The challenge of collecting revenue in developing countries is a significant barrier to providing public goods and services. In the electricity sector, frequent bill non-payment leads distribution utilities (DISCOMs) to supply low-quality power. But can behavioral changes regularize the payment of electricity bills, ultimately preventing electricity poverty?
Researchers from EPIC India are leading a project in the state of Madhya Pradesh with Madhya Pradesh Power Management Company Limited (MPPMCL) that aims to design optimal targeting strategies to increase bill payments and study the effectiveness of enforcement. One of the main goals of the project is to demonstrate how machine learning methods can be used to identify which consumers are most responsive to different types of enforcement actions (warnings, mail notices, SMS notifications, disconnection visits, etc.), to help the utility optimally target scarce resources. This project is crucial as it can help improve revenue collection, ensuring the sustainability of the electricity sector and providing reliable access to electricity for citizens. DISCOMs are limited to specific enforcement strategies that encourage consumers to pay their bills. Since the project aims to identify how best to deploy enforcement resources to maximize collections, this project may help reduce this problem for the state of Madhya Pradesh.
Fiona Burlig, Deputy Director at EPIC-India and one of the principal investigators in this project says, “Electricity has the power to influence the socio-economic growth of a country and non-payment of bills can eventually lead to electricity poverty in a state or country. Our research is hence working towards finding out the right tools that can lead to a change in behavior, regularize bill payments, and ultimately allow DISCOMS to generate profitable revenue.”
Through a large-scale randomized control trial (RCT), the researchers are examining the behavior of over 30,000 households in the Madhya Pradesh districts of Narmadapuram and Narsinghpur by exposing them to various tools that may promote bill payment, such as timely SMS reminders, disconnection visits, notices sent via post, door-to-door bill payment services, etc.
A baseline survey was conducted earlier to gather information about the demographics, attitudes, and views of our sub-sample about electricity and payments. Four intervention groups, each with a different set of tools are planned as strategies to encourage bill payment. Two comparison groups serve as a basis on which the effectiveness of the interventions will be determined.
Adding to the strategies used in the project, Dr. Anant Sudarshan, EPIC Senior Fellow, another principal investigator in the project, says, “Electricity utilities in India suffer a significant problem of widespread non-payment of electricity bills. Research shows that pervasive non-payment is associated with electricity poverty. We are gathering data to understand the patterns behind unpaid bills and ways to prevent electricity markets from failings. We hope to use our prior experiences of working with DISCOMS in Bihar where we identified cost-effective pathways to increase energy access and reduce energy poverty.”
Earlier, in February 2020, a Memorandum of Understanding (MoU) was signed between EPIC India and the Energy Department of the Government of Madhya Pradesh with the purpose of increasing the revenue recovery of DISCOMs.