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Best Practice Features for Private Sector Involvement in Electric Power Sector
As a guiding principle, it is considered that the following features characterize best practice for private sector involvement in the electric power sector:1
Energy sector policies formulated to create a stable framework for power sector development and to facilitate competition through options such as power sector reform and restructuring, and the separation of generation and transmission functions. Best practice features include:
i. Establish legislative framework
ii. Clear energy sector policies and framework for policy-making
iii. Separation between regulator and utility
iv. Separation between generation and natural monopoly transmission functions
v. Competitive market in electricity generation and energy supply
vi. Complementary development of the transmission grid, including through private investment
vii. Environmental and other public policy objectives incorporated and made transparent to electricity sector participants.
Reforms which lead to electricity utilities functioning as commercially viable entities under a regulatory framework which ensures fair treatment between the utility and private sector participants. Best practice features include:
i. A commercial environment with performance targets set for the publicly owned utilities, commercial tariff policies in place and a competitive and stable market in fuel supply
ii. Laws enabling foreign ownership and control of IPPs.
Simplification of the approvals process for IPP projects and the underlying regulatory framework in order to reduce uncertainties and delays. Best practice features include:
i. Consistent central and local government regulations and approval processes.
ii. Clear, published and transparent approvals process
iii. Independent regulation.
The internal processes of electric power utilities relating to IPPs should be sound and transparent, especially in relation to tender/bid processes and evaluation criteria, the terms of power purchase agreements and associated tariff structures and financing terms and conditions.
Good corporate governance practices should e adopted by electric power utilities and both utilities and IPPs should follow internationally accepted accounting and audit procedures.
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1Adapted from APEC Energy Working Group Best Practice Manual endorsed by APEC Energy Ministers in Toronto
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