Electricity is essential to the production of almost all goods and services and so is vital to the public interest. In addition, reliable electricity systems have become more important because businesses and households rely on electronic devices to perform an enormous range of tasks, both basic and advanced. Thus adequate, reliable, competitively priced electricity is essential for modernization, domestic growth, and international competitiveness— and is among the most urgent challenges facing developing and transition economies.

 

Until recently most electricity industries were vertically integrated monopolies owned by national, state, or municipal governments (Joskow 2003a). But since the early 1980s, when Chile began a radical restructuring and privatization program, more than 70 countries have introduced electricity reforms (Bacon and Besant-Jones 2001). And especially over the past decade, views have changed dramatically on how electricity should be owned, organized, and regulated (Newbery 2000a, 2001).Accordingly, there are numerous perspectives and lessons on the most important reform issues and best policy options.

 

A clear-eyed assessment is especially important now given the crisis with electricity reform in California (United States), the recent blackouts in Europe (Bialek 2004), and the challenges confronting electricity systems in several developing and transition economies. Events in California have alarmed policymakers around the world, slowing reform and possibly impeding the development of competitive electricity markets (Besant-Jones and Tenenbaum 2001; Joskow 2001). Some developing and transition economies that had planned reforms might defer them. Others will not consider restructuring and deregulation until there is convincing evidence of their merits.

The forces driving structural changes in the electricity industry differ between countries— especially between industrial and developing countries. In mature industrial countries pressure for change has grown with the emergence of excess capacity and from disillusionment with capital- intensive generation projects triggered by the oil crises of the 1970s. In developing and transition countries reforms have been driven by the poor operating and financial performance of state- owned electricity systems (with low labor productivity, poor service quality, and high system losses), lack of public funds for badly needed investments, unavailability of service for large portions of the population, and government desires to raise revenue through privatization (IEA 1999; Bacon and Besant Jones 2001; Joskow 2003a).3 Reforms were also prompted—and facilitated—by technological innovation.

 

Required: -

1. Critically evaluate the impacts (both positive and negative) and challenges of privatization of utilities on the employees and the customers in Fiji. Discuss the basic premise of the government in undertaking the public enterprise reorganization.
2. Do you think privatized utilities have succeeded in achieving their desired improvements in customer efficiency? Justify your opinion on the future of privatization of utilities in Fijian Economy.