Factors Affecting the Willingness to Pay for Improved Electricity Services in Rural Areas of Pakistan

Abstract

Regulators in many countries provide financial incentives to the electricity distribution companies to improve the quality and standards of the electricity in the rural area in order to promote economic activity. However, in the process, the preferences of rural households are rarely  documented. In most of the cases, the incentives policies do not get desired result due to lack of understanding of the rural household’s willingness to pay for improved and quality services. The present research has been conducted in order to bridge the gap between policy makers and electricity consumers. In this study, we opted for the choice modeling to appraise those factors which influence household’s willingness to pay for improved and better electricity supply. Nearly 58% of the respondents were not satisfied with current electricity delivery services in Kahuta and 77% of respondents were getting financial support from the Benazir Income Support Program in Khanpur. Similarly, nearly 63 % WTP in Kahuta while, 32% are WTP in Khanpur for improved service of electricity supply. Although, respondents had knowledge about the issues caused by the poor and interrupted supply of electricity. Daily load shedding, education, and adoption of energy conservation strategies that affect the WTP behavior and found BISP membership was the distinguishing factor in both locations. The results from this study provide better insight into household’s views on WTP and identify more income opportunities needed by the household to overcome the factors which influence WTP for improved supply of electricity.