1. What are the key indicators of successful reforms? A
comparative analysis of United Kingdom (UK) and Ghana
Table of Contents
Abstract ............................................................................................................... 4
Table of abbreviations ......................................................................................... 5
Introduction.......................................................................................................... 6
3.1. What is “full-scale reform” and the “reforms process”? ................................. 6
3.2. Rationale for the research topic? .................................................................. 8
Literature Review............................................................................................... 11
4.1. Degree of private participation .................................................................... 11
4.2. Degree of adherence to elements of reforms.............................................. 13
4.3. Degree of competition and market power ................................................... 15
4.4. Degree of marginal cost based tariff ........................................................... 15
4.5. Degree of propensity of physical assets for reforms ................................... 16
4.6. Degree of sustainability of reforms.............................................................. 17
4.7. Degree of technical efficiency ..................................................................... 19
Methodology ...................................................................................................... 21
5.1. Key assumptions behind framework & index development ......................... 21
5.2. Selected indicators of the reforms............................................................... 21
Results and interpretation.................................................................................. 25
6.1. Results ........................................................................................................ 25
6.2. Interpretation & Recommendations............................................................. 28
Conclusion......................................................................................................... 31
Bibliography....................................................................................................... 32

2. Table of Figures
Figure 1: Reforms process......................................................................................... 7
Figure 2: Region wise private investment in electricity sector (in $ billions) ............. 12
Figure 3: Segment wise investments from 1990-2012 (in $ billions) ........................ 12
Figure 4: Main steps in a generic reform model ....................................................... 13
Table of Tables
Table 1: Key elements of full-scale reforms ............................................................... 7
Table 2: Framework for electricity sector reforms sustainability ............................... 17
Table 3: Technical parameters of efficiency............................................................. 19
Table 4: The Jena-B (JB) Reforms Framework........................................................ 22

3. Abstract
Since the last two decades, substantial resources and efforts have been invested both
in developed and developing countries to undertake electricity sector reform. The
objectives of such reforms include mainly; the protection of consumer interest,
introduction of institutional efficiency into the sector as well as to increase access to
electricity. The major question is; given the pervasiveness and vigorous pursuit of such
reforms how do countries measure how successful they have been in implementing
them? Due to the lack of universally accepted indicators or measures of successful
reforms, it has become a difficult task to measure the success of such reforms. To fill
in this gap, this paper pools together several key elements and indicators of reform
and develops a coherent framework and index for measuring the success of electricity
sector reforms. It applies this framework in analysing the success of reforms adopted
by Ghana and the United Kingdom and finds that the United Kingdom has been more
successful in implementing reforms in its electricity sector.
Word count: 5280 (excluding word count for Bibliography)

4. Table of abbreviations
CCGT Combined Cycle Gas Turbine
ECG Electricity Company of Ghana
GCV Gross Calorific Value
GRIDCO Ghana Grid Company
IEA International Energy Agency
ILO International Labour Organisation
IPP Independent Power Producers
ISO Independent System Operator
Kcal Kilo Calories
Kg Kilograms
Kj/Kg Kilo joules per Kilowatt hour
Kj/Kwh Kio joules per Kilowatt hour
Kwh Kilowatt Hour
MIGA Multilateral Investment Guarantee Agency
NED Northern Electricity Department
OECD Organization for Economic Co-operation and Development
PLF Plant Load Factor
PURC Public Utilities Regulatory Commission
SB Single Buyer
TAPCO Takoradi Power Company
TPA Third Party Access
VRA Volta River Authority

5. Introduction
The International Energy Agency, 2005, in its report noted that electricity sector reform
is a continuous process which has not been completed anywhere in the world,
however, there is a general lesson to be learned which is stated as follows:
“Electricity market liberalisation is not an event. It is a long process that requires strong
and sustained political commitment, extensive and detailed preparation and
continuous development to allow for necessary improvements while sustaining on-
going investment.”
Given that the electricity sector reform process is an ongoing one across the world, it
is important to quantify the degree of success of initiatives already taken to keep
various stakeholders committed in order to realise the broader objectives of the
process which is to increase total social welfare. The succeeding paragraphs explain
the rationale for quantification of reforms.
3.1. What is “full-scale reform” and the “reforms process”?
Full scale electricity sector reforms are crucial for bringing economic efficiencies to the
sector and to ensure the enhancement of environmental & social welfare (Jamasb, et
al., 2005). In the last two decades almost half of the countries of the world have
introduced electricity sector reforms and billions of dollars have been spent on
liberalising the sector (Erdogdu, 2013) with the objective of enhancing access to and
improving the reliability of electricity services for the populace; funding maintenance &
capacity additions, releasing of public resources for other pressing needs and raising
of immediate revenues for government through sale of assets (Bacon & Besant-

