Struggles Against Privatization of Electricity Worldwide
- Book: Sparking A Worldwide Energy Revolution. Social Struggles in a Transition to a Post-Petrol World. Ed. by Kolya Abramsky. AK Press, 2010
Chapter 14, Part 4. Struggles Against Privatization of Electricity Worldwide. David Hall on behalf of Public Services International Research Unit
"This chapter looks at campaigns against electricity privatization: their extent, what were the issues, who was involved, their use of court cases and electoral campaigns, and the development of alternative policies.
There has been widespread opposition, throughout the world, to all forms of electricity privatization—the sale or privatization of distribution networks; the sale or privatization of existing power plants; the creation of new, private power stations through IPPs (Independent Power Producers); and management contracts or leases to operate networks or power stations. This opposition has come from a wide range of civil society groups, including trade unions, environmentalists, consumer organizations, community organizations, peasant and indigenous groups, and political parties.
These campaigns of resistance have happened in all regions of the world, and in the high income OECD as well as in developing countries. This resistance to electricity privatization has been part of a more general public resistance to all forms of privatization in public services. Despite initial public support for the idea in the 1990s, experience of privatized utilities, in particular, rapidly generated opposition. Opinion surveys in Latin America, for example, showed a dramatic change by 2000, and hostility continued to grow. By 2003, a speaker from management consultant, Deloitte, told a World Bank meeting that there was hardly a country left where politicians dared to support privatization of electricity: “Growing political opposition to privatization in emerging markets due to widespread perception that it does not serve the interests of the population at large,” which they attributed to a number of features of privatization: “Pressures to increase tariffs and cut off non-payers; loss of jobs of vocal union members that will be hard to retrain for the new economy; the perception that only special interests are served—privatization is seen as serving oligarchic domestic and foreign interests that profit at the expense of the country …”2 From then on, the pressures have been reduced, at least in developing countries, because most multi-national companies have taken strategic decisions to withdraw. But continuing pressures for privatization in Europe, and general ideological motives, continue to produce privatization initiatives.
The campaigns have thus tended to be long continuous struggles, because the proposals for privatization have been continuous. A typical example is the case of Ecuador, where government attempts to privatize electricity assets have repeatedly encountered organized resistance including unions, provincial and local governments, indigenous organizations, and others. In 2002, these campaigns forced the abandonment of proposals to sell electricity distributors, after Ecuador’s Congress passed a resolution rejecting the privatization, and a Constitutional Court ruling that the sales were unconstitutional. A further attempt at privatization was abandoned in February 2004 when there was not a single tender for any of the companies.
The greatest issue has been the level of prices, but campaigns have also focused on job losses, failure to invest, unreliability, inefficiency, environmental impact, policy, loss of public accountability and/or national control, and corruption.
Resistance to large price increases was central in a number of campaigns that succeeded in rejecting privatizations. In Senegal, for example, the government refused to meet the demands for price rises of three successive multi-nationals— Hydro-Quebec, Vivendi, and AES—as a result of which even the World Bank abandoned the plan for privatization of the electricity utility.
Other campaigns have been based on defending community interests, as well as resistance to implied price rises, such as the campaign against Enron’s private power plant at Dabhol (in Maharashtra, India), which was based on a long-term power purchase agreement. The campaign was supported by energy NGOs opposed to the project on social, economic, and environmental grounds, and by the local communities around the plant whose livelihoods were seriously damaged by it.
Demonstrations by the local communities were brutally suppressed (leading to the unique case of an Amnesty International report on Enron). The power station was finally nationalized by the Indian government. The long-running campaign against the proposed private power station at Bujagali falls, in Uganda, was also based on the impact on the environment and on local communities. The project was abandoned by the company originally involved, AES, but has since been revived.
Resistance to, and conflicts over, electricity privatization have often formed part of greater political processes and struggles. In Thailand, for example, a series of demonstrations and strikes were organised by the Thai electricity workers union from 2004 onwards, highlighting the dangers of privatization in terms of higher prices, the risk of corrupt allocation of shares to cronies, and the risk of foreign control developing through buying of shares. In March 2004, the government backed down and announced the cancellation of the EGAT privatization plans. Following an election, the government revived the plans; further strikes and demonstrations then formed part of a movement that culminated in the overthrow of the government, and its replacement by military rule, followed by new elections, new privatization proposals, and further action in 2008. In Pakistan, the introduction of IPPs in the 1990s with excessively generous power purchase agreements resulted in the distribution company, WAPDA, becoming unviable, as a result of having to buy power at prices higher than it could charge consumers. The privatization proposals were strongly resisted by the union, and attempts were made to prosecute the companies involved in IPPs for corruption, but these prosecutions were dropped at the insistence of the World Bank, and instead WAPDA was taken over by the military—a precursor of the subsequent military takeover of the country—and the union was banned.
