Sector Results and Learning:
Energy

M&E conducted two Data Quality Reviews under the Tanzania I Compact, the most recent of which was implemented in 2013. At the time, TANESCO had not reported any new customers connected to compact built lines. Given the more general concerns with TANESCO data quality issues, it may have been useful to conduct the DQR at a point at which outcomes are expected to manifest, and therefore there are relevant data points to verify. In addition, the independent evaluator could provide additional oversight to data collection and the DQR.

The ability of evaluators to accurately measure expected results and gather information on factors that may have contributed to the manifestation of results is strengthened by greater detail from sector experts on the expected impact of the intervention on the key outcomes, i.e. a more detailed program logic or theory of change. For example, an engineering expert’s input on certain issues, such as the likely impacts of the new cable on the short term outcomes, such as reliability, and long-term outcomes such as failure of the cable, would have been helpful in designing the evaluation approach and questionnaires. It is important for MCC project teams, particularly the relevant sector experts, to clearly articulate how the proposed activities are expected to change key outcomes and to what degree.

Reform strategies should be appropriately attuned to the country context and level of development of the sector, such that priorities and proposed solutions respond to the most essential challenges. As the final evaluation shows, the Power Sector Reform Project (PSRP) was successful in assisting the Government of Malawi (GOM) in establishing a new power market structure, primarily by unbundling the generation business from the Electrical Supply Corporation of Malawi (ESCOM), which had existed as a vertically integrated electric utility. Coupled with other regulatory improvements, this led to an improved enabling environment, allowing a substantial number of potential investments in generation by private firms to move forward for the first time in Malawi. Nevertheless, the compact efforts dedicated specifically to unbundling of ESCOM were extensive, and the evaluation also noted that key aspects of the re-structuring were incomplete after the compact ended. From MCC’s perspective, stakeholder attention directed at other critical challenges with the utility’s core operations was inevitably diluted as a result. In particular, reforms that sought to strengthen ESCOM’s role as a credible off-taker of power – such as tariff reforms, loss reduction, and accounting and financial management improvements – were not adequately implemented and the utility therefore continued to be perceived as a risk to investment by independent power producers. Moreover, ESCOM’s unbundling led to unintended effects on earlier activities supporting ESCOM’s overall turnaround, including inadvertent financial challenges as there were significant delays in the newly formed generation company coming to mutually acceptable power purchase arrangement with ESCOM (now focused solely on transmission and distribution), even after assuming some of its debts. In turn, this led to challenges with arrears in the sector and growing financial problems at ESCOM. All of these issues implied an ongoing need for financial backing from the Government for ESCOM in order to support investment, but this was slow to emerge.

Further, the administrative processes associated with unbundling ESCOM took up significant time and effort which led to a reduction in the time available to support the new activities introduced through the reform program related to expansion planning, robust generation procurement processes, and transparent operations of the power network. Once unbundled, the failure of the Government to rapidly create a single buyer, in particular, was an obstacle to moving forward in a robust manner with a program for investment in the power sector. These experiences of the project demonstrate that in selecting among a range of needs and challenges within Malawi’s power sector, the unbundling of ESCOM could potentially have been deferred in lieu of more targeted efforts to improve its accountability and financial/operational performance, issues that may arguably have been more central to achieving a sustainable and expanding power sector. Further, substantive outcomes such as improved expansion planning, better organization and transparency in procurement of new generation, and more robust operations of the power system which were targeted through the market restructuring process may have been possible to address without the friction created by the unbundling process.

MCC is applying this lesson by focusing more on implementing activities aimed at increasing private investment in the power sector without necessarily prioritizing the structural reorganization of the utility. In Benin, MCC is supporting the competitive procurement of independent power producers from project development to tendering to help address challenges in securing private sector participation in generation. This approach recognizes that a focus on the process of securing investment is a critical part of achieving intended outcomes. In Burkina Faso, planned work to support enabling environment reforms is bolstered by support for system operations personnel to ensure they can manage the changing operational environment without necessarily prioritizing the unbundling of the electric utility. In addition, MCC continues to support efforts to achieve cost-recovery and financial viability of the power sector through a focus on tariff reforms and government backing for critical investment.

Need to consider how changes in the fuel supply market may affect project design. Stove performance was tested with the predominant coal available in the target market which was in turn prescribed for use with MCA stoves. The evaluation showed that other coal fuel was also used in the target market albeit to a significantly lesser extent. In the last year of the program, the mining operation which provided the predominant coal type was closed and an alternate coal type was introduced by the Government with subsidy. Had more time been available, the project should have developed tests and strategies for alternate stove/fuel combinations.

A political economy analysis (PEA) conducted in compact development may have helped MCC to understand the incentive structure of the utility and the government. After the Government of Liberia refused to extend the utility operations component of the management services contract with Manitoba Hydro International beyond December 2016, the Liberian government installed individuals in LEC’s management whose actions did not serve the best interests of the utility. Then, not respecting the operational independence of ESB International, the operator of a new management services contract in 2018, the government appointed (and refused to remove after numerous requests) another individual who interfered with loss reduction efforts and complicated the utility’s operations. These sorts of dynamics were something that MCC needed to better understand during compact development, however, measures to address them would reduce the country’s ownership for program success. Entrenched political interests resisted reform in the sector. The evaluation indicated that the management services contract would have benefitted from a utility-level and country-level PEA to help increase the likelihood of success. MCC is now conducting more political economy analyses as part of compact development.