Privatization of the electricity sector-building on international experience to promote an alternative strategy for Cyprus

Abstract

The issue of ‘privatization’ is fairly new to Cyprus; it was initiated by the memorandum of understanding (MOU) signed between the Republic of Cyprus and Troika (Eurogroup) on April 9th, 2013. Privatization of electricity was mentioned in one of the clauses of the MOU. The main objective of this work is to look into privatization and the literature about the advantages and disadvantages, the history, the methods used and the lessons learned from other countries. Moreover, a survey was conducted to examine the views of the main stakeholders of the electricity sector (employees and consumers). This research covered their views on the current situation, what are their perspectives regarding privatization and how they would respond in the case that an alternative approach is adopted. Finally, the results were analyzed as part of this work.

The contribution of this work to the literature on privatization includes a suggestion on how to adopt, an alternative to the privatization process, based on the problems caused and lessons learned from other countries. This specific alternative approach which must be seriously considered by the state is based on the theory that since the causes for privatizing electricity are supposed to be related to the difficulties that the state faces in order to compete the private sector, the solution is to make necessary changes to the state, legislation and framework instead of selling public utilities. Findings of the survey suggest that the alternative option can be acceptable by the rest of the main stakeholders of the electricity sector (employees and consumers).