In many developing countries, electricity prices, subject to controls by public sector monopolies, are significantly distorted. This in turn gives wrong signals to investigate the desirability and induces inappropriate technology choice. This paper attempts to investigate the desirability and feasibility of price reforms and divestiture with reference to the electricity sector of Bangladesh. In particular, it discusses the analytical and empirical issues relating to estimation of shadow prices of electricity uses and analyzes the impact of price reform on government revenue and income distribution. Since, electricity generation, transmission and distribution in Bangladesh are fully controlled by a public monopoly, characterized by inefficiency in its operations and chronic financial loss, a second element of the reform examined in the paper is the divestiture and privatization of some of its operations.