Transcript Ensuring sustainable access for the poor through internal revenue generation – electricity Brasilia 2006 Kate Bayliss "Financing access to basic utilities for all" December 2006

Ensuring sustainable access
for the poor through internal
revenue generation –
electricity
Brasilia 2006
Kate Bayliss
"Financing access to basic utilities
for all" December 2006
Overview




A bit of background
Context
Internal Revenue Generation tools
Policy implications
"Financing access to basic utilities
for all" December 2006
Background




1.6bn people in the world do not have access
to electricity.
The majority of these live in rural areas in
sub-Saharan Africa and South Asia.
In Africa, more than 526m people do not
have electricity – more than 75% of the
population.
In Brazil around about 5% of the population
does not have access to electricity (ESMAP
2005).
"Financing access to basic utilities
for all" December 2006
Background


Access largely overlooked in the 1990s as
countries around the world implemented
major reforms of the electricity sector.
Reforms typically included unbundling,
deregulation, liberalisation and privatisation.
“Privatization and deregulation of energy
networks does reduce costs and thus
increases the affordability of connections and
extending grids provided there is competition”
World Bank 2000.
"Financing access to basic utilities
for all" December 2006
Background – disappointing
results
“The most outstanding social impact of power
sector reforms is the inability of reforms to
increase access to electricity among the poor
after 15 years of reform” Afrepren 2005.
 “The Latin American experience shows that
the poor are often the last to benefit from
increased access due to reform”
Chisari, Estache and Waddams Price 2001

"Financing access to basic utilities
for all" December 2006
Electricity is important for
poverty reduction





Education (lighting, ICT, Teacher
Training)
Health (refrigeration, lighting for safe
procedures, operations)
Household safety
Gender balance
Economic development
"Financing access to basic utilities
for all" December 2006
Rural electricity - issues




Low rates of access.
The unconnected are those with least
income.
High cost of service delivery due to
dispersion.
Little commercial incentive for any
distributor to provide service.
"Financing access to basic utilities
for all" December 2006
Urban electricity - issues





Higher rates of access than rural and
lower cost of extension.
Problem is ability/willingness to pay.
High levels of illegal connections.
Social exclusion.
Little commercial incentive for any
distributor to provide service.
"Financing access to basic utilities
for all" December 2006
Weak capacity




Decentralisation  independent electricity
distributors.
 some areas with low income, high
unemployment and low consumption.
Cost recovery difficult and regional inequality
exacerbated potentially.
Weakest distributors are those with most
need and yet are those least likely to be able
to obtain funding.
"Financing access to basic utilities
for all" December 2006
Internal Revenue Generation:
Tariffs


Prices have increased in most countries
following electricity sector reforms with a shift
to ‘marginal cost pricing’.
“In all circumstances, prices should be set at
a level which allows energy providers to
recover the long run marginal cost of
delivering the service including a fair return
on investment.”
World Energy Council (2001).
"Financing access to basic utilities
for all" December 2006
Internal Revenue Generation:
Tariffs

But what costs do you cover?






Independent Power Producers?,
Currency fluctuation?,
Leakages and shortages?,
Private sector profits?
And what is a ‘fair return’?
And how can you tell what the costs are?
"Financing access to basic utilities
for all" December 2006
Internal Revenue
Generation:Revenue Collection

Reduce system losses




Enforce payment



Illegal connections
Technical faults
Billing errors
Prepayment meters.
Disconnection for non-payment.
Community support – ease of payment,
community agents etc.
"Financing access to basic utilities
for all" December 2006
Internal Revenue Generation:
Subsidies

Consumption subsidies are problematic





they benefit the better off that already
have connection;
The poor do not have low consumption
Subsidised connections are preferred.
But there is evidence of low levels of
affordability for consumption.
But effective targeting is difficult.
"Financing access to basic utilities
for all" December 2006
Cost Reduction

Within utility



By consumers


Reduce leakages
Improve productivity
Encourage more energy efficient usage
Cheaper technology such as off-grid
systems in rural areas
"Financing access to basic utilities
for all" December 2006
Policy implications




Middle income countries may be able to
finance increased access through IRG. Poor
countries cannot.
Need a national strategy and coordinated
participatory approach.
Support poor users eg through billing systems
and payment mechanisms.
Need a new approach to subsidies to meet
the needs of the poor.
"Financing access to basic utilities
for all" December 2006
Its not just about the
connection



Need to consider local development
impact for sustainability.
Social inclusion policies to be
coordinated in urban areas.
Electricity is necessary but not sufficient
for poverty reduction.
"Financing access to basic utilities
for all" December 2006
Thank you
Obrigada
"Financing access to basic utilities
for all" December 2006