6. Jones, 2001). Further, it is estimated that an investment of $10 trillion is needed in the
electricity sector in between 2001 to 2030 to meet growing demand. (IEA, 2003). It is
important to understand the key elements of full-scale reforms. These elements are
presented in Table 1:
Table 1: Key elements of full-scale reforms
Sl.
No.
Element Remarks
1. Operating as per
commercial principles
a. Obligation extends to state utilities as well
b. Supply companies procure electricity in
wholesale market and sell to consumers
c. Utilities pay taxes and market interest rates
d. Earn market returns on their equity
e. Utilities have complete autonomy
2. Competition in all
possible segments of
value chain
a. Competition in generation & distribution and
natural monopoly in transmission
b. Consumers must be able to switch between
suppliers at low costs
3. Restructured/unbundled
entities
a. Separated entities operating in competitive
wholesale market
b. Laws against cartel formations
4. Privatisation of
unbundled entities
a. Privatisation under separate ownerships
b. Private entities to bring technical, financial and
managerial capabilities
5. Economic Regulations a. Independent regulator for the sector
b. Prevention of anticompetitive abuses in
wholesale market
c. In retail market, balancing the interests of
supplies with captive customers
6. Government focus on
policy formulation
a. Government formulates policies and executes
them
b. Government gives up the roles of operator and
investor in entire value chain
Source: (Bacon & Besant-Jones, 2001)
The reforms process generally progresses from Model 1 through Model 4 to achieve
the full scale reforms and as presented in Figure 1:
Figure 1: Reforms process

7. Source: (Hunt & Shuttleworth, 1996)
3.2.Rationale for the research topic?
Electricity sector reform is a continuous process and there seems to be no universal
definition of a “Successful reform”. However, it could be observed that there are two
school of thought for measuring successful reforms:
1. Nearness of market structure to retail competition: As per Jamasb,
improved sector efficiency, lower prices and better quality services are
indicators of successful reforms (Jamasb, 2004). In OECD countries the
success of reforms were measured in terms of economic performance
optimisation because these countries already had robust legal & institutional
framework along with a functional political system (Williams & Ghanadan,
2006). Further, for non-OECD countries, the success of reforms was measured
in terms of private investments in the sector (Williams & Ghanadan, 2006).
Model 1: Monopolistic system
• Single monopolist at all points of
electricity value chain
• No competition at all
Model 2: Monopsonistic system
• Single buyer model. Single utility
buys from independent power
producers
• The utility onsells the power to
conumers without competition
Model 3: Wholesale Competition
• Distribution companies buy
directly from competing
generators
• They retain access over retail
consumers
• Open access to transmission
wires
Model 4: Retail competition
• Consumers choose suppliers
• Open access to transmission and
distribution networks
• Competitive retailing

8. These authors focus on the process of changing the initial conditions of the
sector and achieving various milestones till full scale reforms are observed.
2. Sustainability of reforms: Nearness to retail competition consisted of property
rights redistribution (removal of politics/intervention from functioning of sector)
and promoting competition. Benavides argues that:
a. changes in the initial condition may be erratic,
b. the new competition rules may be ignored if not implemented properly;
and
c. The incentive proposed by the regulators may not be conducive to the
regulated entities if they disclose true information even before the
second tariff revision and the politics may require removal of lower price
caps which will deter the introduction of efficient technologies.
Therefore it is important that greater weightage is given to supporting the reform
process once begun to ensure sustainability (Benavides, 2003). Sustainability
measures the propensity of the reforms process to move to the next level of
market structure. If the reform process is not sustainable, it may fail to deliver
its objectives.
In light of above challenges to quantifying successful reforms, this research paper-
“What are the key indicators of successful reforms? A comparative analysis of
United Kingdom (UK) and Ghana” seeks to develop a simple a framework which
combines these two schools of thoughts for measuring the success of reform
programmes. This framework captures the degree of nearness to the retail competition
and degree of sustainability of reforms programme. Further, this paper conducts a
comparative analysis for UK and Ghana using this framework. The developed

9. framework could become an important tool used by citizens & regulators to press for
better governance of the sector and to seek for further reform.
The second chapter presents the literature review for identifying key indicators of
successful reforms in the electricity sector followed by methodology for measuring
success of reforms. The fourth chapter presents a comparative analysis of UK and
Ghana using the framework and presents the results, interpretation and
recommendation. The fifth chapter presents the conclusion.

