World Bank Malaysia Hub Doing Business Case Studies No. 1/May 2020 Digitalization and the Use of Technology in the Electricity Sector Introduction actions are available in the electricity sector around the world, and how they translate to more efficiency in the Digitalization has been identified as one of the major global connection process and to an improved reliability of trends that is transforming the electricity sector.1 A recent electricity supply. study investigating the level of digitalization at utilities in 50 economies around the world shows that almost half of them Publishing data on tariffs and power outages: the first consider the digital grid as part of their strategic programs or step towards transparency and accountability of utility as an area for investment.2 The increasing use of online services processes has been affecting the entire electricity system, from power generation to transmission and distribution.3 One In most developing economies, electricity distribution is a such area is the use of technology in the provision of a service with monopolistic characteristics and is often under reliable supply. Utility companies in several economies have government control. As such, transparency and accountability been investing in automated systems for monitoring in this sector can flourish if the government chooses to interruptions and restoring service, helping them minimize promote them. A first step towards transparency is allowing outages.4 Online tools such as website-based notifications are customers to know how reliable the service is. Both the also commonly used to communicate planned interruptions government and the public benefit from having data on the and to report data on outages to the public. quality of electricity supply. This is usually done by calculating the frequency and duration of power outages through the Other types of information are frequently made available System Average Interruption Duration Index (SAIDI) and the online, contributing to a better customer experience: utilities System Average Interruption Frequency Index (SAIFI), and often inform the requirements for a new service request then making them available to the public.5 Calculating SAIFI through their website, allowing customers to know in and SAIDI can help decision makers estimate the costs caused advance the steps of the connection process, as well as by power outages to the economy and to society as a whole connection charges, documents required, and expected and take informed actions to improve the reliability of supply. service delivery timeframes. In some cases, utilities go further And for citizens to be empowered and able to hold electricity in the adoption of technological solutions by offering a range providers accountable, they need to have information on of digital services and allowing customers to perform a which to base their demands for a reliable service. variety of actions online. For instance, users often can view and pay their electricity bills online or even apply for a new Evidence from Doing Business data shows that utilities in 158 electricity connection from their home, office, or anywhere. economies calculate SAIDI and SAIFI, but less than half of utilities in the world publish this data (figure 1).6 The highest But how can the use of technology and online tools help percentage of utilities that share data on power outages is utilities provide better services to their customers? This study recorded in the OECD high income economies, where 88 aims at identifying what types of online information and percent of utilities share data with the public. On the other Figure 1. Two thirds of economies that collect data on power outages in the world make this data available to the public 100% 80% 60% 40% 20% 0% Sub-Saharan Middle East South Asia East Asia & Latin America Europe & High income: Africa & North Afica Pacific & Caribbean Central Asia OECD Share of economies calculating SAIDI and SAIFI (%) Economies calculating SAIDI and SAIFI - global average (%) Share of economies publishing SAIDI and SAIFI (%) Economies publishing SAIDI and SAIFI - global average (%) Source: Doing Business database. Out of a sample of 190 economies, this analysis showcases the economies that published or calculated SAIDI and SAIFI data for the main business city as of December 2018. Global Knowledge & Research Hub in Malaysia Digitalization and the use of technology in the electricity sector hand, Sub-Saharan Africa is the region with the lowest Research drawing on firm-level data from India provides percentage of utilities sharing outage data with the public (19 evidence that electricity constraints, including higher percent). electricity tariffs, limit growth by pushing businesses to activities with fewer productivity-enhancing opportunities. In Moreover, utilities can enhance the level of predictability of response to an exogenous increase in electricity tariffs, SMEs the electricity service by notifying the public of planned switched to less electricity-intensive production processes.10 service disruptions. In any network, occasional outages are at When it comes to access to information, it has been times inevitable. Sometimes, works on the grid are needed, suggested that price transparency leads to lower and more such as maintenance of equipment, network expansions for uniform tariffs.11 By publishing tariffs online and new connections, or other improvements; these often require communicating changes in tariffs in advance, electricity service to be interrupted. Unfortunately, some utilities do not providers can make the costs of electricity