Energy Sector Governance
Transforming Markets to Foster Economic Growth and Reduce Poverty
USAID’s energy sector governance programs increase economic growth and reduce poverty by changing the way governments, businesses, and civil society work with each other in the energy sector.
Economic growth and sustainable development in developing countries require quality modern energy. The energy sector in many developing countries is dominated by government-owned companies that are operated on a political basis rather than on an economic basis. These companies are usually inefficient, and are frequently undermined by corruption. This often causes higher costs for energy, which results in economic waste and increased debt for governments, and shortages of modern energy for schools, hospitals, businesses, and people’s homes.
Creating the conditions for economic growth and poverty reduction requires increasing access of people and business to modern energy, and increasing the affordability of energy for consumers. This access and affordability, in turn, requires a transformation of energy markets. Such market transformation involves changing the foundation of the sector from politics to market economics and in improving the effectiveness of government, private sector, and consumer institutions in terms of management practices, technical operations, resource use, and energy consumption. USAID's energy assistance programs focus on three critical dimensions of sector governance.
Energy and Government: Improved Democratic Governance of the Energy Sector
USAID works with governments to educate and assist them in understanding the commercial nature of energy, the range of options for governmental administration of the sector, and to help them develop appropriate levels of intervention, given their national circumstances, to promote private sector-led economic growth. With the commercialization of state owned utilities and the creation of space for increased private sector participation, governments have a new and different role to play in mediating the interests of energy enterprises and energy consumers, and in enforcing good governance and democratic processes. This changed role requires increased institutional capacity at national and local levels, including the capacity to respond to civil society. Areas of focus include legal and regulatory frameworks, the presence and effectiveness of independent regulatory and judicial bodies, and energy policy development and implementation. Development interventions include informing/educating legislators, Ministry staff, regulators, and civil society; organizational development of regulatory bodies and other governmental entities; and technical assistance on policy and finance matters.
Energy and the Private Sector: Improved Corporate Governance of the Energy Sector
USAID works with developing country enterprises to educate and assist them in changing from politically based operations to operations based on market economics and democratic political institutions. We assist them in applying modern business methods to their operations in a manner that is consistent with a restructured energy sector. Areas of focus include business models that balance revenue and profits with growth and valuation, technical operating efficiency, customer service, and management models that enable the enterprise to provide reliable services at reasonable prices. Development interventions focus on generation, transmission, and distribution utilities; rural and urban energy entrepreneurs; and the banking and investment community. Assistance is also provided in creating opportunities for expanded private sector participation in the energy sector.
Energy and Consumers: Public Understanding and Participation in the Energy Sector
USAID works with consumers to increase their knowledge of and participation in the social, legal, financial, and commercial conditions required for provision of energy services. The public needs to understand both the reasons for reform of the energy sector and the rules that allow them access to government institutions. Specifically, consumers and civil society organizations need to understand their role in policy and regulations development, and the institutional channels that provide legal recourse for conflict resolution. Such increased knowledge and participation on the part of the public will improve the accountability of both the government and the private sector to the public, and enhance market performance by reducing such “non-technical losses” as non-payment and illegal hook-ups. Areas of focus include increased consumer knowledge and awareness of legal and commercial requirements for energy services and an improved role for civil society in formulating public policies for delivery of energy services.
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