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Averting Expenditures and Willingness to Pay for Electricity Supply Reliability

Published online by Cambridge University Press:  01 December 2020

Naghmeh Niroomand  and
Glenn P. Jenkins
Naghmeh Niroomand
Affiliation:
Automotive Powertrain Technologies Laboratory, Empa - Swiss Federal Laboratories for Materials Science and Technology, Ueberlandstrasse 129, CH-8600Duebendorf, Switzerland
Glenn P. Jenkins*
Affiliation:
Department of Economics, Queen’s University, Kingston, ONK7L 3N6, Canada Department of Economics, Eastern Mediterranean University, Mersin10, Turkey
*
*e-mail: jenkins@econ.queensu.ca
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Abstract

Nepal has suffered from the worst electricity shortages in South Asia. This study is an attempt to measure the willingness to pay for an improved service using a model of revealed preference. Respondents are asked about the actions they are taking to reduce the impact on their household or business of scheduled and unscheduled outages and more stable voltage. We estimate the averting expenditures that were being incurred to compensate for the lack of reliability of the electricity service. The estimated cost of the averting actions as a percentage of the electricity bills is 53 % for households, 47 % for small businesses, 46 % for medium businesses, and 35 % for large businesses. Based on the estimations, we find that in 2017 the annual benefit from improving the reliability of the electricity service would be approximately US$ 188 million with a present value over 20 years of US$ 1.6 billion.

Keywords

averting expenditureselectricityreliabilityrevealed preferencewillingness to pay
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 11 , Issue 3 , Fall 2020 , pp. 501 - 523
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Society for Benefit-Cost Analysis

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