Department of Economics
University of Cape Town
Cape Town, South Africa
Institutional Affiliation: University of Cape Town
NBER Working Papers and Publications
|December 2016||Charging Ahead: Prepaid Electricity Metering in South Africa|
with : w22895
The standard approach to recovering the cost of electricity provision is to bill customers monthly for past consumption. If unable to pay, customers face disconnection, the utility loses revenue, and the service provision model is undermined. A possible solution to this problem is prepaid metering, in which customers buy electricity upfront and use it until the prepaid amount is consumed. We use data from Cape Town, South Africa to examine the effects of prepaid electricity metering on residential consumption and returns to the electric utility. Over 4,000 customers on monthly billing were involuntarily assigned to receive a prepaid electricity meter, with exogenous variation in the timing of the meter replacement. Electricity use falls by about 13 percent as a result of the switch, a decr...