Reform of the energy sector and reformof subsidies ideally go hand in hand. Structural, ownership,and regulatory reforms aimed at making services moreefficient should lead to a rethinking of both the deliverymechanism and the level of subsidy. Chile, one of theearliest and most thorough energy reformers, has also beenone of the more innovative in restructuring its subsidyschemes. It has seen electrification as a key measure inalleviating poverty in rural areas-in 1992 about 47 percentof its rural population had no access to electricity. Itsrural electrification program includes subsidies designed tobe consistent with the broad principles of energyreform-decentralization of decisions to the regional andcommunity level, competition (between technologies as wellas suppliers), and a requirement that all partners in theprocess-users and private companies as well as thestate-contribute to the financing of expansion projects. Theshort-term result: an increase in rural electrification ofabout 50 percent in the first five years of the program.
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