IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v140y2020ics0301421520301373.html
   My bibliography  Save this article

Determination of the lifeline electricity tariff for Lesotho

Author

Listed:
  • Mpholo, Moeketsi
  • Mothala, Matsoso
  • Mohasoa, Lebohang
  • Eager, Dan
  • Thamae, Retselisitsoe
  • Molapo, Tsita
  • Jardine, Tom

Abstract

Lesotho has a poverty rate above 50%, this renders a bulk of households connected to the grid unable to purchase enough energy to cover the essential basic needs at the current tariffs. This is supported by the declining average household consumption reported by Lesotho Electricity Company (LEC) despite an increasing customer base. Even more crucial, for low income countries, tariff levels should balance social stability, affordability, fairness, energy efficiency as well as cost recovery especially because the poor make up the majority of the population. Based on the poverty line, a lifeline tariff of 0.5 to 0.6 Maloti(M)/kWh (2017 tariffs) for a threshold of up to 30 kWh/month is proposed which is 35%–42% lower than the current domestic tariff of 1.424 M/kWh. The standard domestic tariff will need to increase to 1.856 M/kWh to allow for cross-subsidisation and hence maintain the financial standing of the utility company. The threshold capacity is based on the observation that in 2016, around 30% of grid connected households consumed less than 30 kWh/month which is enough electricity to cover the basic needs of an average household. Hence, an increasing block tariff (IBT) approach is proposed such that the first 30 kWh/month are set at a lifeline tariff and any excess is charged at a standard rate which is set such that it cross-subsidises the lifeline tariff.

