Households’ Willingness to Pay for Reliable Electricity Services in Kuyu Woreda, Ethiopia: An Application of Choice Experiment Method
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Date
2016-10
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Addis Ababa University
Abstract
Electricity is one of the essential components for development and in reducing poverty, which is one of
Millennium Development Goals (MDG) for Ethiopia. Unfortunately, a major problem that confronts most
of the electrified households is the irregular and unreliable supply of electricity. Mitigating these
problems can contribute to household income, environmental protection and economic development.
The objective of this research is to estimates households’ willingness to pay (WTP) for an improved
electricity service in Kuyu woreda. These estimates rely on a cross sectional data collected from 170
Respondents through face-to-face interviews. We used the choice experiments (CE) types of valuation
method. The mixed logit model was applied to estimate the respondents WTP.
In addition, we estimated, the implicit price for each service attributes. Accordingly, respondents would
be willing to pay about 19cents per KWHs for reducing frequency of outages and 13cents for reducing
unannounced outage that occurred during nighttime. The estimated compensating surplus showed that on
average respondents are willing to contribute approximately 99cents per KWh or 19.96ETB (0.906 US$)
per month per person for scenario changes from the status quo to service improvement. This is in addition
to the current average monthly charge.
One important implication drawn from the study is that since households are willing to support the plan
for the service improvement, government should subsequently increase the tariff to generate more
electricity energy to reach more households that will improve the economic development of the nation
and the sustainability of the environment.
Key words: Improved electricity service, Willingness to pay, Choice experiment, Millennium
Development Goal.
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Keywords
Improved electricity service, Willingness to pay, Choice experiment, Millennium Development Goal.