Households’ Willingness To Pay For Improved Electricity Supply In The Accratema Metropolitan Areas

ABSTRACT Electricity is an essential commodity that affects every sphere of life. It is especially fundamental for emerging economies whose national developmental agenda require constant availability of power. Ghana depends heavily on electricity to carry out most of its activities. The industry, services sector, and households all need electricity for their activities. Unfortunately, a major problem that confronts the nation is the irregular and unreliable supply of electricity. Electric power usually goes off indiscriminately and in most cases without prior notification to consumers. Households suffer reduction in utility since some leisure activities cannot be undertaken in the absence of electricity. In addition household appliances are not left without damages when the power supply is erratic. Industries on the other hand have to bear increased costs of production by acquiring back up facilities to be able to continue production during power outages. Smaller firms which cannot afford backups are compelled to stop production altogether when there is no power. This study therefore seeks to investigate how much households in the Accra-Tema metropolitan area are willing to pay for improved electricity supply as well as examine the factors that influence households’ willingness to pay using a contingent valuation survey and the ordered probit econometric model. The study collects cross sectional data from a sample of 358 households drawn from different suburbs within the metropolis. Using a face-to-face interview approach, a discrete choice with follow-up elicitation technique was used to collect the data. Results from the study reveal that households are willing to pay a significant amount to improve electricity supply. The mean willingness to pay was found to be GHȼ 0.2667, an amount nearly 47% higher than current average tariffs. The significant factors that affect the willingness to pay of households are household income, tertiary educational level of respondents, size of household, sex of respondents, and the reliability of current supply of electricity. It is recommended that government should invest heavily in power infrastructure to improve electricity supply and subsequently increase tariffs since the people are prepared to pay for it. Increasing household incomes by improving the national daily minimum wage and creating employment opportunities as well as measures to promote formal education in the country to higher levels are among the recommendations made  in this study. Further studies are recommended to estimate the total costs to be incurred in providing a reliable electricity supply system such as the one used in the hypothetical case.