Independent Regulation of Public Utilities in Developing Countries and Efficiency: The Case of Electricity Sector

Abstract

This paper evaluates the effects of the establishment of an Independent Regulatory Authority (IRA) on electricity sector performance in developing countries. The study assesses the impact of such reform on electricity generated, technical quality of the service and country energy efficiency. Double-Difference and Matching are used to address sources of selection bias in identifying impacts; our empirical approach utilizes the panel structure of the data to control for time-invariant unobservables at the country level by applying propensity-score-matched double difference comparison.Our results suggest that introducing Independent Regulation in the electricity industry is effective in stimulating performance improvements: this lead to more generated electricity and better technical quality of the service. The impact on energy efficiency is positive but insignificant. The methodological lesson from this paper is that robust estimation of public reform is possible even in the absence of proper baseline survey.