Rethinking barriers to electrification: Does government collection failure stunt public service provision?

• Published in: Energy policy 2018-03, Vol.114, p.288-300
• Main Authors: Rains, Emily, Abraham, Ronald J.
• Format: Article
• Language: English
• Subjects: Access; Bankruptcy; Clinical trials; Collection; Constraints; Consumers; Contractors; Cost analysis; Electrification; Energy; Energy access; Energy consumption; Energy development; Energy policy; Energy utilization; Fees & charges; Field experiment; Financial sustainability; Financing; Governance; Hard to reach; Human development; Incentives; India; Insolvency; Nonpayment; Public finance; Public service; Public utilities; Revenue; Revenue collection; Rural areas; Rural communities; Rural electrification; Southern Hemisphere; Sustainability; Theft; Viability; Willingness to pay
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2017.12.011

A growing body of evidence demonstrates the importance of energy access for human development. Yet, over a billion people continue to lack access, and financing electrification efforts poses a formidable challenge to resource-constrained governments. Resultingly, growing bodies of work focus on measuring consumer willingness to pay, viability of cost effective non-grid alternatives, and ways of reducing theft. We argue that these studies largely overlook a crucial policy issue – government capacity or willingness to collect revenues. We work with the public energy utility in Bihar, India, to evaluate levels of revenue collection among formally connected energy consumers. We run a randomized controlled trial to evaluate the impact of offering an incentive to local contractors to collect revenues in rural Bihar. The program made significant improvements among small, hard to reach consumers billed on minimum monthly charges. While these improvements are significant, the level of nonpayment at endline remains unsustainably high. Appropriate incentives can increase the proportion of paying consumers, but additional programs, including incentives for meter reading, are needed to further reduce insolvency. We conclude that it is crucial to examine government capacity and willingness to collect revenues when analyzing financial sustainability of energy systems in the Global South. •Limited revenue collection an important but overlooked policy problem.•RCT of offering incentives to contractors on energy bill collection in Bihar, India.•Incentive significantly expands base of paying rural domestic consumers.•Before turning to other policies, government should improve systems of collection.•Scale up recommended with introduction of further incentives for meter reading.