written by: Matt Andrews
The energy sector in Honduras has a history of inefficiency. Financial and energy losses have festered for decades. Various reforms and interventions (often supported by external agents, like this World Bank project) have not solved the problem.
In November 2018 a new unit in the President’s Office helped to mobilize a team of officials to take a fresh look at the problem and address it using the PDIA method—where the focus is on working relentlessly to understand the problem in new ways and to then tackle the problem in a pragmatic, step-by-step manner.
The team initially identified that their problem was to come up with a rapid strategy to liberalize the nation’s energy company. This was largely because an externally inspired law had set the country on a path towards liberalization years ago and officials were wanting to make progress on this path. They believed that the liberalization solution in other countries would solve the problems in Honduras.
The team started working on this problem and preparing a case for splitting up the energy company into three entities. Working week by week in the PDIA process, they soon found that the size of the financial losses were higher than expected, and these losses created a debt that would need to be addressed before any progress could be made in liberalizing the sector.
They shared the size of losses with country leadership and raised an alarm that the problem—when closely examined—was more severe than anyone had known. The President responded to this alarm immediately by appointing a senior trusted person to take charge of the challenge of managing the debt.
As a result of this development, the team returned to the PDIA drawing board in December 2018. They started asking more direct questions about the problem of losses—financial and non-financial—in the sector. It was one thing to handle the debt, but what about curbing the losses that were causing the debt?
The losses problem broke down into various potential causes: Were tariffs correctly accounting for cost? How much of the losses was a billings or collection issue? Etc. In breaking the problem down, the team recognized a need for better information about these causes and started hunting for data.
Over the last four months the team has mobilized data from across the energy sector, and shed light on many questions they have had about why the sector has been so inefficient. They have used this data to develop a new costing model to underpin tariff structures—and they have introduced a new tariff. They have also used the data to initiate a review of subsidies. They have also used the data to identify the biggest areas of loss (by user and geography).
At every step of the work, the team has energized others to start acting on the new evidence they have. Now, the team and its authorizers are expanding the work to further promote action: in restructuring subsidies, public sector budgeting for electricity, billing and collection, and more.
As they move ahead step-by-step, as a team of authorized and empowered individuals bringing their organizations together, I am so inspired about the progress we will see in the months ahead!