1. IntroductionThe reform that took place in Cameroon in the 1990s can be traced back from the unsuccessful experiences that intended to make public enterprises the engine behind the economic system (Tamba, 1996). Within the framework of this reform, the government tried to rationalize the management of public and para-public sector enterprises through the restructuring of some, the liquidation and privatization of others (MINEFI, 1995).
Resorting to the private sector, through the privatization of public enterprises can be justified on the one hand by the link introduced by Leibenstein (1978) between X-inefficiency and a public enterprise; and on the other hand, by the transfer of property rights, which gives private enterprises a managerial superiority (Alchian, 1965 and Demsetz, 1967).The message highlighted by these authors is that in contrast to the public sector, an individual controls his integral rights in a private structure. Schmidt (1991) takes over the idea and establishes a relation between the nature of an enterprise an its investment level. He arrives at the conclusion that the incentive to invest is larger in the private sector than in the public sector because the operator controls the entire enterprise.
In order to answer the question of the efficiency of the electricity sector in Cameroon and its impact on social welfare, we would, in a first place pinpoint the problem of this sector, then come out with the methodological elements that will enable us to measure the change in social welfare, and finally the results of this measure.
2. Research Problem
Until 2001, the supply of electricity in Cameroon was provided by the National Electricity Company (SONAL), which was created in 1974 by the fusion of Electric Energy Company of Cameroon (ENELCAM) and Cameroon Electricity (EDC). Its mission was to produce, transport and distribute electric energy. These three segments have undergone enormous evolution ever since the creation of the company.
In terms of production, it moved from 1312GWh in 1975 to 2417GWh in 1988, then to 3536GWh in 2001. This was due to the increase in the power installed, which moved respectively from 316MW to 757MW, to 843,5MW, during these three periods. Until 1994, SONEL exploited in this transportation segment, 225kV lines of 480km 110kV lines of 100km, 90kV lines of 1064km . In 2001, the length of 110kV lines move to 337km, while the others remained unchanged. In 1988, the distribution segment was made up of 7928km of lines distributed in the following manner: 3864km of average lines with a tension of 33, 30, 15, 10 and 5,5kV; 406km of lines with low tension and 3299 transformation posts. The modifications made in this segment led to an increase in lines and transformation posts. About 19033 km of lines and 6444 posts were censured in 2001.
Although these equipments ensure the provision of a minimum service, two major problems can still be observed. The first is linked to the financial structure of the enterprise that started degrading in 1994, up to the extent that during the period 1996/1997, the unpaid bills of the State and the communes increased to the level of 13534 millions FCFA. The unpaid bills to funding agencies were 26587 millions of FCFA in June 30 1997, and the debts vis-à-vis suppliers was 11095 millions of FCFA at the period date. Money in the cash desk, which was 1546 millions FCFA on the 30th of June 1996 moved to 205 millions in FCFA on the 30th June 1997.
The second problem is linked to the tariffs applied to the different consumers and insufficient investment. It has been observed that low tension and average tension customers subsidize those of the high tension category especially ALUCAM, which consumes about 52% of total electricity production. This is the origin of light cuts. This translates an efficiency problem in the activity of the enterprise, which can be due to under-investment. In the Cameroon electricity sector, inefficiency is observed when energy loss in the network and non-supplied energy (intensity of electricity cuts) increases with time.
These problems seriously affected the enterprise, and the solution adopted by the government was to privatize it. This decision came into being in October 1999 and was effective in the 18th of July 2001: the State enabled a partner to take a majority share in the capital of the company. It therefore became AES-SONEL and it is still in charge of producing, transporting and distributing electricity in the national territory.
The main objective of privatizing the enterprise was to improve the efficiency, production, transportation and distribution of electric energy, as well as the quality of the service supplied. Privatizing SONEL had to lead to getting the finance in order to carry out the necessary investments for the development of the electricity sector (more than 900 billions of FCFA for 20 years), in order to benefit from the professional expertise of accredited world operators of the sector.
The movement from SONEL to AES-SONEL led to a shift from a public monopoly to a private monopoly. This situation is one of the sources of inefficiency, as the rent that such a private monopoly would be searching for will not enable her fix a price at the level of marginal cost as is the case in a competitive situation. This might automatically have an effect on consumers’ welfare and might justify the importance of regulating enterprises in a monopoly situation (Carlton and Perloff, 1998). Regulation can be defined as the authority the State has in controlling economic activity, especially in the presence of monopolies, externalities, asymmetric information or when a good is of a public nature (Leveque, 1998).
Studies carried out by certain authors on privatization show its relation to regulation (Vickers and Yarrow, 1988; Donahue, 1989 and Trinh, 1997). Vickers and Yarrow (1988) study privatization in Great Britain, and remark that it can hardly be envisaged without regulation. They conclude among others that privatization is optimal when enterprises evolve in a competitive market. However, if an enterprise has a monopoly power, privatization should be accompanied by regulation in order to guarantee social welfare. It would therefore be important to study the consequences of regulation on social welfare when a privatized enterprise is regulated.
The regulation of the Cameroon electricity sector is performed by the Regulation Agency (ARSEL) which was created following the law No 98-022 of the 24 December 1998. The main purpose of the implementation of this agency is to favour the increase in investment in order to improve the efficiency of the sector and to guarantee social welfare.
The objective of this paper is to measure the change in social welfare that results from the efficiency of the electricity sector in Cameroon. In order to attain this objective, we would, in a first place appreciate the effect of privatization on the efficiency of the electricity sector, and then evaluate the impact of the regulation of the electricity sector on social welfare in Cameroon.
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