Costly Throw Ups: Electricity Theft and Power Disruptions

Costly ‘Throw-Ups’: Electricity Theft and Power Disruptions†

Fabian B. Lewis†, Ph.D.Research and Analysis Unit, Taxation Policy Division

Ministry of Finance and PlanningOctober 29, 2015

Disclaimer

•The views expressed are personal and not necessarily those of my affiliated institution.

•Full paper available in the Electricity Journal i.e. Aug./Sept. 2015 Volume.

2Jamaica Statistics Symposium, U.W.I.

(Mona), October 29-30, 2015.

Outline of Presentation

Introduction Research ObjectivesWhy Important?Electricity theft in an Int’l ContextMethodology, Data and Empirical ResultsPolicy ImplicationConclusion and Future Work

3Jamaica Statistics Symposium, U.W.I. (Mona), October 29-30, 2015.

Introduction• Power theft is a longstanding problem globally

(even amongst developed countries).• Electricity theft for example, via ‘throw-ups’

(i.e. a Jamaican phrase for illegal connections attached to overhead power distribution lines to abstract electricity), often contributes to power disruptions which in turn, result in inter alia a loss of productive output that could have otherwise been created in an economy.

• These electricity interruptions have practical policy implications. 4Jamaica Statistics Symposium, U.W.I.

(Mona), October 29-30, 2015.

Research Objectives

We want to inter alia: 1.Analyse the evolution of Jamaica’s

electricity theft over an extended period. 2.Assess the magnitude of power theft in an

international context.3.Estimate the direct costs of power

disruptions for several countries (including Jamaica and its sectors).


Why Important? i.e. Justification for Research

Electricity theft is a serious problem manifested in at least four ways: (i) fraud, (ii) directly stealing power, (iii) billing irregularities and (iii) unpaid bills!

Power theft has serious consequences for both utility companies and legitimate customers.


Why Important? cont’d

• Yet there is a surprising paucity of research which explores the relationship among electricity theft, power disruptions and the associated costs internationally.

• We therefore attempt to fill this gap.


Why Important?, cont’d

Power theft: (a) unnecessarily raises the price of power for legitimate consumers.b) adversely affects the quality of electricity supply leading to intermittent power interruptions (i.e. power outages) for both genuine customers and illegal consumers, loss in output and damage to electrical appliances.


Why Important?, cont’d

• (c) adversely affects the amount of re-investment and employment in the power sector by curtailing potential revenue that can be collected.

• (d) power theft especially via ‘throw-ups’ (or ‘spider-webs’), creates fire hazards and sporadically results in death of power thieves and innocent (entangled) persons.


Jamaica’s Electricity Theft

• Overall, electricity theft is typically highest in the most populous and urban parishes of the island.

• In general, the literature corroborates that high electricity theft occurs mainly in relatively poor communities (Not unique to Jamaica. Common in India, for example).

• JPS; the only local, licenced distributor of electricity suffers greatly from power theft.




Notes• Systems losses comprise “technical” (internal)

and “non-technical” (external) energy losses.• “Technical losses” occur naturally while

“Non-technical losses” result from actions external to the power system, such as electricity theft and bill non-payment. Disaggregation of overall systems losses is key but data rarely available.

• Non-technical energy losses is the commonly used proxy for electricity theft.


• Overall, “approximately 26.6 per cent of the total electricity produced/purchased (4,104 GWh) by JPS was lost” in 2014.

• Specifically, 7.0 per cent was stolen (i.e. non-technical loss portion), up from the 8.0 per cent registered in 2003.


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Table1: Jamaica’s Electricity Demand-Supply Profile, 2003-2014

Year Electricity Produced Electricity Sales System Losses Non-Technical Losses*

(MWh) (MWh) (%) (%)

2003 3,696,005 3,009,461 18.6 8.0

2004 3,717,022 2,999,639 19.3 9.3

2005 3,877,990 3,055,154 21.2 11.2

2006 4,046,428 3,120,669 22.9 12.9

2007 4,078,771 3,131,494 23.2 13.2

2008 4,123,290 3,179,078 22.9 12.9

2009 4,213,980 3,203,878 24.0 14.0

2010 4,137,350 3,187,488 23.0 13.0

2011 4,136,879 3,215,990 22.3 12.3

2012 4,135,919 3,133,966 24.2 14.2

2013 4,141,644 3,069,688 25.9 15.9

2014 4,107,457 3,012,979 26.6 17.0

Mean 4,034,395 3,109,957 22.8 12.8

Median 4,115,374 3,126,082 23.0 12.9

Jamaica Statistics Symposium, U.W.I. (Mona), October 29-30, 2015.