10. Literature Review
Economists, international agencies (such as World Bank (World Bank, 1993), the
Inter-American Development Bank & World Energy Council (World Energy Council,
2004) etc.) and private sectors have great interest in assessing the state of electricity
reforms in various countries. While the objective of the private sector is to compare
the conduciveness of countries for power sector investments, the objective of
international lending agencies is to assess the effectiveness of electricity sector
reforms and whether further funding of new reform initiatives is feasible. However, it
is prudent to mention that, each entity followed their own methodologies to assess the
degree of success of reforms. Amidst the differences in approach to capture the
degree of success, the fundamentals of measuring reforms remains the same. The
elements which indicate the degree of reforms are discussed below:
4.1. Degree of private participation
Many developing and under-developed regions of the world need to create additional
generation, transmission and distribution capacities to increase access and reduce
shortages of electricity supplies which otherwise have a significant economic and
social cost. The economic theories clearly indicate that if public expenditure (e.g.
investing in power plants) is funded through additional taxes there is loss in social
welfare because of dead weight loss (Jamasb, 2004). This presents a strong case for
private funding in electricity sector investments. Further, the electricity sector is most
likely to observe cost reduced system losses, lower prices, cost efficiency and
improved revenue collection with increase in private participation, competition and
economic regulation (Newbery, 2002). However, the theoretical and empirical
evidences for privatisation in relation to commerciality of infrastructure reforms are still

11. indecisive (Jamasb, et al., 2005). It may, however, be noted that the electricity sector
is attracting private sector investment as it is being reformed. The trend of private
investment in electricity sector is as shown in Figure 2:
Figure 2: Region wise private investment in electricity sector (in $ billions)
Source: Subsector data for electricity, Private participation in infrastructure sector, The World Bank group1
Also, the private investments are majorly focussed on Greenfield projects, divesture
and concessions. The segment wise investments is presented in Figure 3:
Figure 3: Segment wise investments from 1990-2012 (in $ billions)
Source: Subsector data for electricity, Private participation in infrastructure sector, The World Bank group
1 http://ppi.worldbank.org/explore/ppi_exploreSubSector.aspx?SubSectorID=3
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
East Asia and Pacific Europe and Central Asia Latin America and the Caribbean
Middle East and North Africa South Asia Sub-Saharan Africa
0 50 100 150 200 250 300 350 400 450 500
Electricity generation and transmission
Electricity distribution and transmission
Electricity distribution and generation
Electricity distribution, generation, and transmission
Electricity distribution
Electricity generation
Management and lease contract Greenfield project Divestiture Concession

12. 4.2. Degree of adherence to elements of reforms
The elements of reforms may be deducted from the reforms model based on the
framework suggested by Newbery, 2002 which is presented in Figure 4.
Figure 4: Main steps in a generic reform model
The indicators are discussed below:
1. Existence of electricity law: As per Jamasb, 2004, successful reforms are
usually initiated by enacting a law or act which provides the legal basis for
restructuring, private participation and creation of regulatory bodies. Such laws
reduce the issues related to property rights and conflict addressing mechanism.
Enactment of electricity law was one of the key questions for measuring degree
of reform by the World Bank in its survey of 115 developing countries (Bacon,
1999).
2. Restructured sector: Separation of generation, transmission and distribution
is identified as one of the key elements of reform (Jamasb, 2004). World Bank
has also identified it as one key indicator (Bacon, 1999). The rationale of
restructuring is to introduce competition in generation and distribution business
while transmission business usually operates as natural monopoly. Also, as
most of the inefficiencies originate from distribution business, it is important that
Enactement of electricty law
•Institution of regulator
Separate and regulate distribution
•Ensure access/ commercial pricing
Separate and regulate transmission
•Ensure access/ commercial pricing
Split generation
•Create power market
Privatise
•Generation, transmission and distribution

