Public Utilities in Developing Countries
Paper Session
Friday, Jan. 5, 2024 2:30 PM - 4:30 PM (CST)
- Chair: Jonathan Hughes, University of Colorado
Collateral Accounts: Debt Recovery through Prepaid Electricity Metering
Abstract
Challenges recovering revenue from public services such as water and electricity present a barrier to expanding access in many low and middle income countries. We study a program in Cape Town, South Africa that enrolls households with delinquent municipal tax and service accounts in an aggressive debt recovery program that leverages linkages across municipal accounts. Specifically, households in Cape Town receive electricity through prepaid meters, which require advance purchase of electricity, thereby eliminating arrears in electricity payments. When households reach high levels of billing debts for water use or property taxes, these debts are recovered through electricity purchases. We exploit program rules surrounding eligibility and targeting to recover program impacts on electricity purchases, water consumption and bill payment behavior, along with own- and cross-price elasticities of demand for electricity and water, respectively. A model of municipal revenue helps interpret the findings and derive the optimal revenue recovery rate. We discuss the welfare consequences of debt recovery, both for targeted households and for the population as a whole. Our findings highlight the potential for digitization and linking of government databases to lower the cost of expanding access to electricity and other services.Donor Contracting Conditions and Public Procurement: Causal Evidence from Kenyan Electrification
Abstract
There is limited causal evidence on the effects of different public procurement regulations on project quality and value-for-money for projects funded by national governments or foreign aid donors. This paper uses both policy and experimental variation to study how two key contracting features—namely, the bundling of contract components, and enhanced ex post monitoring—affect outcomes of a large economic development project. To implement Kenya’s nationwide electrification program, the electric utility Kenya Power awarded and administered dozens of contracts with private contractors. We exploit an unusual program feature: different contracting procedures were often used across nearby villages, with Kenya Power awarding bundled contracts at African Development Bank (AfDB)-funded villages but unbundled contracts together with strengthened monitoring at World Bank (WB)-funded villages. To measure impacts, we collect on-the-ground engineering assessments, voltage and reliability data, household survey data on connection quality and usage, and analyze original contracts. The analysis suggests a stark trade-off: construction completion was delayed by 16 months on average at WB-funded sites relative to AfDB-funded sites but WB-funded sites saw a sizeable 0.6 standard deviation increase in construction quality. To disentangle the effects of contract bundling versus monitoring, we implement a randomized audits scheme. The audits improve household connectivity, network size, and voltage at AfDB-funded sites, but have no impact at WB-funded sites, suggesting monitoring and unbundling contracts may be substitutes. Given the apparent trade-off, we investigate how net benefits depend on policymaker time preferences and infrastructure longevity due to improved quality. Under plausible assumptions, WB processes could generate a net benefit ranging anywhere from +4% to -7% of total project value, indicating that neither procurement approach clearly dominates the other in this context.Do Contests Deliver Cost-Effective Energy Conservation?
Abstract
The energy sector in low- and middle-income countries (LMICs) is characterized by two stylized facts: high rates of particulate and carbon emissions per unit of electricity generated, as well as low reliability of electricity. To reduce air pollution levels and increase reliability, utilities have been encouraging urban households to conserve energy and reduce electricity use through various programs. Unlike utilities in other countries, Vietnamese utilities have been employing contests among households to encourage energy conservation, rather than using one-on-one contracts. Contests, which employ relative rather than absolute standards, have the potential to achieve larger aggregate energy conservation. In this paper, we explore the cost-effectiveness of contests versus contracts, particularly when contracts are incomplete due to households' abatement effort and costs being unobservable to the utility. Additionally, we examine how these programs can be scaled in a cost-effective and fiscally feasible manner in LMICs. To answer these questions, we have partnered with a state-owned electric utility company in Hanoi, Vietnam, to conduct a field experiment using their newly launched app. The experiment is conducted on a subset of 12,000 EVN Hanoi customers who have installed the utility's app. We assign households to one of four groups: a control group, a contest group, and two one-on-one contract groups with different terms.The paper makes significant contributions to the empirical literature on tournaments. First, we provide new evidence on a classic question in the tournaments literature, which is whether tournaments are superior to contracts (Lazear and Rosen, 1981; Green and Stokey, 1983). Our analysis is strengthened by the fact that the tournament and contract designs faced by participants are randomly assigned, and we are able to observe high-frequency performance measures (i.e., energy use) before, during, and after the competitions.
Discussant(s)
Edson Severnini
,
Carnegie Mellon University
Steven Puller
,
Texas A&M University
Jesse Buchsbaum
,
University of Chicago
Frank Wolak
,
Stanford University
JEL Classifications
- L9 - Industry Studies: Transportation and Utilities
- O1 - Economic Development