ABSTRACT
This chapter focuses on the interrelated institutional, regulatory and financial reform issues that are essential in improving electricity sector performance in the transition economies. Most transition economies remain hampered by relatively low levels of economic growth and tight fiscal budgets to control both money supply and to provide a stable macroeconomic environment. The chapter introduces the dominant forms of trading and electricity industry structures emerging in the transition economies. The electricity industry is very important to transition economies because economic growth depends upon it. During the centrally planned economy era electricity prices bore little relation to the economic cost of providing power to both households and industry. The chapter considers electricity price developments and explains price setting mechanisms. It describes the emerging forms of economic regulation of the electricity industry in the transition economies. While competition depends on access to monopoly network facilities, economic regulation is required to ensure that network access and pricing support competition.