13. it is unbundled firstly. Further, it is also desirable to identify the number of
distribution entities at this stage. More the number of distribution entities,
greater the competition and multiple are the sources of information for
regulators (Jamasb, 2004).
3. Regulated distribution business: Incentive regulation of distribution business
leads to increase in efficient distribution (Joskow, 1998). The cost plus method
of tariff determination helps in reducing cross subsidies. Further, the collection
efficiencies may go up with introduction of privatisation (Jamasb, 2004) and
distribution franchisees. Also, the provisions for access (including third party
access) to the distribution network should be introduced at this stage (Newbery,
2002).
4. Separated transmission business: Separation of transmission business from
electricity generation is key to developing competition in the generation activity
(Jamasb, 2004). It is important that transmission networks are operated under
incentive regulation to promote capacity building. Further, rules for accessing
transmission network must be clearly spelled out. An independent system
operator (ISO) for dispatch and network stability is also an essential
requirement for increasing competition. It may however be noted that the World
Bank survey didn’t include any question on separate transmission to measure
the success of reforms (Bacon, 1999). Further, existence of congestion
management principle and congestion pricing are indicators of positive reforms.
5. Multiple electricity generators: A wholesale electricity market comprising of
multiple generators is a key indicator of reform (Zhang, et al., 2008). The
generators compete among themselves to conclude supply contracts with
distributors either in a single buyer market or marginal cost based pools or price

14. based spot market (Jamasb, 2004). However, some authors argue that
establishing wholesale market doesn’t necessarily indicate a highly reformed
market as it cannot be readily quantified in physical or monetary terms (Jamasb,
et al., 2005). Allowing entry of independent power producers (IPPs) is also a
key indicator of successful reform.
4.3. Degree of competition and market power
One of the important assumptions for competitive markets is that, there is a large
number of players. It may be important to mention that electricity sectors across the
world were vertically integrated and this fostered economies of coordination. Any
unbundling activity or competition in the market must ensure that efficiencies
generated exceed the economies of coordination (Joskow, 2004). The market share
of large firms is also an indication of market power. Smaller the share better it is for
the sector (Jamasb, 2004). The concentration of ownership gives rise to market power
(Rudnick & Montero, 2002). To avoid concentration of power in the hands of few
players, Argentina has placed a cap on market share for generators (10%).
It is also important that access to transmission and distribution networks are well
defined either through regulated third party access or negotiated third party access.
Most of the developing countries have chosen regulated third party access. Further,
to ensure competition, it is important that the rules for the allocation of transmission
charges, pricing of congestion and arrangements for financing of transmission network
are well laid out.
4.4. Degree of marginal cost based tariff
Prices send strong signals for efficiency of electricity market. It is important that the
prices of electricity reflect the actual cost of services and in the long run, must tend to

15. long run marginal costs where super normal profits are absent. (Benavides, 2003). In
developing countries, where access to energy is a significant challenge, government
generally offers subsidies. Greater the degree of subsidies, more difficult it is for
reforms to work in the short term (World Energy Council, 2004). Carefully designed
subsidies for low income groups is generally accepted by consumers. However, every
reform must target removal of subsidies because economic theory suggests that
welfare gains by those who benefit from removal of subsidy is usually greater than the
welfare loss to consumers who would have enjoyed subsidy (Joskow, 2004). The ratio
of actual tariff and marginal cost could be an important indicator for measuring reforms
(Newbery, 2002).
4.5. Degree of propensity of physical assets for reforms
In many developing countries the physical assets are very few. In such situations it is
important to clearly analyse if the efficiency gains due to vertical unbundling (splitting
into generation, transmission and distribution units) and horizontal splits (dividing into
several competing generation units or distribution units) out-weighs the increased
transaction costs of competition and economies of scale. For example, though coal
fired plants are available in different sizes, the trend of installing plant of size of 300
MW or more has been increasing since the last 15 years (Matthias, et al., 2012). If
coal fired plants of smaller sizes are installed to increase competition, there are
chances that the power prices may increase compared to situations where there is just
one plant of requisite size. Therefore ratio of demand and economic size of power
plants would be an important indicator of power sector reforms.

16. 4.6. Degree of sustainability of reforms
The degree of sustainability of reforms is considered to be one of the most important
indicators of reform (Benavides, 2003) (Bhattacharyya, 2007) (Millán & M. von der
Fehr, 2003). The framework for measurement of the degree of sustainability may be
illustrated as below (Bhattacharyya, 2007):
Table 2: Framework for electricity sector reforms sustainability
SustainableReforms
Politically
Acceptable
Desirable
Feasible
Credible
Socially
Desirable
Accessible
Affordable
Minimises social costs
Environmentally
benign
Fuel & technology choice
Consumption behaviour
Location and risk
Implementable
Simple processes
Ease of transition
Simple legal changes
Economically
efficient
Efficiency
System adequacy
Signal
Financially
Viable
Reduced state support
Revenue adequacy
Cost economy
Source: (Bhattacharyya, 2007)

