in the kWh billed. In this study, the benchmark unit cost is based on 90 percent of kWh dispatched, which assumes aggregate T&D and collection losses of 10 percent.

- This study calculates the average tariff by dividing the amount billed by kWh billed. In the AICD, the average tariff is the effective residential tariff for monthly consumption of 100 kWh, which affects underpricing.

- The capex for LV distribution lines in this study is based on analysis of costs assumed for setting tariffs for the five-year period 2013–2017 in Peru—assumed to be a suitable reference country—in six prototype areas, ranging from high-density urban to low-density rural areas. The costs are increased by 25 percent to reflect higher costs in SSA.

- The AICD assumed that staff levels are entirely a function of the number of customers that distribution companies have, but such an assumption does not apply to power generation. This study instead estimates overstaffing by using benchmark employment in generation, transmission, and distribution separately. The most extensive analysis is carried out for generation, for which information on the type and size of each generation plant was collected. Efficient levels of staffing for generation were estimated based on the type and size of each generation plant. The benchmark number of employees for T&D is set by km of T&D lines with voltage greater than 1 kV and the number of customers. The total numbers of employees reported in the utilities’ annual reports are compared with the staff complement in utilities in three clusters of power utilities in Latin America with similar numbers of customers and km of T&D lines. Annex A1.4 provides additional details.

# A1.2 Financial statement data

Utility financial statements were the primary source of revenues, opex, and other financial data. The study assumes utilities follow IFRS and IAS unless otherwise stated by the utility. Table A1.1 provides a description of each element and the assumptions applied.

**Table A1.1: Description of financial data collected and assumptions applied**

|**Element**|**Description and assumptions**|
|---|---|
|**Revenues**|Revenues captured concern only those directly related to electricity sales that are retained by<br>power utilities. Revenues captured cover those directly related to electricity sales, including<br>collection of bill payments for electricity sales (tariff collection, connection, and reconnection<br>charges), interest from consumer loans, and wheeling charges.|
||IFRS means that revenues are recorded in financial statements on an accrual basis rather than a<br>cash-flow basis, meaning electricity revenue is recognized when electricity is billed to the user.<br>As a result, revenues reflect the amounts billed, and not amounts of cash collected. Per IAS 18,<br>revenue from taxes, fees, and other charges passed on to third parties, such as VAT and<br>subscription fees for public broadcasting corporations (as in Cape Verde), are assumed to be<br>excluded.|
||The following revenues are excluded:|
||- Revenues not directly related to electricity sales, such as revenues from sales of other goods<br>(e.g., water, fiber optic cable leases), financial income, such as interest earned on bank<br>balances or interest earned from non-electricity sector investments, rental income,<br>extraordinary income such as insurance proceeds, and unidentified income (“other income”,<br>“sundry income,” or “miscellaneous revenue”).|

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