Mozambique - sample survey of low voltage electricity customers

Joint United Nations Development Programme World Bank Energy TJ MESMAP Energy Sector Management Assistance Programme Mozambique Sample Survey of Low Voltage Electricity Customers Report No. 195/97 June 1997  JOINT UNDP/WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) is a special global technical assistance program run by the World Bank's Industry and Energy Department. ESMAP provides advice to governments on sustainable energy development. Established with the support of UNDP and 15 bilateral official donors in 1983, it focuses on policy and institutional reforms designed to promote increased private investment in energy and supply and end-use energy efficiency; natural gas development; and renewable, rural, and household energy. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the governments and other institutions providing financial support, and the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Finance and Private Sector Development, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energy planners, and economists from the Industry and Energy Department of the World Bank. The Director of this Department is also the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and public and private donors from countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States. FURTHER INFORMATION An up-to-date listing of completed ESMAP projects is appended to this report. For further information or copies of completed ESMAP reports, contact: ESMAP c/o Industry and Energy Department The World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.  MOZAMBIQUE SAMPLE SURVEY OF LOW VOLTAGE ELECTRICITY CUSTOMERS June 1997  ABBREVIATIONS DNE National Directorate for Energy EDM Electricidade de Mozambique ESMAP Energy Sector Management Assistance Program GWh gigawatt hour kVA kilovolt ampere kW kilowatt kWh kilowatt hour LV low voltage MT Metical (Rate of exchange as of January 1996: 11,000 MT/US$)  TABLE OF CONTENTS EXECUTIVE SUMMARY .............................................i 1. INTRODUCTION .............................................1 2. DOMESTIC CUSTOMERS .............................................2 Total System ............................................2 Southern System (Maputo) .............................................9 Central System ............................................ 13 Northern System ............................................ 14 Isolated Areas ............................................ 15 3. GENERAL CUSTOMERS ............................................ 17 Maputo ............................................ 17 RestofSystem ............................................ 19 TABLES 2.1 Stoves/Fuel Used for Cooking by Income Group ...................... .......................4 2.2 Power Outages ..............................................6 2.3 Reliability and Service Assessment .............................................7 2.4 Switch Away Customers .............................................8 2.5 Preferred Alternative to Electricity ............................................8 2.6 Cooking Habits and Air Conditioning by Income Level ............................................. 10 2.7 Reliability Trend .............................................I 1 2.8 Service Assessment ............................................. 12 2.9 Preferred Alternatives to Electricity ............................................. 12 2.10 Preferred Alternatives to Electricity ............................................. 15 3.1 Service Assessment ............................................. 18 APPENDIX Appendix 1: Sample Design ............................................. 20 Appendix 2: Survey Results ............................................. 26 Appendix 3: Sample Survey Methods - An Overview ............................................. 66 Appendix 4: Mathematical Package for Survey Data Processing ........................................ 80 Appendix 5: Questionnaire ............................................ 83  EXECUTIVE SUMMARY 1. This study was carried out by the World Bank and ESMAP, in close cooperation with the Ministry of Mineral Resources and Energy and DNE, to gain insight into the situation of EDM's LV-customers of the "domestic" and "general" tariff type. In particular, since EDM plans to raise average tariffs to 9.5 UScents/kWh by 1999, there have been concerns about the potential response of this customer group to the scheduled rate increases. A survey conducted in early 1996 was intended to shed light on this issue. The findings of this study are based on the survey, covering a sample of 912 LV-customers randomly selected from the population of customers served through EDM's southern, central and northern grid, and from electricity users supplied in two isolated areas (not connected to any of the major grids). Domestic Grid-Connected Customers 2. The survey found that almost one in two domestic customers interviewed (i.e., the head of a household/family) is a civil servant, and one in five is self-employed. Both groups account for 70% of EDM's clients subjected to domestic tariffs. Almost 43% of the households visited have a monthly income of less than MT 0.5 million, 42% earn between MT 0.5 and MT 1.5 million, and the top 15% eam more than MT 1.5 million a month. 3. Households owning a telephone and renting a house/apartment on average spend 580,000 MT/month, not including expenditures on food and transport. Average monthly expenditures are highest in Chimoio (MT 955,000) and lowest in Nampula (MT 280,000), and they increase with income, from MT 328,000 (low-income households) to MT 1,400,000 (high-income households). However, since not all households questioned have a telephone or pay a monthly rent, and because expenditures on food and other items are not included, the above estimates, while being an indicator of relative differences across households or regions, do not permit inferences about expenditure levels or ratios. 