17. The framework presented in Table 4 is explained below:
1. Degree of political acceptability: A reform process is politically acceptable if
it is desirable, feasible and credible (World Bank, 1995). The desirability of
reform stems from the changes in ideologies. The feasibility of the reforms
process is ensured when there is enough political support for the reforms
process. The credibility aspect is measured by analysing if the political
promises have been kept or not. Most of the reforms process require high
degree of political support (Bhattacharyya, 2007).
2. Degree of social desirability: The degree of social desirability requires
reducing the social costs of reforms. It is often observed that when reforms are
introduced subsidies are gradually removed, this might lead to accessibility
issues for the population who are economically weak. It is important for
government to protect these sections of society either through a policy or
through innovatively structuring subsidies (including inviting bids where service
providers contract for providing required number of connections at least
subsidy) (Wellenius, et al., 2004).
3. Degree of being environmentally benign: Reforms process ultimately leads
to electricity price reduction and hence to increased demand and this leads to
increase in emissions (Vrolijk, 2004). If a reform process directly or indirectly
leads to low carbon generation (including promotion of clean coal technologies,
CCGT etc.) and promotion of renewable energy then it is considered as
environmentally benign (Byrne & Mun, 2003)
4. Degree of implement-ability: The success of any reforms process lies in its
simplicity for implementation. The legal changes must not be very complex and

18. it must provide for simple transition infrastructure and processes
(Bhattacharyya & Dey, 2003)
5. Degree of economic viability and financial feasibility: The degree of
economic viability is indicated by increase in competition and market
determined prices which has been already covered in sections 4.2, 4.3 and 4.4.
The financial feasibility could majorly be presented by private investment in the
sector for capacity creation and reduced state supports (Bhattacharyya, 2007).
4.7. Degree of technical efficiency
Degree of technical efficiencies provide information about the efficiency in running
capital assets which have direct bearing on the marginal costs of generation. Some of
the parameters which could be used for measuring technical efficiencies are presented
in Table 3:
Table 3: Technical parameters of efficiency
Parameters Remarks
Plant load factor
Degree of loading provides information on utilisation of
capital assets and it is measured by plant load factor. Plant
load factor (PLF) is measured in terms of actual output
divided by the installed capacity expressed in terms of energy
generated (Klimstra, 2013) (Cental Electricity Regulatory
Authority, 1999). Higher the PLF better it is for the economy
as it helps in reducing cost of generation and helps in
reducing wasteful investments in additional capacities.
Capacity factor
Capacity factor is measured as the ratio of the installed
capacity to the peak demand. Nearer the capacity factor to

19. Parameters Remarks
unity better it is for the market. However, sometimes reserve
capacities are needed to tackle situations of planned or
breakdown maintenance. Even with the reserve capacities
the capacity factor should be near to unity.
Fuel Efficiency
Fuel efficiency is an important measure of technical
efficiency. It could be measured as the ratio of average
station heat rate (kWh/kcal) and the heat value (GCV
expressed as kcal/kg) of the fuels. Lesser the value, better it
is for the economy.
Labour productivity
A study reported by the IEA/OECD observed a clear
decreasing trend in the work force for all the countries under
study with the introduction of liberalisation implying that,
fewer people were needed to generate, transport and sell
more and more electricity. Increased labour productivity thus
enhanced overall efficiency in the sector as a result of
liberalisation, however, there have also been important social
costs in the wake of this development (International Energy
Agency, 2005)
The next section presents the methodology adopted for the purpose of this research
paper.

20. Methodology
5.1. Key assumptions behind framework & index development
This paper chooses the key indicators discussed in the literature review section and
presents them in a framework. The main assumptions of the framework are as follows:
1. Every indicator has equal weightage. World Bank in its studies has taken a
similar approach (Bacon, 1999).
2. Each indicator is assumed to have maximum score of one (1) and minimum
score of zero (0).
3. Wherever the indicators are difficult to quantify they are indicated as high,
moderate or low. High indicator is given a mark of 1, moderate is given a mark
of 2/3 and low indicator is given a mark of 1/3.
4. Also, values less than 1/3 are highlighted as red, in between 1/3-2/3 are
highlighted as yellow and 2/3 to 1 are highlighted as green. Red represents an
area of significant potential improvement, yellow represents an area of
moderate potential improvement and green represents area of low potential
improvement for realising reform objectives.
5. All the scores are then added and divided by maximum possible score and
multiplied by 100 to get the index value.
5.2. Selected indicators of the reforms
This paper choses the key indicators discussed in the literature review section and
presents them in the following framework named the “Jena-B (JB) Reforms
Framework”.