Jamaica’s Electricity Theft in an International Context

• Rationale: Want to inter alia gauge Jamaica’s electricity theft relative to other countries (is magnitude above or below average?).

• Perform comparative assessment of electricity theft to update and extend Smith’s (2004) research.


Cross-Country Electricity Theft Evolution



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Table 1b: Evolution of Electricity T&D Losses (%) by Selected Regions and Years

Region 1971 1980 1990 2000 2011 Overall Change*

East Asia & Pacific 7.3 6.4 6.3 6.3 5.7 -1.7

Europe & Central Asia 7.3 7.1 7.4 9.2 7.9 +0.6

Latin America & Caribbean 11.8 12.5 14.5 16.0 14.9 +3.1

Middle East & North Africa 7.0 8.9 9.5 11.9 12.0 +5.0

North America 8.5 8.8 9.0 6.0 5.9 -2.5

South Asia 17.6 19.4 20.0 26.9 20.4 +2.8

Sub-Sahara Africa 7.9 9.1 8.9 11.2 10.8 +2.9

Notes: *Percentage point change between 1971 and 2011. Discrepancies due to rounding.

Source: Compiled by author using data obtained from the World Bank’s World Development Indicators.


Snapshots• In our sample of 100 countries, the extent of

power theft ranged from 1.8 per cent (Slovak Republic) to 54.6 per cent (Haiti). Average of 12.2 per cent (and Median of 10.4 per cent).

• Jamaica ranked 17th in terms of electricity theft magnitude; high rank by any measure.


Snapshots, cont’d• Jamaica’s power theft is above that of notable

Latin American and Caribbean countries such as Ecuador, Brazil, Mexico, Panama and Peru but below Nicaragua, Venezuela and Honduras.

• Half of the countries (including developed) experienced an overall increase in electricity theft between 1980 and 2011.


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Table 2: Transmission and Distribution Losses for Selected Countries, 1980 and 2011

T&D Losses No. of Countries (%) No. of Countries (%)

Range (%) in 1980 in 1980 in 2011 in 2011

1 to less than 4 2 2.0 8 8.0

4 to less than 11 55 55.0 45 45.0

11 to less than 16 26 26.0 24 24.0

16 to less than 20 7 7.0 11 11.0

20 to less than 55 10 10.0 12 12.0

Total 100 100.0 100 100.0

Source: Compiled by author using data obtained from the World Bank’s World Development Indicators.


Findings to Ponder

• “Extensive power theft” (i.e. T&D losses of at least 16.0 per cent) rose overall to 23.0 per cent in 2011, up from 17.0 per cent in 1980.

• Smith (2004) utilized an almost identical sample size of 102 countries but based on 1980 and 2000 data. Author did not estimate the cost of power disruptions.


MethodologyEstimating Costs of Electricity Interruptions:

(a) the “production loss” approach (b) customer surveys i.e. “willingness to pay” and “willingness to accept” methods(c) “captive generation approach” and (d) “case studies”.

Teaser: Would you be willing to accept a lower light bill but suffer more power outages?


Value of Lost Load (VoLL)

• VoLL essentially represents “the economic value created by one unit of electricity”.

• Importantly, estimates of the VoLL by sector can assist power companies to determine priority areas for disrupting power when supply shortages arise i.e. statistics supporting policy!


Estimating the Value of lost Load

• VoLL = Gross Value Added divided by Total Electricity Consumed

where VoLL>0. Note that the higher the VoLL, the greater the direct cost of power interruptions to the country’s overall economy or sector.

• We utilise the above production loss approach (PLA) and input-output analysis due to data constraints. 26Jamaica Statistics Symposium, U.W.I.

(Mona), October 29-30, 2015.

VoLL Results• PLA method quantifies the loss in production

due to unavailability of electricity supplied by the grid.

• Overall, the average estimated cost per unit of electricity not supplied due to a power disruption was US$2.94 per kWh in 2011 (compared with US$1.30 per kWh for 1996).

• In other words, the direct cost to the Jamaican economy of one kWh of electricity not supplied is almost US$3.


• Jamaica’s VoLL was below the simple average VoLL of US$3.66 per kWh for the overall final sample of 96 countries.

• Using JPS’ T&D System Average Interruption Duration Index (SAIDI), we imputed the overall direct cost of power disruptions to the Jamaican economy for 2013 to be approximately US$22.84 million (or roughly 0.17 per cent of GDP).


