The wave of economic deregulation and privatization has been sweeping the world for quite some time. The energy sector is also touched by this wave, and there is a sort of competition among developing countries to move fast in order not to miss the train. The power subsector is a major area within the energy sector that is growing fast in the third world and is facing such problems as poor performance and high investment demand for capacity addition that is beyond the capability of the utility. Thus, the power subsector is a target for deregulation and privatization in many countries. However in many cases the objectives of these programs are too narrow and are designed only to attract private investment. We argue that the problems faced by the power sector are diverse, and privatization and deregulation cannot solve all of them, though the financial burden of the utilities may be eased. At the same time, new institutional and regulatory issues will surface. We also argue that the privatization program may lead to neglect of long-term planning of the electricity sector and endanger the energy security of these countries. Finally, we argue for a harmonious cohabitation of private and public utilities in a changed environment where each will play a role.