Power Sector Reform and Regulation

Abstract

The power sector has long been a major obstacle to development in Tanzania. This chapter reviews the reasons that make it so difficult to move from an institutional industry equilibrium that does not bring about desired outcomes in terms of power supply (investment, system expansion, and technical performance) to one that does. The Tanzanian power sector is largely organised as a vertically integrated state-owned monopoly. This model has largely failed across the region for decades. The (difficult) introduction of private power providers and the establishment of an independent regulator have not changed the situation substantially in Tanzania. Political interference has been a constant feature of Tanzania’s power sector. Through pressure on tariffs, this is responsible for its precarious financing. Several high-level corruption scandals involving top officials related to deals made with private providers have turned public opinion against greater reliance on privatisation. As reforming the power sector is hindered by political economy factors, Antonio Estache suggests in his discussion that more reliance should be put on the decentralisation that is being made possible by renewable energy technology.