4. The households interviewed on average consume 227 kWh a month. Average consumption varies between 156 kWhlmonth (low income) and 492 kWh/month (high income). Also, expenditures on electricity rise with income, from 118,000 MT/month (low income) to 294,000 MT/month (highest income), with a mean of 168,000 MT/month. On the other hand, the share of household expenditures recorded by the survey and accounted for by electricity is inversely related to the level of income, i.e., decreases from 35% (low income) to 21% (high income), with a mean of 29%.1 As is explained above, these estimates tend to inflate the significance of expenditures on electricity and, therefore, should only be seen as a proxy for relative differences.  - ii - 5. All households interviewed use electricity for lighting, and nine out of ten have a radio. About 65% own a TV-set and a freezer, and 43% said that they use electricity for cooking. Eight out of ten respondents have an electric iron, and almost 50% use a fan. Air conditioning (on average 20%) shows the largest spread in end use: Only 10% of the low-income customers have an air conditioner, compared to 44% of the high-income households. Other appliances play a minor role.2 6. The survey found that even though woodfuel still is the dominant source of cooking energy (mainly among the lowest income households), electric cooking plays a considerable part. About 39% of the households interviewed use charcoal in tandem with fuelwood, while 34% cook mainly with electricity. LPG is used by 13.6%, 7.6% use LPG in tandem with electricity, and 3% use it in combination with fuelwood and charcoal.3 Electric cooking is most common among higher income households. The higher the income, however, the greater is the tendency to switch from electricity to LPG or to use LPG in addition to electricity. 7. Electric cooking and air conditioning have a marked impact on the level of electricity consumption. When electric stoves are used, monthly household consumption is 323 kWh, compared to 163 kWh consumed by households that do not cook with electricity. Households using an air conditioner consume 421 kWh/month, while those without air conditioning use 183 kWh/month. Thus, the amount of electricity used by households equipped with air conditioners is almost twice as high than that of the average domestic customer (227 kWhlmonth). 8. Almost one third of the domestic customers reported that they experienced disruptions in supply more than twice a week, and 40% said the disruptions were normally longer than two hours. Most complaints came from low-income households. The supply to 36% of the low-income households was disrupted more than twice a week (compared to 29% of the high-income households), and 47% of the low-income customers told the duration of outages was longer than two hours (compared to 30% of the high-income households). 9. The share of customers affected by power outages is much higher in the northern and central region than along the southern grid. This is a plausible finding since the transmission and distribution systems in the central and northern part of the country are in a comparatively poor shape. Almost 44% of the northern and 38.4% of the central system customers said the disruptions occurred more than twice a week, while only 28% of the southern customers made this complaint. In the same vein, the share of customers hit by disruptions with a length of more than two hours is 63.7% in the north and 47.2% in the central region, compared to 33.1% in the south. Overall, the duration of outages seems to be a greater concern than the frequency of disruptions. 2 Typically, high-end appliances such computers, micro waves, vacuum cleaners, hair dryers and toasters are used by customers falling into the highest income category. 3 Currently, LPG is not being distributed in the northern region.  10. Nevertheless, 55.5% of the domestic customers said the reliability of service did improve, and only 15.5% felt that the situation got worse. The share of customers saying the supply became less reliable is lowest in the southern system (12.8%) and highest in the northern system (24%). Along the northern grid, though, almost 65% of the respondents stated that the quality of service got better (compared to 56% in the south and 42% in the central system). 11. The share of customers who regard EDM's service as "good" is highest among low-income households (24%) and lowest among the most affluent ones (16%). This suggests that badly serviced customers, which tend to have a low income, are more satisfied with EDM (or, for that matter, with having access to electricity) than the better served higher-income households. In the northern system, which has the largest share of customers saying the reliability of supply had improved, EDM's ratings are worst. Almost one out of three northern customers stated that EDM provides a "bad" service, and only one in five said the service is "good". Hence, northern customers, while appreciating the recent improvements in reliability, are still less satisfied with EDM's performance than households connected to the southern or central grid. 12. About 15% of the customers questioned expressed the view that they would cease using electricity if tariffs continued to rise. The share of customers saying they would switch away from electricity varies from 9.1% in the southern system to formidable 36.3% in the northern system. The customers' response, however, does not indicate that the willingness to accept higher tariffs increases with income. 