Efficiency Without Ownership: How Concessions Can Reform Electricity Distribution

The World Bank’s 2025 report advocates operations concessions as a pragmatic alternative to full privatization for improving electricity distribution in developing countries. By leveraging private sector efficiency while retaining public ownership, the model boosts performance with lower political and regulatory risk.

In its 2025 report, Operations Concessions for Electricity Distribution, the World Bank offers a compelling analysis of how a pragmatic model of operations concessions can improve electricity distribution in developing countries. Authored by Amol Gupta, David Loew, and Isabelle Bui of the World Bank’s Energy and Extractives Global Practice, the study was produced with technical support from Deloitte Touche Tohmatsu India LLP, PwC Advisory SAS (for Côte d’Ivoire), Abdo, Ellery & Associados (for Brazil), and independent consultants in Uganda and Brazil. Funded by the Public–Private Infrastructure Advisory Facility (PPIAF), the report argues that this model, which allows private companies to operate public electricity distribution networks without transferring asset ownership, holds promise for countries caught in reform gridlock.

A Middle Path Between Public Control and Full Privatization

The report sets the stage by reflecting on three decades of attempted power sector reform in the developing world, much of it inspired by 1990s-era structural adjustment models. These reforms pushed for unbundling, independent regulation, and competitive markets. Yet progress has been limited. Only a small number of developing countries have fully implemented the reform package, and fewer still have achieved sustainable utility performance. In many cases, utilities remain state-owned monopolies plagued by inefficiencies, political interference, and insufficient cost recovery. According to data from the World Bank’s UPBEAT and Power Markets databases, fewer than 30 percent of utilities in low- and lower-middle-income countries recover both operating and debt service costs.

Privatization, while offering some efficiency benefits, has often sparked social unrest, union resistance, and regulatory challenges. Operations concessions offer a third way. Under this model, a private operator takes over electricity distribution operations, handling billing, collections, customer service, and network maintenance, while the public sector retains ownership of infrastructure, manages large-scale capital investments, and procures power from generators. This setup allows governments to harness private-sector efficiency and technology without ceding full control or facing the political backlash of outright asset sales.

Côte d’Ivoire’s Long-Term Success Story

One of the clearest demonstrations of this model’s potential comes from Côte d’Ivoire, where the operations concession with Compagnie Ivoirienne d’Électricité (CIE) dates back to 1990. Initially encompassing generation, transmission, and distribution, the concession evolved over time, especially after generation responsibilities were shifted to independent power producers. Despite challenges in aligning tariffs with rising costs, CIE has remained profitable and operationally efficient. Distribution losses were reduced from 29 percent in 2011 to just 15 percent by 2022, and access to electricity rose dramatically from 48 percent in 2000 to over 70 percent in 2023.

In 2020, Côte d’Ivoire renegotiated and extended the concession, introducing a cost-plus-margin model to remunerate CIE and shifting toward a multi-year business planning framework. The new structure enhanced regulatory oversight without undermining the operator’s autonomy. Importantly, CIE’s revenues are insulated from tariff fluctuations; the company is paid based on forecasted operating costs approved by the regulator, with incentives and penalties tied to performance metrics. This setup encourages efficiency without exposing the private operator to broader sectoral risks.

India’s Franchising Model Brings Urban Efficiency

India’s version of operations concessions is known as the Input-Based Distribution Franchise (IBDF) model. While legally distinct, it mirrors the principles of operations concessions. State-owned utilities contract private franchisees to manage distribution in specific urban areas, such as Ajmer, Bhiwandi, and Kota. The public utility supplies bulk power at substations, and the franchisee pays an agreed “input rate” per unit of electricity. Profitability hinges on reducing technical and commercial losses, improving collections, and maintaining service quality.

This model has seen substantial success, particularly when implemented with rigorous bidding processes and minimum investment requirements. Franchisees like Tata Power have recorded impressive results, cutting losses to below 10 percent in some areas. The franchisee bears limited capital expenditure responsibility, usually focused on metering, customer service systems, and network repairs, areas with quick returns and measurable efficiency impacts. Although early franchises in India sometimes failed due to unqualified bidders, recent rounds have avoided these pitfalls by enforcing strict prequalification standards and performance-linked contracts.

Global Lessons from Uganda, Türkiye, and Brazil

Though fewer countries have adopted operations concessions in electricity distribution, broader experiences with private sector participation offer important lessons. Uganda’s 20-year full-scope concession with Umeme, for example, demonstrates the value of clearly defined transition periods and tariff safeguards. Umeme helped raise national electricity access from 9 percent in 2005 to over 47 percent in 2022 while reducing losses and improving collections, although political backlash over investor returns remains a cautionary tale.

Türkiye’s experience, characterized by “transfer of operating rights” agreements, allowed for full private operation while retaining asset ownership under the public utility. It showed that performance improvements and loss reductions are possible even without asset privatization, provided there is regulatory stability. Brazil, meanwhile, underwent two waves of privatization first in the late 1990s, then in the 2010s proving that even remote and underserved areas can attract private investment when rules are clear, performance targets are enforceable, and legacy issues are handled transparently.

Not a Silver Bullet, but a Strong Step Forward

Despite its advantages, the operations concession model is not without limitations. It continues to depend heavily on public investment for major infrastructure, and the small-scale capital investment allowed to concessionaires may not always attract top-tier investors. The model also does little to directly unlock private financing for power generation, as the public utility typically remains the sole buyer of electricity. Moreover, the low level of asset ownership can limit returns for private firms, particularly in smaller markets.

Nonetheless, the World Bank views operations concessions as a valuable transitional model, one that can strengthen utility operations while providing time for institutional reforms and regulatory maturity. In some cases, operations concessions could evolve into full-scope privatizations, especially if they include contractual options to convert after meeting performance benchmarks. In other contexts, governments may find that continuing with well-structured operations concessions is sufficient, especially if they deliver results without sparking political or social unrest.

Ultimately, the report calls for realistic, context-sensitive reform strategies. For countries where electricity distribution is faltering but privatization remains politically sensitive or institutionally difficult, operations concessions offer a promising path to achieve better performance, attract private expertise, and lay the foundation for more sustainable power sectors.