consumption more give customers any advance notice. Business owners may predictable. However, this is not always done. Doing Business incur additional costs if they were not expecting outages, data show that in more than one fifth of economies around since they cannot prepare in advance; and without the the world, nearly half of them in Sub-Saharan Africa, tariffs relevant information, manufacturers are not able to suspend and tariff changes are not published online or announced in and reschedule their operations on the days affected by advance. scheduled outages. To mitigate the impacts of power outages, utilities in several economies, such as Costa Rica and Côte A common way for governments to promote accountability in d’Ivoire, have enacted measures to increase predictability and the electricity sector is setting up a regulator with the task of transparency of the electricity supply (box 1). monitoring electricity providers. During the 1990s, many developing economies created energy regulatory agencies, Another area of the electricity sector where transparency making this the most widely adopted power sector reform plays a major role is tariffs. Customers are affected not only by during that period.12 Research shows that, even if in practice service reliability, but also by the cost of electricity these agencies lack the independence and decision-making consumption. Studies on the impact of electricity tariffs on competence that are foreseen in the legislation, the presence businesses’ behavior and performance suggest that their of a regulator has a positive impact, especially among performance and productivity are sensitive to prices. privatized utilities with good governance rules.13 Most importantly, a sound regulatory framework should monitor Figure 2. Electricity tariffs and data on power outages are and enforce both tariff-setting and the quality of service. An most commonly available to the public in Sub-Saharan analysis based on Doing Business data demonstrates that the Africa when there is an independent regulator monitoring existence of regulatory utility supervision is highly correlated utility performance with the publication of data on both tariffs and power outages.14 This relationship is evident at both the global and Share of Sub-Saharan African economies sharing data on the regional levels. For instance, Doing Business data show power outages and tariffs (%) that economies in Sub-Saharan Africa that have an 80% independent regulator are nearly three times as likely to 60% publish data on outages and tariffs (figure 2). The complexity and importance of the regulator’s role is likely to increase in 40% the future, in view of the technological disruptions that are taking place in the power sector, including the increased 20% importance of digitalization, renewable energy, and 0% decentralized power generation.15 Power outage data publicly available Tariffs are online Independent regulator No regulator An example of a country that established an energy regulator during this period is Uganda. In 1999 the Electricity Act Source: Doing Business database. This analysis verifies the presence of an created the Electricity Regulatory Authority (ERA) to monitor independent regulator among the 9 Sub-Saharan African economies that publish and regulate the performance of electricity suppliers, enforce data on power outages in the main business city; and among the 30 economies in this region that publish data on electricity tariffs, including announcements of tariff adherence to the National Grid Code, and approve tariff changes ahead of the billing cycle. Similar results are observed on a global level and structures.16 Since then, the regulator’s roles have been for all regions. Globally, 89 percent of economies that publish data on outages, and 80 percent of those that publish tariffs, have a regulator. The percentage of evolving, with the aims of increasing transparency and economies that have a regulator varies from 60 percent of economies that publish reliability. In 2014, ERA established a quarterly Automatic data on tariffs in East Asia and the Pacific, to 100 percent of economies that publish data on power outages in South Asia, Europe and Central Asia, and the OECD high Tariff Adjustment plan based on a specific formula that income group. adjusts tariffs fluctuations up to 10 percent, due to changes in Box 1. Good practices in dealing with planned outages: by service interruptions. It is even possible for customers to the cases of Costa Rica and Côte d’Ivoire report any service irregularity or make a complaint about the reliability of supply.8 Such practices can contribute to The Compagnie Ivoirienne d’Electricité (CIE), the utility in Côte promoting accountability in the electricity sector and, within d’Ivoire, follows the practice of announcing planned outages the constraints imposed by outages, empower businesses to in advance. The days of the scheduled power cuts, as well as make better informed choices about their activities. their duration and areas affected, are announced in the Some utilities even take advantage of the popularity of social utility’s website. CIE also provides an explanation for the media to announce planned outages on platforms such as outages and the contact details for customers who need Facebook. The utilities in the Bahamas and Barbados both additional information.7 Similarly, the Compañía Nacional de frequently use their Facebook pages to communicate Fuerza y Luz (CNFL), the utility in Costa Rica, announces scheduled outages to the public.9 This type of announcement planned outages in advance. In this case, the utility provides allows for direct interactions between the public and the exact timeframe in hours during each day to be affected representatives from the utility, increasing its accountability. 