In contrast with developing countries, maintaining rather than expanding access to utility services is the main challenge facing governments in Central and Eastern Europe and the former Soviet Union.
This paper outlines a conceptual framework for the evaluation of utility subsidy mechanisms, and applies this framework to the mechanisms currently in use in transition countries.
The authors find that some of the most widely used utility subsidy mechanisms - burden limits, across-the-board price subsidies, and no-disconnection policies - support the middle class rather than the poor. They have a detrimental impact on the financial health of the utilities, on industrial competitiveness, and on local and central government budgets.
To select the subsidy mechanism that suits their circumstances best, governments should collect information on the utility connection ratio of poor households and their consumption patterns, assess the feasibility of measuring utility consumption at the level of individual households, score the performance of each subsidy mechanism against a given set of criteria, determine the weights assigned to these criteria, and identify the mechanisms with the highest aggregate scores. |
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