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Table 3: Jamaica’s Electricity Consumption, Total Value Added and Value of Lost Load by Sector, 2011

Sector Electricity Consumed Sectoral Electricity Total Value Added Sectoral Value Added Value of Lost Load

(GWh) Use Share (%) at Basic Prices (J$ M) Share (%) (US$ per kWh)

Agriculture, Forestry &Fishing 78.6 1.9 70,438 6.6 10.35

Mining & Quarrying 63.2 1.5 15,487 1.5 2.83

Manufacturing 489.9 11.7 96,566 9.1 2.28

Electricity & Water Supply -760.0 - 35,867 3.4 -0.54

Construction 38.3 0.9 77,921 7.3 23.49

Wholesale & Retail Trade;

Repairs; Installation of

Machinery & Equipment 517.8 12.3 201,491 18.9 4.49

Hotels & Restaurants 756.9 18.1 45,481 4.3 0.69

Transport, Storage & Communic. 182.4 4.4 104,330 9.8 6.60

Finance & Insurance Services 144.5 3.4 111,869 10.5 8.94

Real Estate, Renting &

Business Activities 143.0 3.4 130,771 12.3 10.56

Producers of Government Services 665.6 15.9 152,708 14.3 2.65

Other Services 352.6 8.4 69,803 6.5 2.29

Total Economy 2.94

Notes: VoLL computed by dividing sectoral Gross Value Added by the electricity consumed in each sector. GWh means Gigawatt hours. The negative sign on the ‘Electricity’ sector is due to the fact that it generates more electricity than it utilizes and consequently, the sector’s electricity demand is negative. Source: Author’s estimates.


Policy Implication• When power has to be disrupted due to a

“generation forced outage”, it should be cut first in the Hotels & Restaurants (i.e. tourism) sub-sector followed by Manufacturing but last in Construction. Direct cost to economy would be lowest. (But we qualify our prescription as tourism was 5.8 per cent of real GDP in 2014).

• JPS’ approach to distributing scarce electricity should be re-visited to account for the direct economic effects (based on sectoral VoLL estimates). 30Jamaica Statistics Symposium, U.W.I.

(Mona), October 29-30, 2015.

Conclusion• Electricity theft by whatever means, is costly. • Paper (for the first time) investigated the nexus

among electricity theft, power disruptions and the resulting direct cost to an economy.

• We showed that electricity theft rose overall not only in many countries but in most regions globally between 1971 and 2011. Haiti ranked 1st overall.

• Worryingly, “extensive power theft” increased internationally since 1980.

• We estimated the direct cost of one kWh of electricity not supplied in Jamaica to be approximately US$2.72 for 2013. 25Jamaica Statistics Symposium, U.W.I.

(Mona), October 29-30, 2015.

Conclusion, cont’d• The direct damage to the Jamaican economy

due to power disruptions is below the corresponding average cost per kWh for a 2011 sample with 96 countries.

• Estimated direct cost of electricity disruptions ranged from US$0.43 to US$9.91 per kWh.

• JA’s sectoral value of lost load was highest for Construction but lowest for Tourism.

• JPS could explore using harmonic generator system (Depuru et al., 2011) to isolate and punish “throw up” users. 32Jamaica Statistics Symposium, U.W.I.

(Mona), October 29-30, 2015.

Future Research• Future work on electricity theft should inter

alia extend our analysis to ascertain damage to households (in terms of lost leisure time or spoilage of goods) and corroborate our original VoLL estimates using alternative methodology.


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Thanks for Listening!

Selected References

Depuru, S. S., Wang, L., and Devabhaktuni, V. (2011). Electricity Theft: Overview, Issues, Prevention and a Smart Meter Based Approach to Control Theft, Energy Policy, Vol. 39, pp. 1007-1015.

Jamaica Public Service (2015). Annual Report 2014, Jamaica.

Lewis, F. B. (2015). Costly ‘Throw-Ups’: Electricity Theft and Power Disruptions, Electricity Journal, Vol. 28, Issue 7, pp. 118-135.

Smith, T. B. (2004). Electricity Theft: A Comparative Analysis, Energy Policy, Vol. 32, pp. 2067-2076.

World Bank (2014). World Development Indicators, Available at: <http://databank.worldbank.org/data/download/WDI_excel.zip>.

Appendix


Jamaica Statistics Symposium, U.W.I. (Mona), October 29-30, 2015. 35

Jamaica Statistics Symposium, U.W.I. (Mona), October 29-30, 2015. 36

Economy & Finance

Costly Throw Ups: Electricity Theft and Power Disruptions