The Stranglehold on Energy

Editorial

Electricity production should serve the interests of all, not just a privileged few

At one time, energy production for public consumption in Mauritius was fully controlled by the state. The Central Electricity Board (CEB) was not only the distributor but also the sole producer of electricity for the entire nation. That changed in the mid-1990s when advisors from the World Bank and the IMF recommended that the government shift the CEB’s role to a mere distributor, leaving electricity production in the hands of private Independent Power Producers (IPPs). To be fair to the “twin sisters” – the World Bank and the IMF -, that was their era of pushing privatisation onto client states across the globe as a means to reduce high public sector capital expenditure demands for investments with low or slow returns, provided of course, that the deal with private producers (IPPs) was fair and equitable to both parties. In our case, this recommendation coincided with the declining profitability of the sugar industry, leading major sugar conglomerates to diversify into real estate and energy production.

The adoption of this policy saw the gradual decline of CEB’s role in energy production. Today, around 60% of the electricity supplied to Mauritians is generated by private sector IPPs. Since the first IPP authorization in 1997, several former sugar companies have established themselves as major power producers. The agreements between these IPPs and the CEB, vetted by the World Bank teams, were and remain heavily skewed in favour of the private producers. According to contractual terms, the CEB is obligated to purchase all the electricity generated by the IPPs before utilizing its own production capacity. This arrangement places the public sector in a subsidiary position, forcing the CEB to maintain idle backup capacity while prioritizing electricity from private producers. Bagasse, a major disposal headache for the sugar mills, became valued as an alternative fuel like imported coal and its price pegged to international rates.

The agreements between the CEB and IPPs essentially create a risk-free business model for the private energy producers, namely a captive market with no competitors. Any fluctuation in production costs — whether due to coal prices, inflation, changes in freight charges, exchange rate variations, or taxation — is automatically transferred to the CEB and pegged to forex rates. This means that Mauritian consumers and taxpayers ultimately bear the financial burden, while IPPs continue to enjoy high guaranteed returns.

The CEB, despite being a state-owned entity, is bound by these rigid contracts that prevent it from competing on a level playing field. It is forced to scale down its own production whenever IPPs increase their output, ensuring that private producers always get the lion’s share of the market. The public sector is effectively at the mercy of these agreements, raising serious concerns about transparency, fair competition, and the long-term interests of Mauritian consumers. Since those days of enthusiastic privatisation, the twin sisters may have moved on to more sober views, but it is the recipient countries that continue to bear the consequences over the imposed long-term contracts.Read More… Become a Subscriber

Mauritius Times ePaper Friday 21 March 2025