Privatization of electricity distribution in Brazil: Long-term effects on service quality and financial indicators

Abstract

In this study, we analyze the long-term effects of the privatization of electricity distribution companies carried between 1995 and 2000 in Brazil using statistical analysis of regulatory indicators of privatized and the remaining state-owned enterprises (SOEs). The sample includes indicators concerning service quality, losses, operational costs, and profitability from 34 distribution companies between 2008 and 2019, representing 97% of the market in energy terms. According to the results, private ownership positively affects both quality and financial indicators considering regulatory goals. Therefore, the privatization program seems to have achieved its original goal. In addition, partially privatized SOEs have similar quality indicators to private companies but do not achieve operational costs and profitability similar to regulatory references. The financial reports of remaining SOEs indicate the controlling federal states did not receive a positive net sum of cash flow in the last nine years. Privatization of such companies should improve financial indicators while maintaining or improving the service quality, besides generating revenue to the controlling federal states.