2 Doing Business Case Studies No.1 Figure 3. Types of information commonly found online for new electricity connections Share of economies with online information Share of economies with online information on connection costs and fees (%) on timeframes and deadlines for connection services (%) High income: OECD High income: OECD Europe & Central Asia Europe & Central Asia Latin America & Caribbean South Asia East Asia & Pacific East Asia & Pacific Middle East & North Africa Middle East & North Africa South Asia Sub-Saharan Africa Sub-Saharan Africa Latin America & Caribbean 0% 20% 40% 60% 80% 0% 20% 40% 60% Share of economies with online information Share of economies with online information on on the procedures required to obtain a the forms and documents required to apply for new connection (%) a new connection (%) High income: OECD Europe & Central Asia Europe & Central Asia Middle East & North Africa Latin America & Caribbean High income: OECD Middle East & North Africa South Asia East Asia & Pacific Latin America & Caribbean South Asia East Asia & Pacific Sub-Saharan Africa Sub-Saharan Africa 0% 25% 50% 75% 100% 0% 25% 50% 75% 100% Source: Doing Business database. At least one of these types of information on how to obtain a new electricity connection is published online in 144 out of 190 economies covered by Doing Business. costs, exchange rates, and oil prices.17 Tariff changes are According to the OECD, bringing together the full range of communicated to customers in advance, as well as the requirements, including the expected time to obtain a new reasons for the change.18 The monitoring of power outages connection, its costs and the necessary documents and has also been improving in the country. In 2018, UMEME, the procedures, into one single website helps reduce utility serving Kampala, started to calculate data on power administrative burdens for entrepreneurs (figure 3).23 outages according to common international standards.19 Furthermore, the availability of online information enhances transparency and accountability of power companies and can Providing online information for a more transparent reduce transaction costs and time for all parties involved.24 connection process Not surprisingly, utilities in nine of the top 10 economies ranked on the ease of getting electricity in Doing Business Through new technologies, power utilities are transforming 2020 publish information on connection requirements on their relationship with customers. Online interfaces allow new their websites.25 and existing clients to get access to information, personalized services and opportunities to minimize costs.20 In the Electricity suppliers benefit their customers by providing European Union, the Third Energy Package establishes that information in a short, easily understandable, prominent and consumers are entitled to receive transparent information on accessible manner, to the point that this practice is applicable prices and tariffs, as well as in standard terms and mandatory in the EU.26 This regulation is adopted at the conditions with regards to access to electricity services.21 national level, for instance by Portugal’s energy regulator, When it comes to getting information and receiving energy which obliges suppliers to provide consumers with a services, some entrepreneurs consider the internet as their standardized information chart for energy offers and preferred information channel (instead of contacting an contracts, or in France, where the distribution company electricity company in person or by phone).22 Therefore, it is Enedis provides an online descriptive notice for new important that utilities provide information online about connections, the ‘Fiche descriptive de l’offre’.27 Another connection requirements, procedures, costs and timeframes example of an economy that has implemented good practices for companies seeking a new connection. related to availability of information through online platforms 3 Digitalization and the use of technology in the electricity sector is the United Kingdom. In its website, UK Power Networks Figure 4. Among low and lower middle economies it is clearly establishes what are the steps to get connected to the faster to obtain a new connection when online application grid, how much it will cost and how long it will take for a new is available customer to obtain a connection.28 Additionally, it offers a pre-application online service where entrepreneurs can find a 120 ‘Frequently Asked Questions’ section, communicate with 108 days experts and request face-to-face meetings to learn more Average time to obtain 100 before they apply for a new electricity connection. electricity (days) 80 When distribution utilities share information on the access to 65 days electricity services, as well as on customer’s rights and 60 obligations, for both residential and business customers, they 40 contribute to a more transparent connection process.29 However, the availability of information on access to power 20 services is not homogeneous around the world. The requirements to obtain a new commercial connection are not 0 published online in almost one fourth of the world’s Economies with Economies without online application online application economies. This figure varies greatly across regions, as this information is not published in nearly half of the economies in Source: Doing Business database. Sub-Saharan Africa, compared to only