21. Table 4: The Jena-B (JB) Reforms Framework
Sl. No. Indicator Calculation methodology and remarks
Degree of private participation – Maximum marks: 1
1 Degree of private
participation
Formula: (Generation capacity owned by
private sector/ total capacity)
Remarks: As per figure 3, maximum private
investments have happened in generation
segment, therefore only generation is
considered for this paper.
However, if investment in transmission and
distribution are also high as per segment
investment characteristics then they may
separately be considered as indicators
Degree of adherence to elements of reforms – Maximum marks: 9
1 Existence of electricity
law requiring reforms
Yes ( 1 mark)
No (0 marks)
2 Existence of electricity
sector regulators
Yes ( 1 mark)
No (0 marks)
3 Restructured electricity
sector
High (1 mark)
Moderate (2/3 marks)
Low (1/3 marks)
4 Multiple distributors or
distribution franchisees
High (1 mark)
Moderate (2/3 marks)
Low (1/3 marks)
5 Regulated distribution
business
Yes (1 mark)
No (0 marks)
6 Incentive regulation for
transmission
Yes (1 mark)
No (0 marks)
7 Independent system
Operator
Yes (1 mark)
No (0 mark)
8 Wholesale electricity
market
High (1 mark)
Moderate (2/3 marks)
Low (1/3 marks)
9 No barriers for IPP entry High (1 mark)
Moderate (2/3 marks)
Low (1/3 marks)
Degree of competition and market power – Maximum marks: 5
1 Ownership of 3 largest
players in generation
Formula: 1 – (Generation capacity owned by
three largest firm/total generation capacity)

22. Sl. No. Indicator Calculation methodology and remarks
Remarks: The formula represents the capacity
which is free from market power
2 Ownership of 3 largest
players in transmission
1 – (Transmission capacity owned by three
largest firm/total transmission capacity)
3 Ownership of 3 largest
players in distribution
1 – (Distribution capacity owned by three
largest firm/total distribution capacity)
4 Rules for third party
access have been laid
out
Yes (1)
No (0)
5 Provisions of congestion
pricing is available
Yes (1)
No (0)
Degree of marginal cost based tariff – Maximum marks: 2
1 Industrial tariff Formula: If recent industrial tariff/ marginal cost
is less than 1 then 1 mark should be allocated,
otherwise indicator value is 1/( Recent industrial
tariff/ marginal cost)
Remarks: Generally it is observed that
industrial tariffs are greater than marginal cost.
The formula brings the indicator within range 0
and 1.
2 Residential tariff Formula: If (recent residential tariff/ marginal
cost) is less than 1 then value of indicator is
equal to the calculated value. Otherwise the
indicator value is 1 mark.
Remarks: Generally it is observed that
residential tariffs are less than marginal cost
due to subsidies. The formula brings the
indicator within range 0 and 1.
Degree of propensity of physical assets for reforms – Maximum marks: 1
1 Propensity of physical
assets for reforms
If total physical asset is greater than 3752 MW
then 1 Mark else 0 Mark
Degree of sustainability of reforms – Maximum marks: 5
1 Politically acceptable This paper uses Worldwide Governance
Indicators published by World Bank to measure
political acceptability. The scores are
2 Size of efficient and environment friendly CCGT plant -
http://www.siemens.com/sustainability/en/environmental-portfolio/products-solutions/fossil-power-
generation/combined-cycle-power-plants.htm

23. Sl. No. Indicator Calculation methodology and remarks
calculated as (summation of all the six
indicators/63)
2 Government considered
removal of subsidy in
phased manner
High (1)
Medium (2/3)
Low (1/3)
3 Percentage of
renewables in energy
mix
(Installed capacity of renewables/total installed
capacity)
4 Efficient technologies
like CCGTs have been
introduced
Yes(1)
No (0)
5 Legal framework
provides for
implementation
Measured as average of government
effectiveness, rule of law and government
effectiveness as published by World Bank
under World Governance Indicators
Degree of technical efficiency – Maximum marks: 4
1 Average Plant load
factor
(Actual output (kWh)/Installed Capacity (kWh))
2 Capacity Factor (Peak Demand /Installed capacity)
3 Fuel Efficiency 1 – (Station heat rate(Kj/kwh)/Heat Value of
major fuel(Kj/kg))
4 Labour productivity Formula: 1 – Labour force participation rate
(as published by International Labour
Organisation)
Remarks: Assumption lesser the labour force
participation greater is the productivity
The above framework is populated for Ghana and United Kingdom in next section and
a comparative analysis is made.
3 http://info.worldbank.org/governance/wgi/index.aspx#reports

