Power Tariffs : Caught between Cost Recovery and Affordability

This is the first paper to build a comprehensive empirical picture of power pricing practices across Sub-Saharan Africa, based on a new database of tariff structures in 27 countries for the years 2004-2008. Using a variety of quantitative indicator...

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Bibliographic Details
Main Authors:	Briceno-Garmendia, Cecilia, Shkaratan, Maria
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ADMINISTRATIVE COSTS ASSET VALUE AVAILABILITY BALANCE BLOCK TARIFF BLOCK TARIFFS BORDER TRADE CAPITAL COSTS CAPITAL INVESTMENTS COLLECTION OF BILLS COMMERCIAL CUSTOMERS COMMERCIAL TARIFFS CONNECTED HOUSEHOLDS CONSUMER PROTECTION COST OF POWER COST OF POWER PRODUCTION COST RECOVERY COSTS OF POWER CURRENCY DIESEL DISCOUNT RATE DISTRIBUTION ASSETS DISTRIBUTION LOSSES DOMESTIC CUSTOMERS ECONOMIC COSTS ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIES OF SCALE ELECTRICITY ELECTRICITY MARKET ELECTRICITY PRICE ELECTRICITY PRICES ELECTRICITY REFORMS ELECTRICITY REGULATOR ELECTRICITY TARIFFS ELECTRIFICATION EMPLOYMENT END USERS ENERGY MARKETS ENERGY SOURCES EQUITY ISSUES EXPENDITURE EXPENDITURES FINANCIAL HEALTH FINANCIAL SUSTAINABILITY FIXED CHARGE FREQUENCY DISTRIBUTION FUEL GENERATION GENERATION CAPACITY GROSS DOMESTIC PRODUCT HOUSEHOLD CONSUMPTION HYDRO POWER HYDRO-POWER HYDROPOWER IMPLICIT SUBSIDIES IMPLICIT SUBSIDY IMPLICIT TAX INFRASTRUCTURE INVESTMENT INFRASTRUCTURE SECTOR INFRASTRUCTURE SERVICES INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ENERGY INVESTMENT DECISIONS KILOWATT-HOUR KILOWATT-HOUR OF ELECTRICITY KILOWATT-HOURS LARGE CUSTOMERS LEVEL OF CONSUMPTION LEVEL OF DEMAND LEVELS OF CONSUMPTION MARGINAL COSTS MONETARY FUND NONPAYMENT OPEN ACCESS PEAK DEMAND POOR CONSUMERS POOR HOUSEHOLDS POWER POWER CONSUMPTION POWER COSTS POWER DEMAND POWER DISTRIBUTION POWER GENERATION POWER GENERATION SYSTEMS POWER NETWORK POWER PRICING POWER PRODUCERS POWER PRODUCTION POWER SECTOR POWER SYSTEM POWER SYSTEMS POWER TRADE PREFERENTIAL TARIFFS PREPAYMENT PREPAYMENT OPTION PRESENT VALUE PRICE DIFFERENTIAL PRICE LEVEL PRICE OF POWER PRIMARY ENERGY PURCHASING POWER REGIONAL TRADE RESIDENTIAL CONSUMERS RESIDENTIAL CUSTOMERS SMALL BUSINESS SMALL BUSINESSES STREET LIGHTING TARIFF BLOCK TARIFF DESIGN TARIFF INCREASES TARIFF LEVELS TARIFF REGIMES TARIFF SCHEDULE TARIFF SCHEDULES TARIFF STRUCTURE TARIFF STRUCTURES TRANCHE TURNOVER UPFRONT FIXED COSTS UTILITIES UTILITY COSTS VOLTAGE WAGES WATER PRICES WATER SERVICES
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111208085934 http://hdl.handle.net/10986/3671

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Summary:	This is the first paper to build a comprehensive empirical picture of power pricing practices across Sub-Saharan Africa, based on a new database of tariff structures in 27 countries for the years 2004-2008. Using a variety of quantitative indicators, the paper evaluates the performance of electricity tariffs against four key policy objectives: recovery of historic power production costs, efficient signaling of future power production costs, affordability to low income households, and distributional equity. As regards cost recovery, 80 percent of the countries in the sample fully recover operating costs, while only around 30 percent of the countries are practicing full recovery of capital costs. However, due to the fact that future power development may be based on a shift toward more economic technologies than those available in the past, existing tariffs look as though they would be consistent with Long Run Marginal Costs in nearly 40 percent of countries and hence provide efficient pricing signals. As regards affordability, today's average effective tariffs are affordable for 90 percent of today's customers. However, they would only be affordable for 25 percent of households that remain unconnected to the grid. Tariffs consistent with full recovery of economic costs would be affordable for 70 percent of the population. As regards equity, the highly regressive patterns of access to power services, ensure that subsidies delivered through electricity tariffs are without exception also highly regressive in distributional incidence. The conclusion is that achieving all four of these policy objectives simultaneously is almost impossible in the context of the high-cost low-income environment that characterizes much of SSA today. Hence most countries find themselves caught between cost recovery and affordability.

Power Tariffs : Caught between Cost Recovery and Affordability

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