one economy in Europe Note: The relationship between the time to obtain a commercial electrical and Central Asia.30 connection and the possibility to submit application online is statistically significant at the 1 percent level after controlling for the logarithm of GNI per capita in low and lower middle income economies. When pooling data for all income levels, the Doing Business data show that there is a strong correlation relationship is only significant at the 10 percent level. between economies that have online information on how to obtain a new commercial connection and their performance on getting electricity. Availability of online information about applications, compared to an average of 92 days in economies a new connection is most strongly correlated with without similar online application services. The evidence for performance when it includes information on cost; low income and lower middle income economies is even transparency and predictability of connection costs is more pronounced (figure 4). associated with more affordable connection charges.31 Overall, economies that publish information online for For example, the Chinese utilities serving Shanghai and obtaining a new commercial connection have an average Beijing, the Shanghai Municipal Electric Power Company and getting electricity score of 73.3, while those without online the State Grid Beijing Electric Power Company, both launched information have an average score of 57.2. Over the years, new mobile applications in early 2017, allowing customers to several examples of utilities that use technology to improve pay their electricity consumption bills and receive the efficiency of their connection services have been notifications of power outages. Customers are also identified. For instance, in 2018 the utility in the Indonesian encouraged to use these apps to request a new connection to cities of Jakarta and Surabaya, Perusahaan Listrik Negara the grid. Towards the end of 2017, most applications were (PLN), invested on digitalization to reduce the time to obtain a already submitted through the mobile apps, which new connection. Through efforts to comply with the significantly reduced the time required to obtain new procedural and time estimates published on its website, PLN commercial connections from over four months to around managed to improve its efficiency and to have better one month in both cities. accountability of its services. Furthermore, there is a wide range of auxiliary services that Enhancing consumer experience through online can improve the efficiency of the utility’s operations and the process of issuing electricity connections. Besides offering applications, digital signatures, bill payments and other online applications, several utilities around the globe offer digital services services such as online payment of connection costs, a digital Online public services help reduce travel time required to signature for signing contracts and documents, or a comply with the requirements imposed by public monitoring or tracking function. Integrating these administrations.32 Similarly, electronic interfaces at the utility functionalities into electronic portals can contribute to that allow customers to submit their applications online can enhancing customer experience and lead to more lead to a decrease in the time required to obtain a new transparency and accountability of utility services, as electrical connection. Currently, in over 40 percent of customers have more information on the status of their economies around the world, utilities have an electronic requests.34 For instance, throughout 2011-12, the Dubai portal that allows customers to apply for a commercial Electricity and Water Authority in the United Arab Emirates connection online. Utilities in OECD high income economies introduced an online application platform allowing customers lead the cohort, with almost 80 percent of them providing to submit and track their applications online, which reduced online application services. They are followed by their peers in the time for processing applications. In a similar vein, in the the Europe and Central Asia and Middle East and North Africa second half of 2017, the utilities in the Russian cities of regions, where online applications are available in almost 50 Moscow and St. Petersburg upgraded their single windows for percent of cases.33 new connection applications, enabling customers to apply and pay for a new connection online, as well as sign Online application platforms can help reduce the time connection and supply contracts using an electronic required to process applications and issue technical signature. conditions by utilities. This, in turn, affects the overall time of obtaining a new connection. Notably, economies with an Digital infrastructure for the issuance and payment of online application for an electricity connection tend to have a electricity bills is another area that demonstrates the wide more efficient connection process in general, compared to range of utility services that have potential for digitalization. those where utilities are not equipped with online application Online services at the utilities may be provided through their platforms. Globally, obtaining a new electricity connection own platform or by linking it with online banking or mobile takes on average 68 days in economies with online payment services. Doing Business data show that in over 60 4 Doing Business Case Studies No.1 Figure 5. In most economies around the world, customers can receive and pay their electricity bills online 100% 80% 60% 40% 20% 0% High income: Europe & Latin America & East Asia & Middle East South Asia Sub-Saharan OECD Central Asia Caribbean Pacific & North Africa Africa Share of economies where customers receive electricity bills online (%) Economies where customers receive electricity bills online - global average (%) Share of economies where customers can pay electricity bills online (%) Economies where customers can pay electricity bills online - global average (%) Source: Doing Business database. This analysis is based on a sample of 180 economies. Data are not available for Equatorial Guinea, Kiribati, Liberia, Maldives, Federated States of Micronesia, Mongolia, Samoa, Timor-Leste, Tonga, and Vanuatu. percent of economies, customers receive their electricity bills consumers in 2012 to 52 percent in 2017.36 Similar online. Notably, in nearly 75 percent of economies customers developments are taking place across the region and can pay their bills using online services, although there is wide beyond.37 Digitalization of billing benefits both customers – by variation across regions (figure 5). This may be indicative of reducing travel time and allowing for more convenient the different level of integration of online banking services payment options, and utilities – by increasing revenue into the electricity sector across the different regions. As collection and reducing the costs of maintaining service online banking services are becoming widely available around centers. At the same time, important risks, such as fraud, the world, citizens and businesses eagerly make use of them. privacy and data security issues, should not be neglected.38 For instance, online bill viewing and payments are most The successful application of digital technologies requires common in the OECD high income group – and it is estimated new governance frameworks and goes beyond the mere that on average two thirds of internet users in the OECD transfer of existing services to online options, as technology economies used online banking services in 2018.35 can be leveraged to re-engineer and transform the delivery of public services.39 Implementing a fully-fledged digitalization of Digital bill payments may be less common in Sub-Saharan utility services overnight would be a challenging process. In Africa; however, this is also a growing trend in the region, in this regard, gradual development and the introduction of particular through mobile money. In Uganda, the share of digital services, through integration with existing online electricity consumers paying their bills with mobile money banking services, may pave the way for further digitalization skyrocketed within five years, jumping from 3 percent of total of processes and services. Box 2. Behind the scenes: back-office digitalization of operations and streamline the process of issuance of utilities operations electrical connections. In many cases, GIS eliminates the need to conduct a site visit in order to prepare technical conditions Providing customers with an opportunity to apply online for and estimate the connection costs, thereby enabling utility new electrical connections is a good example of utility employees to determine the details of a new connection reorganization that benefits the user. However, having an without visiting the customer’s premises. This, in turn, allows online portal for electricity distribution services is only the first customers to avoid an extra interaction with the utility step in tackling the problem of administrative fragmentation. representatives, which streamlines the process of obtaining When it comes to the electricity connection process, citizens new electricity connections. and businesses expect efficiency and coordination between the agencies involved. In this regard, back-office integrated An interesting case is that of Kenya Power and Lighting Co. reorganization of the administrative body can help eliminate Ltd. (KPLC), the utility in Nairobi, which introduced a GIS at the unnecessary steps and improve efficiency. From the agency’s end of 2015. KPLC carried out a comprehensive national point of view, an efficient reorganization marked by improved campaign obtaining a General Packet Radio Service (GPRS) to inter-agency coordination or integration, and supported by an coordinate all equipment used in electricity transmission and enhanced digitalization of operational processes, can help distribution– mapping all substations, transformers and improve cost effectiveness and the quality of services in the meters in the GIS, which was further linked with cadastral electricity sector.40 maps from the survey of Kenya and Google Maps. This One example is the use of a geographic information system allowed the utility to prepare the connection designs for (GIS). The implementation of GIS allows data from different customers in urban areas where there is an existing network sources to be combined and linked to maps of specific areas.41 directly from the utility’s office. As a result, the site visit, a By providing solutions for data integration and visualization procedure that used to be necessary to provide a quotation of through maps, combining spatial and non-spatial data, GIS is connection costs, was removed, making it easier and faster to used as an information and analytical tool and as a decision obtain an electricity connection in Kenya. Over the recent support system.42 In the electricity sector, GIS has proven to years, utilities in many other economies, such as Armenia, be successful in supporting decisions in grid management or Thailand and Mexico, implemented GIS, eliminating the need expansion, and utilities around the world have been for a site inspection and streamlining the process of providing introducing GIS as a solution to enhance their back-end new electrical connections. 