Suggested Citation

  • Mpholo, Moeketsi & Mothala, Matsoso & Mohasoa, Lebohang & Eager, Dan & Thamae, Retselisitsoe & Molapo, Tsita & Jardine, Tom, 2020. "Determination of the lifeline electricity tariff for Lesotho," Energy Policy, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:enepol:v:140:y:2020:i:c:s0301421520301373
    DOI: 10.1016/j.enpol.2020.111381
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421520301373
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2020.111381?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sun, Chuanwang & Lin, Boqiang, 2013. "Reforming residential electricity tariff in China: Block tariffs pricing approach," Energy Policy, Elsevier, vol. 60(C), pages 741-752.
    2. World Bank, 2019. "Lesotho Poverty Assessment," World Bank Publications - Reports 33030, The World Bank Group.
    3. Kebede, Bereket, 2006. "Energy subsidies and costs in urban Ethiopia: The cases of kerosene and electricity," Renewable Energy, Elsevier, vol. 31(13), pages 2140-2151.
    4. Gassmann, Franziska, 2014. "Switching the lights off: The impact of energy tariff increases on households in the Kyrgyz Republic," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 755-769.
    5. Hosier, R. H. & Kipondya, W., 1993. "Urban household energy use in Tanzania : Prices, substitutes and poverty," Energy Policy, Elsevier, vol. 21(5), pages 454-473, May.
    6. Karekezi, Stephen & Kimani, John, 2002. "Status of power sector reform in Africa: impact on the poor," Energy Policy, Elsevier, vol. 30(11-12), pages 923-945, September.
    7. Lin, Boqiang & Jiang, Zhujun, 2012. "Designation and influence of household increasing block electricity tariffs in China," Energy Policy, Elsevier, vol. 42(C), pages 164-173.
    8. Winkler, Harald & Simões, André Felipe & Rovere, Emilio Lèbre la & Alam, Mozaharul & Rahman, Atiq & Mwakasonda, Stanford, 2011. "Access and Affordability of Electricity in Developing Countries," World Development, Elsevier, vol. 39(6), pages 1037-1050, June.
    9. Price, Catherine Waddams & Pham, Khac, 2009. "The impact of electricity market reform on consumers," Utilities Policy, Elsevier, vol. 17(1), pages 43-48, March.
    10. Williams, J.H. & Ghanadan, R., 2006. "Electricity reform in developing and transition countries: A reappraisal," Energy, Elsevier, vol. 31(6), pages 815-844.
    11. Dube, Ikhupuleng, 2003. "Impact of energy subsidies on energy consumption and supply in Zimbabwe. Do the urban poor really benefit?," Energy Policy, Elsevier, vol. 31(15), pages 1635-1645, December.
    12. Karekezi, Stephen & Majoro, Lugard, 2002. "Improving modern energy services for Africa's urban poor," Energy Policy, Elsevier, vol. 30(11-12), pages 1015-1028, September.
    13. Severin Borenstein, 2012. "The Redistributional Impact of Nonlinear Electricity Pricing," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 56-90, August.
    14. Louw, Kate & Conradie, Beatrice & Howells, Mark & Dekenah, Marcus, 2008. "Determinants of electricity demand for newly electrified low-income African households," Energy Policy, Elsevier, vol. 36(8), pages 2814-2820, August.
    15. Necmiddin Bagdadioglu & Alparslan Basaran & Catherine Waddams Price, 2007. "Potential Impact of Electricity Reforms on Turkish Households," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2007-08, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    16. Fankhauser, Samuel & Tepic, Sladjana, 2007. "Can poor consumers pay for energy and water? An affordability analysis for transition countries," Energy Policy, Elsevier, vol. 35(2), pages 1038-1049, February.
    17. Vagliasindi, Maria, 2012. "Implementing energy subsidy reforms : an overview of the key issues," Policy Research Working Paper Series 6122, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rossi, Federico & Heleno, Miguel & Basosi, Riccardo & Sinicropi, Adalgisa, 2021. "LCA driven solar compensation mechanism for Renewable Energy Communities: the Italian case," Energy, Elsevier, vol. 235(C).
    2. Jan, Muhammad Zain & Ullah, Kafait & Abbas, Faisal & Khalid, Hassan Abdullah & Bajwa, Tariq M., 2023. "Barriers to the adoption of social welfare measures in the electricity tariff structure of developing countries: A case of Pakistan," Energy Policy, Elsevier, vol. 179(C).
    3. Wang, Xiaolei & Wei, Chunxin & Wang, Yanhua, 2022. "Does the current tiered electricity pricing structure still restrain electricity consumption in China's residential sector?," Energy Policy, Elsevier, vol. 165(C).
    4. Klug, Thomas W. & Beyene, Abebe D. & Meles, Tensay H. & Toman, Michael A. & Hassen, Sied & Hou, Michael & Klooss, Benjamin & Mekonnen, Alemu & Jeuland, Marc, 2022. "A review of impacts of electricity tariff reform in Africa," Energy Policy, Elsevier, vol. 170(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hung, Ming-Feng & Chie, Bin-Tzong, 2017. "The long-run performance of increasing-block pricing in Taiwan's residential electricity sector," Energy Policy, Elsevier, vol. 109(C), pages 782-793.
    2. Liu, Chang & Lin, Boqiang, 2020. "Is increasing-block electricity pricing effectively carried out in China? A case study in Shanghai and Shenzhen," Energy Policy, Elsevier, vol. 138(C).
    3. He, Xiaoping & Reiner, David, 2016. "Electricity demand and basic needs: Empirical evidence from China's households," Energy Policy, Elsevier, vol. 90(C), pages 212-221.
    4. Li, Lanlan & Luo, Xuan & Zhou, Kaile & Xu, Tingting, 2018. "Evaluation of increasing block pricing for households' natural gas: A case study of Beijing, China," Energy, Elsevier, vol. 157(C), pages 162-172.
    5. Lin, Boqiang & Chen, Xing, 2018. "Is the implementation of the Increasing Block Electricity Prices policy really effective?--- Evidence based on the analysis of synthetic control method," Energy, Elsevier, vol. 163(C), pages 734-750.
    6. Ming-Feng Hung & Bin-Tzong Chie & Huei-Chu Liao, 2020. "A Comparison of Electricity-Pricing Programs: Economic Efficiency, Cost Recovery, and Income Distribution," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(1), pages 143-163, February.
    7. Stefan Bouzarovski & Saska Petrova & Sergio Tirado-Herrero, 2014. "From Fuel Poverty to Energy Vulnerability: The Importance of Services, Needs and Practices," SPRU Working Paper Series 2014-25, SPRU - Science Policy Research Unit, University of Sussex Business School.
    8. Ahlborg, Helene & Boräng, Frida & Jagers, Sverker C. & Söderholm, Patrik, 2015. "Provision of electricity to African households: The importance of democracy and institutional quality," Energy Policy, Elsevier, vol. 87(C), pages 125-135.
    9. Jacome, Veronica & Ray, Isha, 2018. "The prepaid electric meter: Rights, relationships and reification in Unguja, Tanzania," World Development, Elsevier, vol. 105(C), pages 262-272.
    10. Prasanna, Ashreeta & Mahmoodi, Jasmin & Brosch, Tobias & Patel, Martin K., 2018. "Recent experiences with tariffs for saving electricity in households," Energy Policy, Elsevier, vol. 115(C), pages 514-522.
    11. Wu, Ya & Zhang, Li, 2017. "Evaluation of energy saving effects of tiered electricity pricing and investigation of the energy saving willingness of residents," Energy Policy, Elsevier, vol. 109(C), pages 208-217.
    12. Trotter, Philipp A. & McManus, Marcelle C. & Maconachie, Roy, 2017. "Electricity planning and implementation in sub-Saharan Africa: A systematic review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 74(C), pages 1189-1209.
    13. Arthur, Maria de Fatima S.R. & Zahran, Sammy & Bucini, Gabriela, 2010. "On the adoption of electricity as a domestic source by Mozambican households," Energy Policy, Elsevier, vol. 38(11), pages 7235-7249, November.
    14. Khanna, Nina Zheng & Guo, Jin & Zheng, Xinye, 2016. "Effects of demand side management on Chinese household electricity consumption: Empirical findings from Chinese household survey," Energy Policy, Elsevier, vol. 95(C), pages 113-125.
    15. Mazur, Christoph & Hoegerle, Yannick & Brucoli, Maria & van Dam, Koen & Guo, Miao & Markides, Christos N. & Shah, Nilay, 2019. "A holistic resilience framework development for rural power systems in emerging economies," Applied Energy, Elsevier, vol. 235(C), pages 219-232.
    16. Ahlborg, Helene & Hammar, Linus, 2014. "Drivers and barriers to rural electrification in Tanzania and Mozambique – Grid-extension, off-grid, and renewable energy technologies," Renewable Energy, Elsevier, vol. 61(C), pages 117-124.
    17. van der Kroon, Bianca & Brouwer, Roy & van Beukering, Pieter J.H., 2013. "The energy ladder: Theoretical myth or empirical truth? Results from a meta-analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 20(C), pages 504-513.
    18. Jiang, Haiyan & Hu, Yuanyuan & Zhang, Honghui & Zhou, Donghua, 2018. "Benefits of Downward Earnings Management and Political Connection: Evidence from Government Subsidy and Market Pricing," The International Journal of Accounting, Elsevier, vol. 53(4), pages 255-273.
    19. Gassmann F. & Tsukada R., 2013. "Switching off or switching source : energy consumption and household," MERIT Working Papers 2013-047, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    20. Maheshwar Giri & Binoy Goswami, 2018. "Determinants of Household’s Choice of Fuel for Cooking in Developing Countries: Evidence from Nepal," Journal of Development Policy and Practice, , vol. 3(2), pages 137-154, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:140:y:2020:i:c:s0301421520301373. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.