The Economics of system loss

This paper deals with the problem of electricity theft. In developing countries, individuals and ﬁrms illegally underpay their electricity bills in various ways. This results in large amounts of unbilled electricity, and causes signiﬁcant revenue losses to the electricity distribution utilities and...

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Hauptverfasser:	Abdallah, Wahid, Wolff, Hendrik
Format:	Working Paper
Sprache:	en_US
Veröffentlicht:	BRAC Institute of Governance and Development (BIGD) 2022
Schlagworte:	Compliance Illegal behavior Evasion Electricity tariffs Electricity theft Legal institutions
Online Zugang:	http://hdl.handle.net/10361/15893

id	10361-15893
record_format	dspace
spelling	10361-158932022-01-13T21:01:33Z The Economics of system loss Abdallah, Wahid Wolff, Hendrik Compliance Illegal behavior Evasion Electricity tariffs Electricity theft Legal institutions This paper deals with the problem of electricity theft. In developing countries, individuals and ﬁrms illegally underpay their electricity bills in various ways. This results in large amounts of unbilled electricity, and causes signiﬁcant revenue losses to the electricity distribution utilities and hence, presents a case of compliance similar to tax evasion. We argue however that electricity theft, unlike tax evasion, is easier to measure, as it is captured in what is called system loss,deﬁned as unbilled electricity as a percentage of the electricity supplied. Whereas this measure always contains some technical loss due to transmission and distribution channels, a large part of it also contains the stolen amount, since it remains unbilled. We look at changes in system loss in Indian electricity supplying authorities for diﬀerent states between 2003 and 2012 in response to the stricter legal environment. We expect that electricity theft should respond to these changes, whereas technical loss should be non-responsive. We use the recent provisions for stronger law enforcement institutions stipulated under the Electricity Act 2003 in India to test this hypothesis. The disparity in the timing of adoption of the Act of diﬀerent states allows us to design a quasi-experiment. We also consider electricity prices to draw a similar analysis corresponding to the eﬀect of tax on tax evasion. We ﬁnd that adoption of the Act and thereby the creation of a stronger legal institution reduce system loss whereas increases in price, like increases in tax, increases system loss. 2022-01-13T04:38:55Z 2022-01-13T04:38:55Z 2016 2016-06 Working Paper http://hdl.handle.net/10361/15893 en_US https://bigd.bracu.ac.bd/publications/the-economics-of-system-loss/ application/pdf BRAC Institute of Governance and Development (BIGD)
institution	Brac University
collection	Institutional Repository
language	en_US
topic	Compliance Illegal behavior Evasion Electricity tariffs Electricity theft Legal institutions
spellingShingle	Compliance Illegal behavior Evasion Electricity tariffs Electricity theft Legal institutions Abdallah, Wahid Wolff, Hendrik The Economics of system loss
description	This paper deals with the problem of electricity theft. In developing countries, individuals and ﬁrms illegally underpay their electricity bills in various ways. This results in large amounts of unbilled electricity, and causes signiﬁcant revenue losses to the electricity distribution utilities and hence, presents a case of compliance similar to tax evasion. We argue however that electricity theft, unlike tax evasion, is easier to measure, as it is captured in what is called system loss,deﬁned as unbilled electricity as a percentage of the electricity supplied. Whereas this measure always contains some technical loss due to transmission and distribution channels, a large part of it also contains the stolen amount, since it remains unbilled. We look at changes in system loss in Indian electricity supplying authorities for diﬀerent states between 2003 and 2012 in response to the stricter legal environment. We expect that electricity theft should respond to these changes, whereas technical loss should be non-responsive. We use the recent provisions for stronger law enforcement institutions stipulated under the Electricity Act 2003 in India to test this hypothesis. The disparity in the timing of adoption of the Act of diﬀerent states allows us to design a quasi-experiment. We also consider electricity prices to draw a similar analysis corresponding to the eﬀect of tax on tax evasion. We ﬁnd that adoption of the Act and thereby the creation of a stronger legal institution reduce system loss whereas increases in price, like increases in tax, increases system loss.
format	Working Paper
author	Abdallah, Wahid Wolff, Hendrik
author_facet	Abdallah, Wahid Wolff, Hendrik
author_sort	Abdallah, Wahid
title	The Economics of system loss
title_short	The Economics of system loss
title_full	The Economics of system loss
title_fullStr	The Economics of system loss
title_full_unstemmed	The Economics of system loss
title_sort	economics of system loss
publisher	BRAC Institute of Governance and Development (BIGD)
publishDate	2022
url	http://hdl.handle.net/10361/15893
work_keys_str_mv	AT abdallahwahid theeconomicsofsystemloss AT wolffhendrik theeconomicsofsystemloss AT abdallahwahid economicsofsystemloss AT wolffhendrik economicsofsystemloss
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The Economics of system loss

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