Charging Ahead: Prepaid Electricity Metering in South Africa / B. Kelsey Jack, Grant Smith.

Format:

Book

Author/Creator:

Jack, B. Kelsey.

Contributor:

National Bureau of Economic Research.

Smith, Grant.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22895.

NBER working paper series no. w22895

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Charging Ahead

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

The standard approach to recovering the cost of electricity provision is to bill customers monthly for past consumption. If unable to pay, customers face disconnection, the utility loses revenue, and the service provision model is undermined. A possible solution to this problem is prepaid metering, in which customers buy electricity upfront and use it until the prepaid amount is consumed. We use data from Cape Town, South Africa to examine the effects of prepaid electricity metering on residential consumption and returns to the electric utility. Over 4,000 customers on monthly billing were involuntarily assigned to receive a prepaid electricity meter, with exogenous variation in the timing of the meter replacement. Electricity use falls by about 13 percent as a result of the switch, a decrease that persists for the following year. This creates a tradeoff for the utility: revenue from consumption falls but more of it is recovered on time and at a lower cost. The benefits to the electric utility outweigh the costs, on average, though results are very heterogeneous. Poorer customers and those with a history of delinquent payment behavior show the greatest improvement in profitability when switched to a prepaid meter. These findings point to an important role for metering technologies in expanding energy access for the poor.

Notes:

Print version record

December 2016.