Access to electricity has risen dramatically – together with household incomes, urbanization, and the adoption of modern appliances – in many developing countries, yet the provision of reliable and uninterrupted electricity remains a challenge for policy makers and energy providers.
Many of these countries subsidize electricity for residential and agricultural consumers, but repayment rates are still very low because of electricity theft and billing irregularities, while electricity transmission and distribution losses reach very high levels.
There are often therefore insufficient investment in new capacity and in maintenance of existing infrastructure, so electricity providers often resort to outages or rolling blackouts to manage the gap between supply and demand.
This vicious cycle perpetuates if poor energy supply influences individuals’ willingness to pay, actual payments of bills or theft. The unfortunate reality is that, in many cases, electricity theft and non-payment can be both common and acceptable, cementing itself as the norm. It is therefore important to understand the nature of these social norms and how they can be shifted. The picture is enriched by the role of the government who provides to utilities these missed payments in order to retain the political support of the poor households and avoid civil unrest, should the firm disconnect areas with many non-paying users.
Better designed pricing and subsidy policies can be a solution to break the cycle, as suggest Shaun McRae on the case of Colombia.