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Valuing Electricity Service Attributes: A Choice Experiment Study in Madhya Pradesh, India

Presentation by

Herath Gunatilake
Clean Energy Forum 8 June 2012

Introduction
• • • • • 1.2 Billion Investment on distribution improvement Electricity and well-being of households Matching service quality with consumer preferences Electricity is a composite commodity Unbundling the Demand – Hours of supply Quality (voltage) Customer service Accuracy/transparency of billing • Values of the service attribute – Development Impacts

Methods
• Stated vs Revealed Preference methods • Unbundling – Stated Preference Method • Choice Experiments:

Attribute and levels Experimental design Questionnaire development Sampling Econometric modeling

Service Attributes and Their Levels
Attribute Levels

1) Hours of Supply

(i) 24 hours
(ii) 18 hours: 5 am to 11 pm (iii) 12 hours: 5 am – 12 noon and 6pm – 11 pm (iv) 8 hours irregular

2) Quality of Supply

(i) No or minimal voltage fluctuations (ii) Continue with poor quality

3) Customer Service

(i) A dedicated customer service (ii) Continue to get the same level of customer service

4) Billing

(i) Easy to read, understand and accurate bill regularly each month. (ii) Continue with current billing system

Example of a Choice Set

Access and Satisfaction with Service Attributes
Attribute Number of days household get power per month Number of hours household get power in a day Number of times in a day supply is interrupted Longest duration for continuous power Shortest duration for continuous power Attitude Questions Satisfaction with hours of service Very unsatisfied Somewhat unsatisfied Neutral Power outage fixed or goes off any time abruptly Always know times of power outage Sometimes know about timings Power goes off at uncertain times Symptoms of poor voltage quality seen in power supply How often do bad quality problems occur Rarely Sometimes Almost always Satisfaction with quality of electricity Very unsatisfied Somewhat unsatisfied Neutral Summer season Other season 25.3 25.8 5.7 5.9 3.0 3.1 3.0 3.0 1.2 1.2 % Households Reporting 84.32% 10.91% 1.59% 24.42% 20.10% 55.48% 98.08% 46.00% 17.23% 36.77% 80.21% 14.80% 2.17% 81.59% 11.31% 2.95% 22.50% 15.05% 62.45% 98.31% 39.06% 19.98% 40.96% 80.65% 14.11% 1.94%

Econometric Model

bill echr24 echr18 echr12 ecquality ecservice ecbilling optout echr24•ecquality echr24•ecservice echr24•ecbilling

= = = = = = = = = = =

monthly bill amount offered for the scheme; effect codes for 24 hours supply effect codes for 18 hours supply effect codes for 12 hours supply effect codes for good quality / voltage of supply effect codes for good customer service effect codes for accurate and easy billing 1 if respondent does not choose any of the schemes interaction term between echr24 and equality; interaction term between echr24 and ecservice; and interaction term between echr24 and ecbilling;

Conditional Logit Model Results
Variable
Offered bill 24 Hr Supply 18 Hr Supply 12 Hr Supply Quality

Coefficient
-0.015** 0.884** 0.042 -0.177** 0.419**

Standard Error
0.001 0.043 0.040 0.042 0.025

P>|z| 0.00 0.00 0.29 0.00 0.00

WTP
106 52 37 55 37

Cust. Service
Accurate Billing Optout Hr24-quality Hr24-service Hr24-billing

0.286**
0.343** -1.802** -0.005 0.059 0.009

0.023
0.025 0.079 0.041 0.042 0.045

0.00
0.00 0.00 0.91 0.17 0.84

45
-1 8 1 251

Total WTP

Comparison of WTP for Combination of Service Attributes

Relative Contributions to WTP of Attributes for different Hours of supply

24-Hours Supply

12-Hours Supply

Predicted Uptake (%) by Income for Different Levels of Service Provision with Block Tariff

Conclusions
• Hours of supply captures the highest value • Other attributes together contribute 56% to the WTP • Other Attributes are more important when hours of supply is less than 24 • Uptake rate increase significantly when every aspect of service improves simultaneously • Understanding consumer preference and aligning the service accordingly is necessary to enhance development impacts

Thank You.