Cost Benefit Analysis of Power Sector Reform in Haiti

The paper's argument is sequencing. Haiti has the least developed power system in the Western Hemisphere, and the authors hold that this is a governance failure rather than a capital shortage: repeated donor investments in meters and information technology, including recent World Bank operations, produced no lasting reduction in losses because the utility itself was never reformed. The recommendation that follows is that all bilateral donors and multilateral development banks condition further power-sector assistance on tangible, verifiable reform steps.

The designed program has two components. The first strengthens the legal and regulatory framework, supporting the ministry in charge of energy and a regulator intended to become autonomous and accountable, and underwriting the corporatization of EDH and the legal basis for management contracts, leases, concessions and privatization of its units; an upper bound of USD 20 million over five years, with USAID, Canada and France as candidate funders. The second supports EDH operations with technical assistance and metering at an estimated USD 38 million over five years, with the IDB and World Bank as candidates. Continuation past year three is conditioned on performance: five public-private partnership units established as the minimum milestone and ten as the maximum, with termination if the minimum is missed, and average technical, commercial and collection losses falling from 70 percent to 25 percent over the following decade.

Benefits are estimated by benchmarking against the USAID-supported turnaround of the Kabul distribution company DABS, which cut losses from 60 to 24 percent in five years; the authors halve that rate of improvement for Haiti. Averted losses are valued at USD 0.30 per kWh on generation of 875,000 MWh a year, held constant, which they describe as conservative. At a 50 percent chance of success the economic net present value is USD 40 million at a 12 percent discount rate with an economic internal rate of return of 17 percent, and the financial figures are USD 195 million and 28 percent. Sensitivity testing puts the break-even chance of success at 8 percent. The authors name the binding risks as lack of political will and corruption by those who benefit from the present system, and note that their own consultation with Haitian authorities and EDH was very limited, placing the work at the project-identification stage rather than at feasibility.