Efficiency and Equity Effects of Electricity Metering

Abstract

Many households lack meters to measure their electricity or water consumption. I show that provision of electricity meters leads to a large reduction in electricity consumption over the first four months following meter installation. This is consistent with previous overconsumption by unmetered users facing a zero marginal price. However, it also reflects underconsumption by metered customers paying a marginal price exceeding marginal cost. I quantify these welfare effects using billing data from a large sample of mostly rural counties in Colombia. I show that the efficiency effects are relatively small compared to the distributional effect of metering. Very poor households, whose electricity consumption is low, would particularly benefit from meter provision.

Publication
Working Paper