Document Type : Research Paper
Authors
1 Assistant Professor in Electricity and Energy Economics Department, Niroo Research Institute (NRI), Tehran, Iran
2 Ph.D. Student in the School of Electrical and Computer Engineering (ECE), University of Tehran, Iran
Abstract
Features such as natural monopoly and economies of scale in network industries such as the electricity industry led to the fact that in most countries, the ownership and management of the mentioned industries in a vertically integrated form is provided to the government. Such an attitude prevailed in most countries until the end of the 1980s. Technological advances in these industries, including the electricity industry, led to a new attitude in the 1990s. Based on this approach, vertically integrated network industries include separate activities that have different economic characteristics from competitive to monopoly levels, and this provided the basis for power sector reform.
This study employs analytical-descriptive methods and a case study approach, structured into three parts. The first part establishes a theoretical framework, examining the key components of electricity sector reforms and the importance of sequencing these reforms. The second part analyzes China's electricity sector reform process in five stages, based on the developed framework. The third part provides tailored policy recommendations for Iran's electricity industry. The findings of this research show that China's experience in the gradual separation of policy-making, regulation, and service provision affairs from each other, decentralization through the mechanism of provincial and local governments, and the commercialization of state-owned companies can bring lessons learned for Iran's electricity industry. In this regard, recommendations such as a-reorganizing the Ministry of Energy as a policy-making body and state-owned companies as actors of the service provider layer and b- Redefining the new financial relationship between the key companies of the electricity industry and the Ministry of Energy in order to commercialize the behavior of state-owned companies are suggested for Iran's electricity sector.
Introduction
In the 1990s, the atmosphere for breaking the vertically integrated structure in the electricity industry was provided.Chile was the first country to start reforming the electricity sector in 1978. After Chile, the wave of reforms in the electricity sector reached a new stage in England and America in 1979 and 1981, respectively. The design and implementation of electricity sector reforms in developing countries and even developed countries have followed different paths with completely different results. For example, despite the success of England, South Korea's power sector reforms met with a degree of failure.
Since China has experienced a structurally and functionally different process in the reforms of the electricity sector and has many similarities with Iran's economy from the point of view of the level of government intervention in economic activities, therefore, in this article, the experience of this country has been analyzed. This article intends to answer the following questions in this regard: 1- What components are included in the reforms of the electricity sector and is their sequence (first and last) important? 2- How and during what stages has China been able to implement reforms in the electricity sector? And 3- What lessons can China's experience in the field of electricity sector reforms bring to Iran's electricity industry?
Methods and Material
The first section of this research is done by analytical and descriptive methods through the review of related articles and books. In the second section, China's electricity sector reforms have been analyzed by case study method. This method deals with the deep study of a case, a specific topic, or a specific phenomenon. The last section is dedicated to providing recommendations for Iran's electricity industry.
Results and Discussion
In this article, the components of the electricity sector reforms were analyzed from the perspective of the World Bank and other experts. Unlike the World Bank's model, which summarizes the reform process in four key components, other thinkers in this field not only believe in the components of electricity sector reform in various forms such as three-stage, four-stage, and five stages models, but they have also criticized their sequence depending on the conditions of each country.
The next part was devoted to China's experience in the reform of the electricity sector. The process of reforming the electricity sector in this country is summarized in five stages.
In the first stage (1949 to 1985), all activities were vertically integrated within the Ministry of Electric Energy (MEP). In the second stage (1985 to 1996), structural and institutional changes occurred through diversification of ownership and management decentralization by granting powers to provincial governments, and gradually the governance structure of China's electricity sector became very similar to the quasi-federal model.
The third phase (1997 to 2001) in China is dedicated to the commercialization of state-owned enterprises (SOEs) in the electricity industry. Corporatization and commercialization at this stage, provided conditions for government service companies to operate as commercial entities. The fourth stage (2002 to 2014) is assigned to the separation of the generation sector from the network and institutional changes in this regard. In the fifth stage (2015 until now), additional measures have been taken to improve the electricity market situation in China. At this stage, the powers of the provincial governments increased compared to before, and matters such as the responsibility of creating a separate transmission and distribution tariff, and creating electricity markets, were all granted to the provincial institutions.
Conclusion
The key finding of this research shows that China has been able to achieve a successful path through three policies: 1- Gradual separation of policy making, regulation and service provision affairs from each other, 2-Decentralization through the mechanism of provincial and local governments, and 3- Commercialization of state-owned companies. In this regard, the following recommendations are suggested for Iran's electricity industry:
Legislative revisions: Revision of the Iranian Electricity Organization Law (1967) and the Ministry of Energy law (1975) based on specifying the duties and authorities in three layers: policy making, regulation and service provision.
Restructuring governance: Reorganizing the Ministry of Energy as a policy-making body and state-owned companies as actors of the service provider layer.
Financial restructuring: Redefining the financial relationship between the key companies of the electricity industry and the Ministry of Energy in order to commercialize the behavior of state-owned companies in this sector
Keywords
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