Pre-Paid Electricity: Better Service Delivery for the Poor?

Prepaid water and electricity meters offer a promising solution to lumpy and unpredictable bills by allowing customers to choose the timing and quantity of purchases. At the same time, prepayment circumvents debt accumulation, allowing utility companies to serve otherwise high-cost customers. Researchers will collaborate with the municipal utility in Cape Town, South Africa to evaluate customer responses and revenue recovery for prepaid versus credit electricity metering. The study will generate new evidence on the impacts of prepaid meters on energy use and revenue recovery using both a randomized phase-in of new prepaid customers and a retrospective evaluation of historic transitions to prepaid meters in a ten year, household database of all municipal utility customers. Researchers will explore how prepaid meters change the customer experience and the municipality’s revenue recovery. The pilot study will be used to refine hypotheses about consumption responses and explore the potential for complementary interventions, such as improved price information. Findings from this pilot study will contribute to the literature on service delivery for customers with limited liability, and will inform future (testable) policy interventions for South Africa and other developing country municipalities.