducing nontechnical losses (Bhatiaand Gulati 2004). The state utility was in poor financial condition,with losses of $0.9 billion in 1997. Despite powersector restructuring, new distribution utilities remainedweak, billing only 42 percent of the power entering theirsystem because of losses and nonmetered agricultural users.The utility companies undertook major institutionalchange, replacing meters and introducing remote- meteringtechnology. Irregularities in billing and metering werefound for 15 percent of the 23,000 industrial connectionsinspected in 2000–01. Total transmission and distributionlosses were reduced from 38 percent in 2000 to 26 percentin 2003 through reductions in nontechnical losses caused byregularization of 2.25 million unauthorized connections.Impacts of transmission projects are tied to activity inthe generation sector. Power planning requires a systemsapproach. Separating transmission from generation isdifficult because of their complementarity.A Bank-supported transmission development project inNigeria (carried out over 2004–08) highlights the impact ofthe generation sector on transmission investment economicreturns, as well as the potential vulnerability of loss reductiongains. The project was designed to respond to criticalpower needs in Nigeria and an urgent request for assistancefrom the newly elected democratic government. It aimed toimplement a major transmission system investment whilesupporting power sector reforms, including commercializationof the power sector. The project was also motivatedby the Bank’s desire for involvement in the power sectorreform process. Total project cost was $122 million ($103million from the International Development Association).Transmission infrastructure investments reduced technicallosses from 11 percent to 8 percent in 2007, but lossesrebounded to nearly 9.5 percent by 2008 because of acombination of poor maintenance and increased powertransmitted through the system transmission. Althoughsignificant gains were made in system reliability, the projectedeconomic benefits were not realized because powergeneration did not increase by enough to take advantage of102 | Climate Change and the World Bank Group