24. Results and interpretation
6.1. Results
Sl.
No.
Indicator Ghana United Kingdom
Sources/
Remarks
Degree of private participation – Maximum marks: 1
1
Degree of private
participation
0.00 1.00
Ghana: (Volata
River Authority,
2014)UK:
(Pique., 2006)
Degree of adherence to elements of reforms – Maximum marks: 9
1
Existence of
electricity law
requiring reforms
1.00 1.00
Ghana: (KUSI,
2005);
UK (UK
Government,
2011)
2
Existence of
electricity sector
regulators
1.00 1.00
3
Restructured
electricity sector
1.00 1.00
4
Multiple distributors
or distribution
franchisees
0.00 1.00
5
Regulated distribution
business
1.00 1.00
6
Incentive regulation
for transmission
0.00 1.00
7
Independent system
Operator
1.00 1.00
8
Wholesale electricity
market
0.00 1.00
9
No barriers for IPP
entry
0.00 1.00
Sub-total 5.00 9.00
Degree of competition and market power – Maximum marks: 5
1
Ownership of 3
largest players in
generation
1.00-1.00
= 0.00
1.00-
(0.15+0.13+0.12)
= 0.60
Ghana:
(Graduate
School of
Business,
Capetown,
2014); UK:
2
Ownership of 3
largest players in
transmission
1.00-1.00
= 0.00
1.00-1.00
= 0.00

25. 3
Ownership of 3
largest players in
distribution
1.00-1.00
=0.00
1.00-0.48
=0.52
(Pique., 2006),
(Sheffield
Energy
Resources
Information
Services, 2012)
4
Rules for third party
access have been
laid out
1.00 1.00
Ghana: (Energy
Commission,
2006); UK: (UK
Government,
2011)
5
Provisions of
congestion pricing is
available
0.00 1.00
UK
(Perekhodtsev &
Cervigni, 2010)
Sub-total 1.00 3.12
Degree of marginal cost based tariff – Maximum marks: 2
1 Industrial tariff 1.00 1.00 Ghana: Cost
plus IPP tariff is
considered to be
long run
marginal tariff
for Ghana which
is 95.79 Cedis
(Jenkins, 2007),
(PURC, 2013)
UK:
(Government of
UK, 2012),
(Parsons
Brinckerhoff,
2010)
2 Residential tariff
45.34/95.79
=0.47
1.00
Sub-total 1.47 2.00
Degree of propensity of physical assets for reforms – Maximum marks: 1
1
Propensity of
physical assets for
reforms
1.00 1.00
In both countries
cumulative
physical assets
are greater than
350 MW
Degree of sustainability of reforms – Maximum marks: 5
1 Politically acceptable
(0.60+ 0.50
+0.52+0.55+
+0.54+0.56)/6
= 0.55
(0.92+0.6
+0.92+0.95
+0.93+0.92)/6
=0.87
(Voice and
accountability+
Political
Stability+

26. Government
effectiveness+
Regulatory
quality+ Rule of
law+ Control of
corruption)/6
2
Government
considered removal
of subsidy in phased
manner
0.33 1.00
Ghana (UK Aid,
2012); UK is
taking steps to
remove
subsidies in
even
renewables
3
Percentage of
commercial
renewables in energy
mix
0.06 0.11
Ghana: (Seth, et
al., 2012); UK
(Ecotricity,
2013)
4
Efficient technologies
like CCGTs have
been introduced
1.00 1.00
In both the
countries such
technologies
have been
introduced
5
Legal framework
provides for
implementation
(0.50+0.55
+0.54)/3
= 0.53
(0.92+0.95
+0.93)/3
=0.93
(Government
effectiveness+
Regulatory
quality+ Rule of
law)/3
Sub-total 2.47 3.91
Degree of technical efficiency – Maximum marks: 4
1
Average Plant load
factor
0.69 0.66
Ghana:
(Seckley, 2004)
(TAPCO, 2009)
(Energy
Commission
Ghana, 2006)
UK: (UK Govt,
2013)
2 Capacity Factor
1729 MW
/2280 MW
=0.75
57490MW
/81778 MW
=0.70
Ghana: (Energy
Commission,
Ghana, 2013)
UK: (UK Govt,
2013)