13. Almost 40% of the customers said they would substitute kerosene for electricity if the latter were no longer affordable; 52% would replace electricity mainly with kerosene or with kerosene in combination with charcoal. And while kerosene scores best among the poorest households (straight kerosene is preferred by 42.1%, and kerosene in tandem with charcoal by 56%), one out of three customers with the highest income favors LPG and 53.6% of them would opt either for straight LPG or for LPG in combination with charcoal. Only the poorest households do not consider LPG as an alternative to electricity. Except for the isolated areas, almost no household would switch back to fuelwood, and only one in ten respondents would use charcoal in lieu of electricity.4 General Grid-connected Customers 14. Customers subject to "general" tariffs constitute a rather heterogeneous group, notably those with a monthly turnover in excess of MT 10 million (about 45%). Most of the businesses run by general customers can be classified as "services", mainly retailing; only a small number of workshops and manufacturing activities were encountered. Regional differences (between customers in the southern system and those operating in 4 It should be noted that the questionnaire did not explicitly ask for the end uses in which households would displace electricity. The customers only stated which fuel they would use in lieu of electricity if electricity were too expensive, without regard to a particular end use.  -liv- other parts of the country) seem less pronounced than in the case of domestic electricity users. 15. In terms of monthly expenditures, the low-turnover and high-turnover customers differ by a factor of ten. Average monthly electricity bills vary between MT 400,000 and MT 1,500,000. As a rule, general customers reported that the quality of service provided by EDM was not quite as bad as that described by domestic customers. However, they seemed less satisfied with EDM's performance than their domestic counterparts. Yet only 6.2% said they would quit using electricity if tariffs continued to rise. IsolatedAreas 16. With 72.2%, the share of electricity users accounted for by civil servants is disproportionately high in isolated areas. Monthly expenditures (net of food etc.), on the other hand, are significantly lower than among the grid-connected customers (MT 200,000 vs. MT 580,000). Electric cooking and other high-end uses are uncommon. About 83% of the households interviewed cook with woodfuel, and only 2.4% have an electric stove. 17. Judged by the response of the households questioned, the quality of service in isolated areas leaves as much to be desired as does the service standard experienced by grid-connected customers. However, only 2.4% of the isolated electricity users said that the reliability of supply had declined, and no more than 2.4% gave a bad rating for the utility's performance. If electricity became too expensive, 22% would resort to other forns of energy, and 44.5% of them would choose kerosene as a substitute. Conclusions 18. In conclusion, most domestic customers interviewed seem to be well off by Mozambiquen standards, and they clearly do not want to miss electricity, even when the quality of service is relatively poor.5 Higher rates would reduce demand (as is the case with every ordinary good), but the rate increases sought for by EDM are unlikely to crowd out a large number of this customer group. Still, 15% of the customers questioned said they would discontinue purchasing electricity if it became too expensive (without stating what the threshold of affordability would be). However, the strong preference given to kerosene and LPG as potential substitutes for electricity and the low propensity to switch back to traditional sources of energy such as charcoal or fuelwood suggest that most households connected to the grid are more concerned about fuel and service quality than about costs.6 It 5 It should be kept in mind in this connection that only 5% of the total population have access to electricity. 6 Since the survey did not collect data on the relative costs of fuels and appliances, it is assumed that income-based preferences revealed by purchases are indicative of cost differentials: Currently, low- income households use mainly woodfuel (rather than kerosene or LPG) in addition to electricity. Therefore, woodfuel can be deemed to be more "affordable" than the higher-quality substitutes kerosene and LPG.  -V.- can therefore be assumed that in general the willingness to pay for electricity is much higher than the rates currently charged by EDM. This study expects that if EDM implements the planned increases in rates, most households will continue to buy electricity, but in smaller quantities. 19. Tariff increases will be least acceptable for poor households, notably those in the northern system (and in isolated areas) where income is lowest. The northern system has the highest share of new customers; it suffers from the highest rate of non-technical losses, and it has the largest proportion of customers saying they would cease to use electricity if tariffs continued to rise. In addition, the quality of service has been much worse than in the rest of the country, and most households with access to electricity still use woodfuel for cooking (87%). In short, northern system customers face tighter budget constraints and their attachment to electricity is not as deep as in other parts of the country. Hence, the probability that domestic customers drop out of the electricity market and resort to alternative fuels is much higher in the northern region than along the southern and central network. Similar arguments apply to the domestic electricity users in isolated areas. 20. Finally, the situation in the northem system is likely to foreshadow the problems that EDM will meet in the wake of its ambitious electrification program aiming at about 5000 new connections a year. Therefore, the response of the northern customers to the scheduled tariff increases and other measures (enforcement of revenue collection, introduction of prepaid meters) should be closely monitored so that lessons can be dawn for EDM's grid extension policy.  1. INTRODUCTION 1.1 This study was prepared by the World Bank and ESMAP, in close cooperation with the Ministry of Mineral Resources and Energy and DNE, to apprehend the situation of EDM's small LV-customers (