Ten years of reforms in getting electricity

Electricity is essential for businesses. Power shortages negatively impact firms’ revenues, cause losses in output, and hinder productivity and growth. Since Getting Electricity was first added to the areas measured in the Doing Business report in 2010, a total of 189 reforms were implemented around the world, leading to improvements in access to electricity and in the quality of supply. Almost two thirds of reforms reduced the time required to obtain a new connection, whereas one fourth simplified the connection process, reduced costs, or improved reliability. Overall, while there is still room for improvement in the electricity sector, supply has become more reliable and access to electricity is now easier, faster and cheaper.

Providing faster connections to the electrical grid

Between 2010 and 2019, 108 utilities around the globe implemented 112 reforms decreasing connection time. This was achieved through the use of electronic systems, organizational structure adjustments, enforcing deadlines and investing in human capital and in availability of material for connection works. South Asia reduced time the most, passing from an average of 164 days to get a new connection in 2010 to 90 days in 2019 (Figure 1). Examples of reforming efforts in the region include Bangladesh Power Development Board’s investments in staffing, digitalization and increased power generation. In 2013-14, an entrepreneur in Chittagong had to wait 488 days for a new connection; in 2018-19 this process took 158 days. Over that same period,TATA Power Delhi Distribution improved its organizational structure, reducing the average connection time in Delhi from 137 to 27 days.

Source: Doing Business database. The number of economies covered by Doing Business increased from 189 in DB2014 to 190 in DB2020.

Reducing the time of a new connection also involved strategies such as simplifying approval processes, combining electrical inspections, or reducing documentary requirements to apply for a new service. In ten years, 58 reforms successfully reduced the steps to get electricity around the world. Notable improvements were observed in regions such as Europe and Central Asia. In Moscow, nowadays a customer can obtain an electricity connection in only two steps; ten years ago, this required ten interactions.

Making connections more affordable for businesses

Getting Electricity is not only easier and faster, but also cheaper than 10 years ago. Over the past decade, 40 reforms were adopted to reduce the costs of access to electricity. Lowering connection fees, absorbing costs, and reducing security deposits have been effective measures. For instance, in 2017 Georgia’s National Energy and Water Supply Regulatory Commission approved a fixed fee for commercial connections based on the subscribed capacity, covering costs of works and material. Another example comes from Togo, where in 2018 the Compagnie Energie Électrique du Togo (CEET) reduced by half the amount charged for a new connection in Lomé.

As a result of such actions, between 2010 and 2019, the global average cost to connect to electricity dropped from 2,317% to 970% of the local income per capita. The greatest decrease took place in Sub-Saharan Africa – getting electricity is now around four times cheaper in the region. Yet, connection costs remain high, at around three times the global average.

Towards a more reliable electricity supply

In 2014, Doing Business introduced an index to measure the reliability of supply and the transparency of tariffs. Since then, 45 reforms improving electricity supply were implemented. Possible ways to decrease power outages include upgrading the grid, expanding generation, or using automated systems to monitor outages and restore service, such as SCADA (Supervisory Control and Data Acquisition). Globally, the quality of power supply improved over the years: the average duration of power cuts decreased by around one third in five years, from 71.8 hours in 2013 to 22.5 hours in 2018 (in terms of outages per customer in the main business city, as measured by the system average interruption duration index, SAIDI).

Since 2013, Europe and Central Asia implemented the highest number of reforms to make electricity supply more reliable; it had the highest improvement in the average score on the reliability of supply and transparency of tariffs index. For example, in 2018 EPS Distribucija, the utility in Serbia, carried out several works on the network, investing in substations, installing remote-control technology, and improving grid maintenance. As a result, the frequency of outages in Belgrade decreased to 3.1 power cuts per customer in 2018, comparing to 4.1 in the previous year (as measured by the system average interruption frequency index, SAIFI).

Improving transparency of electricity pricing

When businesses are aware of the existing and upcoming electricity tariffs, they are in a better position to plan their expenses accordingly. Since 2013, 7 economies enhanced transparency of tariffs, three of them coming from East Asia and Pacific: China, Myanmar and Thailand. In 2019 China started to announce tariff changes one billing cycle ahead in Beijing and Shanghai, thereby increasing tariff transparency

International good practices helping entrepreneurs in Getting Electricity

Following the good practices in the area of getting electricity, the first step is to provide new customers with a simple, fast and affordable way to get a new connection to the grid. Furthermore, to ensure the benefits of electrification, supply should be steady and reliable. Finally, utilities should ensure that prices are transparent, while balancing between providing an affordable supply and the need to recover costs of investments in infrastructure and generation. As shown by Doing Business data, in the past decade governments and utilities around the world have been improving services and reducing the barriers that hinder inclusion in the power sector. Important improvements have been taking place in the areas of reliability of supply and tariff transparency as well, benefitting millions through an improved service.