Most of the campaigns have been led by trade unions. This is based on the clear economic interest of workers whose jobs and working conditions are threatened, but the unions have generally campaigned on wider issues of public interest, including prices and accountability. Environmentalists have been involved in many campaigns, and, in some cases, have taken a leading role. Community groups, especially where a private power plant threatens the local environment, and consumer groups, who became increasingly wary of the price rises associated with privatization, have also been widely involved.
An outstanding example of this is the union campaign in Thailand, which has successfully prevented the privatization of the state electricity company, EGAT, by direct action in the form of strikes, demonstrations, and political action against the governments that have proposed privatization. Their opposition to privatization was supported by other organizations, including a number of environmental groups that developed quite detailed proposals for alternative reforms. The unions, however, neither advanced any alternatives of their own, nor offered support for the environmentalist alternative proposals.
Examples of alternatives can be categorized according to three major issues: the need to extend systems to ensure universal connections, the need for transparency, and the need for efficiency.
The first example concerns the most successful extension of electricity services in sub-Saharan Africa, in South Africa. The ending of apartheid, following a massive liberation struggle, created an almost revolutionary situation open to political initiatives, including a program for electrification of cities and the countryside through the state electrical utility, ESKOM: “a period of political change and policy disruption were essential to the program’s initiation, and the critical role played by organizations and individuals outside of national government in helping shape new electrification policies and strategies.”8 There was no formal role at all for international institutions such as the World Bank. Instead—unlike nearly all other programs in Africa—a central role was played by organizations representing citizens. A key body on the whole process was a public multi-stakeholder planning institution, the National Electrification Forum (NELF), “a broad-based stakeholder body with participants from Eskom, municipalities, the DMEA, unions and others [supported by] … university-based electricity researchers … and the energy policy analysts/activists in the ANC.” NELF formed an arena where stakeholders could negotiate the shape of an electrification program, which would be both politically legitimate and practically implementable, based on a political acknowledgement of the social function of electrification and its funding from [public finance]: the end result was the “transition of electrification from a socially desirable (but economically limited) activity to an imperative, brought about broadly by a powerful democratic drive and commitment to service delivery (including the electoral significance of achieving targets).”
Secondly, improving transparency and public accountability is a significant issue because in almost all countries, the pre-existing public sector organizations have become unpopular because of a lack of responsiveness to public concerns both on an individual and a collective basis. Improving transparency also creates a more favorable political environment for campaigns. The outstanding example of development of this kind of alternative is the work of the Indian energy group, Prayas (www.prayaspune.org). Prayas recognizes the achievements of the existing Indian electricity model, based on state ownership, self-sufficiency, and cross-subsidy to agriculture and households. In fifty years, capacity has increased fifty-five fold, with 78 million customers, and half a million villages connected. There are, however, limits to these achievements, and real problems in the sector: half the population is still unconnected, and there are power shortages, weak accounting and metering, and huge financial losses. Prayas advocates the application of three principles of transparency, accountability, and participation (TAP): “all the governance functions and governance agencies are made amenable, on mandatory basis, to full transparency to the public, direct accountability to the public, and meaningful participation of the public.… The three major governance agencies—the state, the utilities, and the regulatory commissions—could be TAPed in a variety of ways. However, the space and capabilities of civil society institutions will be the important determinants of successful TAPing of these agencies” (Prayas 2001). Prayas showed the potential of these principles by demanding public consultation on price-setting by the distribution authority in Maharashtra, India, and then successfully advocating operational changes which enabled significantly lower tariffs. It has published a series of booklets on this kind of approach.
Thirdly, diagnosis of the problems may identify efficiency as a key issue for popular reform. In 2008, the National Union of Electricity Employees (NUEE) in Nigeria, where 70 percent still lack electricity connections, argues that privatization will lead to the continuing denial of electricity connections to those who currently do not have access to electricity. The union argues instead that: “the crisis has more to do with corruption and problems relating to the management of the sector.… Some of the alternatives proffered by NUEE include the efficient use of Thermal stations and gas, accurate billing and payment for electricity consumption.” 10 Echoing the success of the South African multi-stakeholder organization, the NUEE has called for a summit, “targeted at all stakeholders in the Sector … to assist governments and the various stakeholders in developing joint strategies and actions to extend and improve the efficiency of the electricity services and also develop alternative sources of generating power.”