Why Are Connection Charges So High? : An Analysis of the Electricity Sector in Sub-Saharan Africa
This study develops and structurally estimates a model of household and electric utility behavior to describe how the low access rates and high connection charges that are common in the Sub-Saharan Africa region arise from regulated electricity tar...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/659251523907847219/Why-are-connection-charges-so-high-an-analysis-of-the-electricity-sector-in-Sub-Saharan-Africa http://hdl.handle.net/10986/29709 |
| Summary: | This study develops and structurally
estimates a model of household and electric utility behavior
to describe how the low access rates and high connection
charges that are common in the Sub-Saharan Africa region
arise from regulated electricity tariffs being set too low.
As a result, the utilities lose money on each connected
customer and low electricity consumption by households makes
it difficult to recover the cost of providing a connection.
For each possible choice of the regulated tariff, the
optimal upfront connection charge is computed that will
maximize profits for the utility in its service territory.
Higher tariffs are associated with lower optimal connection
charges and higher electrification rates. Nonetheless, due
to households' low willingness to pay for electricity
services, the equilibrium electrification rates in the model
are much lower than 100 percent. Future advances in
electrification will require higher incomes, increased
coverage of the distribution network, and lower connection costs. |
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