5 Digitalization and the use of technology in the electricity sector Conclusion 7 8 Compagnie Ivoirienne d’Electricité. http://www.cie.ci/communiques Compañía Nacional de Fuerza y Luz. https://www.cnfl.go.cr/suspension-del-servicio-electrico 9 The Barbados Light & Power Company Limited, Facebook page: When it comes to electricity, customers need first and https://www.facebook.com/blpconline/ and Bahamas Power and Light, Facebook page: foremost a reliable, affordable and predictable electricity https://www.facebook.com/mybpl242/ supply. They should be made aware of how reliable the 10 Abeberese 2013. Akuru et al. (2014), using data from Nigerian businesses, reaches a similar conclusion. service is, how much their consumption costs will be, and 11 Austin and Gravelle 2007. where and when planned outages will happen. They should 12 Foster and Rana 2020. know in advance what they must do to obtain a new 13 Idem. 14 The relationships between regulatory monitoring and the publication of data on power connection, how much this will cost them and how long it will outages, and between regulatory monitoring and the publication of data on tariffs take. Ideally, the public could also benefit from digital services (including announcements of tariff changes ahead of the billing cycle) are both statistically such as online applications for a new connection and online significant at the 1 percent level after controlling for logarithm of GNI per capita. 15 Foster and Rana 2020. bill viewing and payments. 16 Mawejje 2013. 17 Godinho and Eberhard 2019. Digital transformation comes as a response to such needs. But 18 The latest change took place when ERA reduced the electricity tariffs in the country in it represents much more. It can improve operational January 2019, announcing the new tariffs and the causes for the decrease (The efficiency, reduce transaction delays and costs, and positively Independent 2019). 19 Umeme, the distribution utility in Kampala, started to calculate SAIDI and SAIFI according to impact firm productivity. In terms of the delivery of public standards such as the inclusion of all service interruptions lasting up to five minutes or less. services, digital transformation significantly improves the way 20 Deloitte 2017. citizens interact with their governments.43 As shown in this 21 European Parliament and Council 2009. 22 Idem. study, across the different regions there is plenty of room for 23 OECD 2003. innovation in the electricity sector, through further 24 World Bank 2012. digitalization and automation of an array of services, starting 25 The top 10 economies ranked in the Doing Business 2020 ease of getting electricity are: United Arab Emirates; the Republic of Korea; Hong Kong SAR, China; Malaysia; Germany; from online applications and payment of bills to the use of GIS Thailand; Russian Federation; United Kingdom; Taiwan, China; and Sweden. Utilities in all and automated systems for outage monitoring and service economies except Germany make connection requirements, including timeframes, costs, restoration, as well as through the communication of documents and procedures, available to the general public through their websites. In Germany, the utility operating in Berlin offers a consultation service to potential information on outage schedules, tariffs, or requirements for customers, where the necessary information about connection requirements is provided. a new connection. 26 European Consumer Organization 2018. 27 For Portugal, see Entidade Reguladora dos Servicos Energéticos 2015. https://dre.pt/ application/conteudo/66490056. For France, see ENEDIS Fiche descriptive de l’offre de forniture d’électricité. https://particulier.edf.fr/content/dam/2-Actifs/Documents/Offres/ NOTES fiche-descriptive-vert-electrique.pdf 28 UK Power Networks. https://www.ukpowernetworks.co.uk/electricity/new-connection/over70kva This case study was written by Viktoriya Ereshchenko, Youmna 29 Fumagalli and Lo Schiavo 2009; Pargal and Ghosh Banerjee 2014. Al Hourani, Silvia Carolina Lopez Rocha, and Erick Tjong. 30 For the purposes of this analysis, economies are represented by the power company that provides services in the main business city. 1 EWorld Economic Forum 2017. 31 Economies that have connection requirements online have an average 7 points higher 2 EY 2016. score on the ease of getting electricity. The relationship is based on data published by 3 McKinsey&Company 2018. Doing Business 2020 and it is significant at the 1 percent level, controlling for income per capita. 4 Over the past five years, fifteen economies introduced automated systems to monitor 32 ITU 2017. power outages and restore supply in the main business city, joining the group of 133 33 Online application portals are available in 40 percent of economies in East Asia and Pacific; economies out of 190 that use automated outage monitoring systems: Albania, The 31 percent of economies in Latin American and the Caribbean; 28 percent of South Asian Bahamas, Brunei Darussalam, Bulgaria, the Arab Republic of Egypt, El Salvador, Gabon, economies; and 17 percent in Sub-Saharan Africa. Georgia, Iraq, Kenya, Kosovo, Lao PDR, Montenegro, Paraguay, and Vietnam. 5 SAIDI measures the average total duration of outages experienced by a customer in a given 34 Westholm 2005. period, and SAIFI measures the average frequency of outages experienced by a customer 35 OECD 2019. in a given period. 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