Cost Benefit Analysis of Power Sector Reform in Haiti
ICER Distinguished Scholar Award Paper
Co-authors: Nicolas Allien, Jay Mackinnon, and Bahman Kashi
This paper argues that to improve the power sector in Haiti, which now constitutes a critical constraint to economic growth, it would be necessary to carry out a significant regulatory and utility governance reform; without these reforms, any physical investment program would be ineffective and unsustainable. Haiti has the most underdeveloped and inefficient power sector in the Americas. Numerous past attempts to reform it have failed due to lack of political will. In this paper, we consider a multi-phase program of reform and assess its feasibility. In the first phase, the Government of Haiti (GOH) carries the corporatization of units of Electricité d’Haïti (EDH); introduces management contracts, leases, and concessions; and privatizes EDH units as appropriate. If the first phase succeeds we propose proceeding to later phases that would support EDH. Costs have been estimated based on a similar program implemented in Afghanistan by the United States Agency for International Development (USAID). Our estimation of economic benefits is based on a projected reduction in technical losses, valued at the retail price of electricity for average consumers; net gains in consumer surplus resulting from servicing high value customers are excluded from the model due to lack of reliable data to support a quantitative estimate. Furthermore, the analysis is conducted based on a 50 percent chance of success for the reform. At these conservative measures of costs and benefits, the project is found to be economically and financially viable (Economic IRR: 15 percent, Economic NPV: 11 Million 2017 USD, Financial IRR: 28 percent, Financial NPV: 78 Million 2017 USD).
Belt, Juan A. B.
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