The Distributional and Fiscal Implications of Public Utility Pricing

By David Coady, Samir Jahan, Fabiana Machado, Mengfei Gu

June 2, 2023

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David Coady, Samir Jahan, Fabiana Machado, and Mengfei Gu. The Distributional and Fiscal Implications of Public Utility Pricing, (USA: International Monetary Fund, 2023) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The setting of public utility prices involves balancing various competing government policy objectives, from equity concerns to ensuring the financial sustainability of providers and balancing public finances. In practice, public utility pricing often departs significantly from government objectives and tends to be characterized by unnecessarily complex price schedules, below cost-recovery tariff rates, and sectoral inefficiencies that contribute to large fiscal costs. Countries commonly embark on utility pricing reform in response to these heavy fiscal pressures. The paper discusses various reform options available to governments, with a focus on residential pricing schedules, highlighting their fiscal, financial, redistributive, and efficiency implications.

Subject: Commodities, Consumption, Electricity, Household consumption, Income, National accounts, Tariffs, Taxes

Keywords: Baseline tariff schedule, Consumption, Cost-recovery tariff, Efficiency, Electricity, Equity, Fiscal sustainability, Household consumption, Income, Proxy-means test discount scheme, Public utility pricing, Subsidy reform, Tariffs, Utility pricing reform strategy

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/118
Stock No:

WPIEA2023118
ISBN:

9798400243141
ISSN:

1018-5941

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