Effect of Reforms on Technical Efficiency of Electricity Production in Kenya Relative to Other Developing Countries

Abstract

The current structure of the Kenyan electricity sector has resulted from many changes brought about by both donor and government driven reforms. The sector which was once run as a government owned monopoly is now a more market-oriented entity. The reforms have resulted in splitting of generation, transmission and distribution into independent entities, establishment of an independent regulatory authority, private sector participation in generation and institution of other complementary entities. One of the drivers of these reforms was the need to improve the economic performance of the sector to make it capable of supporting the economy. This study uses Data Envelopment analysis and stochastic frontier methods to analyse the effect of the reforms on the efficiency of Kenya’s power sector in relation to other countries in similar stage of development. The findings reveal that Kenya’s Power sector has been experiencing positive changes in technical efficiency over the period after the reforms. The countries which have undertaken reforms, to a larger extent, appear to be more efficient. However, they experience huge system losses which need to be reduced to better the sector’s efficiency Keywords: Reforms, Technical efficiency, Data envelopment analysis, Stochastic frontier analysis DOI: 10.7176/JETP/13-1-03 Publication date: January 31 st 2023