Water Electricity And The Poor

Utility subsidies to consumers of water and electricity services are often justified as a mechanism for making services affordable for the poor. After all, an estimated 1.1 billion people in the developing world lack access to safe water, 2 billion are without electricity, and 2.4 billion without sanitation. But critics object that such subsidies can work against improving quality of service to existing consumers and extending access to unconnected households. Financially strapped utilities are often inefficient, provide low-quality services, and lag behind in expanding networks. During the 1990s, experts urged that water and electricity services should charge enough to fully cover costs. Households could spend 10-50 percent more on water and electricity without major effects on poverty levels, but in many countries much larger price increases are needed to recover costs. A substantial proportion of the population of lower income countries may find it difficult to pay the full cost of services.

This book reviews the prevalence and variants of consumer subsidies found in the developing world and the effectiveness of these subsidies for the poor. It places consumer subsidies in a broader social protection framework and compares them with poverty-focused programmes in other sectors using a common metric. It concludes that the most common subsidy instruments perform poorly in comparison with most other transfer mechanisms. Alternative consumption and connection subsidy mechanisms show more promise, especially when combined with complementary non-price approaches to making utility services accessible and affordable to poor households. The many factors contributing to those outcomes are dissected, identifying those that can be controlled and used to improve performance.

Subsidies for utility services are widespread in the water supply, sanitation, and electricity sectors. One motivation is to improve social welfare of the poor by facilitating their access to and use of such services, as well as by redistributing resources to augment their purchasing power. At the same time, such subsidies have often been seen as engendering resource use inefficiencies and financially weak utilities, which hobble efforts to expand and improve service. Those adverse consequences have often been used to argue against charging consumers less than the cost of service. The impact of subsidies on both counts has been the subject of much controversy. The debate has gained renewed vigor as governments seek to ensure that all citizens have ready access to minimal levels of such services while striving to recover a larger share of the costs of utility operations to generate the resources required to sustain service and to improve its quality.This book makes a substantive contribution to our thinking on a key facet of the debate: the distributional impact of consumer subsidies for urban water supply and electricity services. Drawing together empirical research across a wide range of countries, it documents the prevalence and variants of consumer subsidies found in the developing world and presents a number of indicators that are useful in assessing the degree to which such subsidies benefit the poor. The findings are placed in a broader social protection framework where comparisons are drawn with poverty focused programs in other sectors using a common metric.The book's findings are sobering. It concludes that the most common subsidy instruments (quantity-targeted subsidies such as those delivered through increasing block tariffs) perform poorly in comparison with most other transfer mechanisms. Alternative consumption and connection subsidy mechanisms show more promise, especially when combined with complementary nonprice approaches to making utility services accessible and affordable to poor households. Throughout, the authors dissect the many factors contributing to those outcomes, identifying those that policy makers can control and use to improve performance.

"Subsidies to residential utility customers are popular among policymakers, utility managers, and utility customers alike, but they are nonetheless the subject of much controversy. Utility subsidies are seen as a way to help make utility service affordable for poor households and as an alternative mechanism for income redistribution. These arguments in favor of subsidies are countered by serious concerns about their adverse effects on consumer behavior, utility operations, and the financial health of utilities. Both the affordability and redistributive arguments for subsidies are based on the presumption that poor households benefit disproportionately from water and electricity subsidies, that they are well-targeted to the poor. The authors test this assumption by examining the extent to which the poor benefit from consumption and connection subsidies for water and electricity services. Their analysis of a wide range of subsidy models from around the developing world shows that the most common form of utility subsidy-quantity-based subsidies delivered through the tariff structure-are highly regressive. Geographically targeted or means-tested subsidies do better, and in many cases have a progressive incidence, but large numbers of poor households remain excluded. Low levels of coverage and metering severely limit the effectiveness of consumption subsidy schemes to reach the poor. Simulations suggest that connection subsidies are an attractive alternative for low coverage areas, but only if utilities have the means and motivation to extend network access to poor households and only if those households choose to connect. "--World Bank web site.

"Subsidies to residential utility customers are popular among policymakers, utility managers, and utility customers alike, but they are nonetheless the subject of much controversy. Utility subsidies are seen as a way to help make utility service affordable for poor households and as an alternative mechanism for income redistribution. These arguments in favor of subsidies are countered by serious concerns about their adverse effects on consumer behavior, utility operations, and the financial health of utilities. Both the affordability and redistributive arguments for subsidies are based on the presumption that poor households benefit disproportionately from water and electricity subsidies, that they are well-targeted to the poor. The authors test this assumption by examining the extent to which the poor benefit from consumption and connection subsidies for water and electricity services. Their analysis of a wide range of subsidy models from around the developing world shows that the most common form of utility subsidy-quantity-based subsidies delivered through the tariff structure-are highly regressive. Geographically targeted or means-tested subsidies do better, and in many cases have a progressive incidence, but large numbers of poor households remain excluded. Low levels of coverage and metering severely limit the effectiveness of consumption subsidy schemes to reach the poor. Simulations suggest that connection subsidies are an attractive alternative for low coverage areas, but only if utilities have the means and motivation to extend network access to poor households and only if those households choose to connect. "--World Bank web site.

Drawing on cases from electricity distribution and other infrastructure industries, and from experiences spanning Asia, Africa and Latin America, this book examines new business models to bring basic utility services to the four billion people comprising the base of the socio-economic pyramid. Access to utilities is key for achieving economic growth and improving the lives of citizens worldwide. Throughout the world, people continue to suffer severe electricity shortages and lack potable water. Contributors to this work, who include academics and practitioners from the World Bank, the Inter-American Development Bank, USAID, the AES Corporation and several academic institutions, show that access to utilities is key for achieving economic growth and improving the lives of citizens worldwide. They offer analysis of business models in utilities serving the bottom of the pyramid (BOP) through market mechanisms and showcase innovations in organizational processes and services in order to effectively reach the BOP. The book also discusses the key factors in developing profitable business ventures that can engage the world's four billion poor. The book is aimed at both academics with an interest in applied research in business and the role of markets in servicing the poor worldwide, practitioners, public sector organizations and NGOs engaged in supplying,financing, and managing microcredit and market initiatives with low-income sectors, and international utility companies and other firms seeking to expand in emerging markets. In addition, the book will be useful as a text in a variety of courses and will give readers a deeper understanding of the potential for business to alleviate poverty, as well as inspire a deeper involvement in social issues as a career alternative or voluntary activity.

Rarely has such a contentious and complex issue emerged in twenty-first century development as that of water. In this book, co-editors David Hemson, Kassin Kulindwa, Haakon Lein, and Adolfo Mascarenhas use a global spread of case studies to illustrate that water is not simply an issue of physical scarcity, but rather a complex and politically-driven issue with profound future implications, both in the developing world and outside it. The book argues that for the international community to achieve the Millennium Development Goals, governments must step in to protect the rights of the poor. Here, the links between poverty and access to clean water are explored with an eye to political reform that can end the exploitative policies of big business and help to shape a more equitable world for all.