27. 3 Fuel Efficiency
1.00 -
(10876/43000)
=0.75
1.00 –
7385/38000)
= 0.80
Ghana: (MIGA,
2009)
UK: (Roques, et
al., 2006)
4 Labour productivity
1.00-0.71
= 0.29
1.00-0.62
=0.38
(ILO, 2010)
Sub-total 2.48 2.54
Total – Maximum marks: 26
Grand total of individual
countries
13.42 22.57
Jena-B Reform Index
(13.42/26)*100
=51.61
(22.57/26)*100
=86.80
6.2. Interpretation & Recommendations
1. Jena-B Reform Index: The JB Reform index for the United Kingdom is 86.80
whiles that for Ghana is 51.61. This indicates that, UK has experienced more
successful electricity sector reform than Ghana.
Recommendation: Ghana has to take more concrete actions to attain higher
levels of success in electricity sector reform. The key areas of improvement are
highlighted below.
2. Degree of Private Participation: From the framework analysis it was found
that the degree of private participation in electricity generation in Ghana is
almost nil. The government should make further efforts to reduce barriers of
entry into generation by independent power producers (IPPs). For instance the
power pricing for IPPs should follow long run marginal pricing rather than pricing
adopted for the old hydroelectric power projects in Ghana which have low costs
of generation (Jenkins, 2007). Further, effective public-private partnership
models in generation such as those adopted in India may be promoted (Ministry
of Power, 2004).

28. 3. Degree of Adherence to elements of Reform: Ghana scored less than UK
for this indicator. The key areas in which Ghana lagged behind UK were, the
number of distributors or distribution franchisees, incentive regulation for
transmission, the existence of wholesale electricity market and the barriers to
entry for IPPs.
Recommendation: Ghana may try to introduce competition in distribution
business either by splitting the Electricity Company of Ghana (ECG) into a
number of small distribution companies or by privatising the distribution
services through distribution franchisees. ECG and Northern Electricity
Department (NED) may be combined and put under incentive regulations for
distribution which provide for long run marginal cost pricing, incentives for loss
reductions and capacity additions (KUSI, 2005). Further, KUSI, 2005 suggested
that the transmission business may be brought under incentive regulations and
development of rules for electricty market.
4. Degree of Competition and Market Power: Ghana scored significantly less
than UK for this indicator. Ghana needs improvement in the following areas;
market share of the largest players in generation, distribution and transmission
and provisions for congestion pricing.
Recommendation: The Volta River Authority, VRA (generation utility) may be
split into smaller entities controlled separately that is, separate ownership for
each entity and GRIDCO (transmission utility) may be brought under incentive
regulation. The Public Utilities Regulatory Commission (PURC) may introduce
time-of-the-day pricing for the transmission networks.
5. Degree of Marginal Cost based Tariff: Ghana needs to improve its residential
tariff to reflect the marginal cost. Further, the subsidies should be innovatively

29. removed. The subsidy removal may include inviting bids (on the basis of
subsidies) from service providers who may provide quality services at the least
subsidy.
6. Degree of Sustainability of Reforms: For this indicator, Ghana performs more
poorly as compared to the UK.
Recommendation: The reform process in Ghana requires more political
support. This could be attained through such means as good governance
(effective implementation of proposed policies by all agencies concerned).
Also, the reforms process must directly address the need to increase the share
of commercial renewables in the energy mix in the sector.
7. Degree of Technical Efficiency: As revealed by this indicator, both Ghana
and UK are at par when it comes to the degree of technical efficiency.
Recommendation: New technologies requiring less labour intervention may
be introduced by both countries.

30. Conclusion
This study sought to identify key indicators of successful electricity sector reforms and
to measure them based on a framework using the degree of nearness to retail
competition and the degree of sustainability of the reforms programmes. The key
indicators of successful reforms have been identified and presented as a framework
named the “Jena-B (JB)” Reforms Framework. They consist of 26 key parameters
based on which the degree of success of reforms may be measured.
The framework was used to conduct a comparative analysis of Ghana and UK and it
was found that the UK is comparatively more successful in its electricity sector reform
endeavours. The key areas of improvement for Ghana included augmenting private
participation in the sector, splitting of its largest generation utility into smaller entities
to foster competition, introducing incentive regulation in the transmission and
distribution segments and garnering enough political support for the reforms process.
The JB reform framework is a fairly simple framework which could be developed from
secondary information. However, the possible limitations are stated as follows:
 It has been assumed that each parameter of reform contributes equally to the
reform process. This might not be the case and actual weightages may be
derived from country specific situations.
 Where the parameters were difficult to quantify, a ranking strategy of “high,
moderate and low” ranks with corresponding marks of 1, 2/3 and 1/3 were
assigned respectively. These qualitative parameters could further be improved
with primary surveys.

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