Pre-paid meters and household electricity use behaviors: Evidence from Addis Ababa, Ethiopia

Abstract

In low-income countries such as Ethiopia, pre-paid metering is often argued to alleviate several challenges with traditional electricity billing systems, including high non-payment rate, pilferage and fraud, administrative and enforcement costs for utilities, and inflexibility and incongruence of bills with poorer consumers' irregular income. Despite increasing adoption of this technology, few studies examine its causal impacts on household behaviour. This paper examines the impacts of pre-paid metering on electricity consumption, ownership of appliances, level of satisfaction, and cooking behaviour in Addis Ababa, the capital of Ethiopia. We employ propensity score matching and instrumental variable techniques to control for the non-random selection into pre-paid metering. Results indicate that pre-paid customers have significantly lower electricity consumption compared to those with traditional meters, and express greater satisfaction with utility service. This technology also has a positive, but modest and statistically insignificant impact on total appliance ownership, and a positive and significant impact on ownership of energy-efficient lights. Impacts are heterogeneous across customers, however: those who are more educated, who have higher income, and who do not share meters tend to reduce electricity use more. The results suggest that pre-paid meters have had positive impacts on households and the utility in Addis Ababa.