# **6 Conclusion**

In summary, this paper has provided a comprehensive survey of electricity pricing practices and tariff structure designs across more than 60 countries around the world. The results show that, on average, electricity prices stand at around $0.13 per kilowatt-hour across all countries and customer categories. However, this average conceals huge variations, with the highest prices observed at around $0.80 per kilowatt-hour, about 40 times higher than the lowest prices observed, at around $0.02 per kilowatt-hour. Where separate agricultural tariffs exist, these tend to be the lowest at $0.06 per kilowatt-hour on average. Prices are somewhat higher for public sector consumers ($0.07 per kilowatt-hour on average), and considerably higher for residential customers ($0.14 per kilowatt-hour on average) and particularly commercial and industrial customers (at close to $0.20 per kilowatt-hour on average).

Electricity tariffs clearly reflect underlying cost drivers. Prices are particularly high for Small Island Developing States (SIDS): at $0.26 per kilowatt-hour on average compared with $0.16 per kilowatt-hour elsewhere. Countries with substantial domestic energy resources tend to enjoy relatively low tariffs, such as $0.12 per kilowatt-hour for countries with hydro-power, and $0.15 per kilowatt-hour for fossil fuel exporters. Consumers in high income countries generally face higher tariffs, at $0.24 per kilowatt-hour on average, than those in low and middle-income countries, at $0.15 per kilowatt-hour on average.

The results indicate that price differentiation is widespread. The vast majority of countries enforce tariff structures that benefit residential and agricultural consumption at the expense of commercial and industrial users. Residential tariffs are typically about half the level of industrial and commercial tariffs, while agricultural users tend to pay only about a fifth of what other user categories are charged.

Volumetric pricing remains the mainstay of electricity tariff structures. In the case of residential customers, 65 percent of the countries apply Increasing Block Tariffs (IBTs). For commercial and industrial customers, linear charges are more widely applied, and increasingly modified by Time-of-Use factors and complemented with load-related fixed charges, particularly in middle-income and high-income countries. Where Time-of-Use factors exist, they entail unit charges that are twice as high during peak as during offpeak periods. Where load-related charges exist, they typically entail fixed costs of around $4.6 per kilowatt across residential, commercial and industrial customer groups.

Residential IBTs typically incorporate close to four consumption blocks. The first block is around 80 kilowatt-hours per month on average, or twice the average residential consumption, while the highest block amounts to some 470 kilowatt-hours per month and is closer to the average residential consumption level. The first block is typically priced at around $0.09 per kilowatt-hour and covers 57 percent of operating costs, while in the final block the price typically rises to around $0.18 and more than fully covers average operating costs. Overall, there is evidence that first blocks are set well below average consumption and that cost recovery improves at higher consumption blocks.

On average, residential electricity tariffs are not very far from recovering operating costs but have not yet achieved limited capital cost recovery. Commercial tariffs on the other hand just about cover limited capital costs. Performance on residential cost recovery is weakest for countries in the low-income bracket in the residential segment, and/or those facing relatively high costs of service provision in excess of US$0.20 per kilowatt-hour. Over the period 2015-16, an overwhelming majority of residential tariffs either fell or failed to increase even in nominal terms, while almost half of commercial and industrial tariff schedules increased in line with or in excess of the inflation rate.

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