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A Regional Review of Social Safety Net Approaches in Support of Energy Sector Reform


The energy sector reform process is occurring throughout the transition countries of Central and Eastern Europe (CEE) and Eurasia. The United States Agency for International Development (USAID) has supported this process in numerous countries. The electricity sector reform process generally involves establishing a modern legal and regulatory framework, unbundling the monopoly electric utility into separate generation, transmission and distribution companies, and creating a competitive electricity market and privatization. This process is leading to the introduction of transparent commercial operations, modern technology, and investment that is needed to provide reliable and economic service for the long run. The transition to this end goal includes increasing tariffs and the collection enforcement for the supplied electricity. During the transition there will be some impact on vulnerable populations. To identify approaches that will ease the impact on these populations, a multi-country study was conducted to identify social safety net approaches in support of energy-sector reform. This report documents this activity’s results. The study identifies and documents lessons learned and best practices to ease the transition impact of power sector reform. The three approaches to helping low-income households afford energy are contrasted and compared. The approaches are: 1) subsidies and assistance payments; 2) energy-efficiency mechanisms; and 3) tariffs. Each mechanism’s impact is analyzed using a matrix that compares a range of quantifiable evaluation criteria. The country reports (appendices) review the mechanisms that Armenia, Bulgaria, Hungary, Kazakhstan and Romania have used. The results are available for government policymakers, international financial institutions, donors, and others interested in power sector reform and addressing the needs of vulnerable populations.