The Restructuring and Privatisation of the Peruvian Electricity Distribution Market

This paper attempts to assess the social welfare impact of the restructuring and privatisation of the electricity market in Peru. The target companies, Electrolima and Electro Sur Medio, account for 64 percent of the total distribution market and 100 per cent of the privatised distribution companies respectively. Actual and counterfactual operating costs are examined. A separate analysis is performed for each company, due to the differences in terms of economies of scale and market structure. The benefits of being connected were also computed based on counterfactual scenarios. Companies that were not privatised (benchmark companies) were used for making appropriate comparisons and for determining our preferred counterfactual cost decline. Benchmark companies were also important for analysing the trend in quality issues. The results show that privatisation was worthwhile and that the social welfare of being connected has an important contribution on it. Government and producers benefited the most and consumers the least due to price increase