DOING BUSINESS 2014Indicators on Getting Electricity

Caroline FrontignyResearch Analyst

Doing Business Project

1. The Doing Business report

What does Doing Business measure?

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How does Doing Business define SMART business regulations?

S

•STREAMLINED—regulations that accomplish the desired outcome in the most efficient way

M

•MEANINGFUL—regulations that have a measurable positive impact in facilitating interactions in the marketplace

A

•ADAPTABLE—regulations that adapt to changes in the environment

R

•RELEVANT—regulations that are proportionate to the problem they are designed to solve

T

•TRANSPARENT—regulations that are clear and accessible to anyone who needs to use them

Following Doing Business best practices would significantly decrease the time to start a business

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• In the 107 economies covered by both Doing Business and the World Bank’s Entrepreneurship Database, an estimated 3.1 million limited liability companies were newly registered in 2012 alone.

• Because not all economies followed best practice, entrepreneurs spent an extra 45.4 million days satisfying bureaucratic requirements.

Days to start a business (millions)

Source: World Bank’s Entrepreneurship Database ; Doing Business database.

Not following best practices Following best practices

46.9

1.5

6

Best performers on the Doing Business ranking

1. Singapore

2. Hong Kong SAR, China

3. New Zealand

4. United States

5. Denmark

6. Malaysia

7. Korea, Rep.

8. Georgia

9. Norway

10. United Kingdom

11. Australia

12. Finland

13. Iceland

14. Sweden

15. Ireland

16. Taiwan, China

17. Lithuania

18. Thailand

19. Canada

20. Mauritius

21. Germany

22. Estonia

23. United Arab Emirates

24. Latvia

25. Macedonia, FYR

26. Saudi Arabia

27. Japan

28. Netherlands

29. Switzerland

30. Austria

Latin America and Caribbean economies on average rank near the middle in the global ease of doing business

OECD High income 29

Eastern Europe & Central Asia 73

East Asia & Pacific 86Latin America & Caribbean 97Middle East & North Africa 98

South Asia 121

Sub-Saharan Africa 140

1

185

South AmericaArgentina, Bolivia, Brazil, Chile, Colombia, Ecuador,

Guyana, Paraguay, Peru, Uruguay, Venezuela RB

105

Caribbean Community Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines,

Suriname, Trinidad and Tobago

95

Central America Belize, Costa Rica, El Salvador, Guatemala,

Honduras, Nicaragua, Panama104

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Pace of reforms remains strong in 2012/13: share of economies with at least one reform making it easier to do business

OECD high Income

Europe and Central Asia

Middle East and North Africa

South Asia

East Asia and Pacific

Sub-Saharan Africa

Latin America & the

Caribbean

Worldwide, 114 economies implemented 238 reforms in 2012/2013, 18% rise with respect to 2011/2012.

66%

40%

75%

60%

58%

53%

73%

1

Business reforms in the Caribbean

• The Bahamas, Jamaica, and Trinidad and Tobago took steps to improve their business regulatory environment over the past year.

• Jamaica led the way in the Caribbean by adopting new legislation for private credit bureaus, reducing the corporate income tax rate, and streamlining procedures for starting a new business.

• Since 2005, 11 of 12 economies in the region have implemented regulatory reforms making it easier to do business in the areas measured by Doing Business. Jamaica implemented the most reforms in the region with 13 reforms during this period, followed by the Dominican Republic with 12.

2. The Getting Electricity indicator

• Based on Enterprise Surveys in 118 economies around the world

• Direct responses from representative samples of the private sector

• Access to finance, electricity and informality are the top obstacles across the developing world

Percent of firms identifying the problem as the main obstacle to their business activity

Access to finance

Electricity

Informality

Tax rates

Political instability

Inadequately educated workforce

Corruption

Crime, theft and disorder

Customs and trade regulations

Transport

Access to land

Tax administration

Business licensing and permits

Labor regulations

Courts

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

15.8%

14.3%

11.1%

11.0%

7.9%

7.8%

6.7%

5.8%

3.3%

3.3%

3.1%

2.9%

2.8%

2.6%

0.9%

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Electricity is a major obstacle to business activity

Getting Electricity focuses on interactions between an entrepreneur and distribution utility

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The indicator distinguishes between 3 types of connection works

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Getting Electricity indicators – of what use are they to policy makers?

Distribution utilities retain monopolistic positions even in otherwise liberalized markets

Customers are captive Benchmarking utility performance helps regulators

help customers

Great majority of distribution utilities surveyed are only “game in town”

Benchmarking against utilities in other countries needed

Regulatory agencies often have to rely on self-reporting of utilities:

Limits effective monitoring of utility performance (especially in such areas as quality of service regulation)

Independent benchmarking can fill a gap

Time and cost to obtain an electricity connection are negatively correlated with the electrification rate.

The cost to obtain an electricity connection is negatively correlated with the % of transmission and distribution losses

Simpler connection processes are associated with higher firm sales, in particular in industries with high electricity needs

Getting Electricity correlates with other sector challenges….

…and can support regulators in their dialogue with the utility……

Where is getting electricity easy – and where not?

In economies where getting electricity is most efficient, requiring fewer interactionswith authorities and less time, utilities often carry out the external connection works themselves.

They also obtain the necessary approvals and streamline procedures with other agencies.

Where is it easier to get electricity ?a

Iceland

Korea, Rep

Germany

United Arab Emirates

Hong Kong, China

Singapore

Taiwan, China

Switzerland

Sweden

San Marino

Latin America reformed more than in other years and focused on Improving efficiency of the utility

Type of reforms since 2009

3. Getting Electricity in the Caribbean region

Good practices in the Caribbean in making it easy to get an electricity connection

Practice Countries

Streamlining approval processes (utility obtains excavation permit or right of way if required)

Antigua and Barbuda, Bahamas, Belize, Dominica, Dom. Republic, Guyana, St. Lucia, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago

Providing transparent connection costs and processes

Barbados, Guyana, Jamaica, St. Lucia, Trinidad & Tobago

Reducing financial burden of security deposit for new connections

Antigua & Barbuda, St. Kitts & Nevis, Trinidad & Tobago, Barbados, Belize, Jamaica, Puerto Rico, St. Lucia

Ensuring safety of internal wiring process by regulating the electrical profession rather than connection process

Puerto Rico

Caribbean Countries – Time to get electricity

JamaicaDominican Republic

Bahamas, TheBelize

BarbadosDominica

Trinidad and TobagoHaiti

SurinameSt. Vincent and the Grenadines

GrenadaAntigua and Barbuda

Puerto RicoSt. Lucia

St. Kitts and Nevis

0 20 40 60 80 100 120

Average : 55 days

Caribbean Countries – Cost to get electricity in USD

Puerto Rico

Suriname

Dominica

St. Kitts and Nevis

Haiti

Jamaica

Bahamas, The

Grenada

Dominican Republic

Antigua and Barbuda

St. Vincent and the Grenadines

Belize

St. Lucia

Barbados

Trinidad and Tobago

- 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Average : 25,000 USD

Caribbean Countries – Cost to get electricity in GNI per capita

HaitiDominica

JamaicaSuriname

Puerto RicoBelize

Dominican RepublicSt. Kitts and Nevis

GrenadaSt. Vincent and the Grenadines

St. LuciaAntigua and Barbuda

Bahamas, TheBarbados

Trinidad and Tobago

- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Cost structure : variable and fixed connection fees

Tackling High Costs for Getting Electricity: Trinidad and Tobago’s New Approach

The most effective regulatory systems govern connection costs in a way that is cost effective for utilities and fair for customers.

Trinidad and Tobago lowered connection costs by introducing a capital contribution scheme to resolve the “free rider” issue (which occurs when first customers fund the entire construction works, to the benefit of future customers).

The new scheme was implemented through extensive collaboration among multiple stakeholders, including the regulator, electricity utility and entrepreneurs.

Connection costs are spread amongst new and future customers

Recommendations from the capital contribution working group

• Introducing a reimbursement scheme. To ensure that connection costs are more widely spread across different users, assets eventually shared by customers connecting later must be reimbursed to initial customers by T&TEC.

• Setting connection costs with revenue from electricity supply. T&TEC is required to show that a connection is not commercially viable without a capital contribution and that it should be no more than what it would cost to be commercially viable. This approach allows a balanced allocation of costs because a new connection is also a source of future revenue. But large industrial customers still bear the full capital costs of connecting to the network, and connection costs are small relative to the company’s turnover.

• Involving the private sector. Customers can use T&TEC employees or contractors for conducting connection works. But T&TEC should prepare a list of prequalified contractors for customers, specify technical criteria and inform customers about the average costs of works in various areas. Many economies have opened their electricity markets to prequalified contractors—offering more options to customers and helping utilities meet the demand for new connections in a timely, cost-effective way.

Getting Electricity in Trinidad and Tobago

No. Procedure Time to Complete Associated Costs

1 Request final internal wiring inspection from the Government Electrical Inspectorate and receive Inspection Certificate of Approval thereafter 21 days TTD 1,550.0

2Submit a request for service to the Trinidad and Tobago Electricity Commission (T&TEC) and await site inspection by a Consumer Investigator from T&TEC 14 days no charge

3 Receive site visit from T&TEC Engineer/Consumer Investigator and await conditions of supply letter 5 days no charge

4 Pay Service Deposit to T&TEC and await external connection, meter installation, and electricity turned on 21 days TTD 5,250.0

Caribbean countries – Ranking in Getting Electricity

Economies Ranking for Getting Electricity in 2013

Trinidad and Tobago 10

St. Kitts and Nevis 19

Antigua and Barbuda 20

St. Vincent and the Grenadines 25

St. Lucia 31

Puerto Rico 38

Suriname 40

Bahamas, The 45

Belize 57

Dominica 64

Haiti 67

Grenada 71

Barbados 83

Dominican Republic 127

Jamaica 132

Caribbean countries – some common features

• Multiple inspections conducted by utility as well as other agencies – causing delays in the connection process

• 12 out of 15 Caribbean economies charge a security deposit for new connections, and in only 5 economies, the security deposit can be settled with a bond or bank guarantee.

• Transparency – in only 4 out of 15 Caribbean economies, the electricity fees are easily accessible (published online or available in brochures)

• Distribution systems often lack spare capacity – new connection requires expansion of network, and customers have to shoulder additional capital investments.

Good practices : Transparency of new electrical connection cost

Getting a new electricity connection costs more than twice as much in economies where information on the connection fees is more difficult to access

Similar results were found for the fees to register property and to obtain a construction permit.

Quality of supply – power outages

Quality of Supply - Total hours of power outages per year

Less than 1 hr More than 1 hr More than 100 hours0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

25.00%

58.33%

16.67%16.67%

83.33%

Small Islands

Carribean

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