majority of countries in SSA have long experienced serious power shortages, resulting in load-shedding and frequent interruptions to service. The economic costs of power outages, including the costs of running backup generators and of forgone production, typically range between 1 and 4 percent of GDP (Foster and Briceño-Garmendia 2010). Infrastructure problems, and notably deficient power generation and transmission infrastructure, have been estimated to account for 30–60 percent of overall drains on firm productivity, well ahead of red tape, corruption, and other factors (Escribano, Guasch, and Pena 2008).

The analysis and measurement of the “hidden costs” of state enterprises (particularly in the power sector) derives from the International Monetary Fund’s concern with the quasi-fiscal activities occurring in countries of the former Soviet Union. Quasi-fiscal activities can be thought of as those operations that “could in principle be duplicated by specific budgetary measures in the form of an explicit tax, subsidy or other direct expenditure” (Mackenzie and Stella 1996). It was feared that the substantial quasi-fiscal activities observed in these countries could have large macroeconomic effects as governments were forced to intervene to finance these activities. In the former Soviet Union countries the energy sectors were becoming a source of large public sector imbalances and financial instability, and Petri, Taube, and Tsyvinski (2002) noted that low energy prices and the toleration of payment arrears were particularly prevalent in these countries. They developed a methodology to value various aspects of the quasi-fiscal activities and applied it to the energy sector in Azerbaijan and the gas sector in Ukraine. A similar analysis for the power and water sectors in Ghana was carried out by Chivakul and York (2006).

Saavalainen and ten Berge (2006) and Ebinger (2006) extended the approach of Petri, Taube, and Tsyvinski to provide estimates of the quasi-fiscal deficits (QFDs) of the power sectors in countries in Europe and Central Asia. Saavalainen and ten Berge defined the QFD of state-owned public utilities as _[t]he value of the implicit subsidy computed as the difference between the average revenue charged and collected at regulated prices and the revenue required to fully cover the operating costs of production and capital depreciation_ .<sup>1</sup> This QFD, or implicit subsidy, was termed a hidden cost<sup>2</sup> by Ebinger. Not all the elements of the QFD relate to a monetary cost being too large. For example, a low rate of bill collection is a cost in the sense of a loss of revenue. For the set of 20 countries analyzed by Ebinger based on 2003 data, underpricing accounted for 67 percent of total hidden costs, excess transmission and distribution (T&D) losses for 22 percent, and poor bill collection for 11 percent. Total hidden costs declined from 5.4 percent of GDP in 2000 to 2.6 percent in 2003.

The approach of Ebinger was utilized in the Africa Infrastructure Country Diagnostic (AICD), a knowledge program that undertook extensive data collection in the 2000s (primarily between 2001 and 2008) in all key infrastructure sectors, including electricity (http://www.infrastructureafrica.org/). Recognizing that the weak infrastructural base in SSA is constraining economic growth, the AICD estimated the magnitude of the QFDs for the power sector in SSA.

> 1 This definition assumes that the costs of production are the same in the hypothetical case of efficient operation and the actual case. The difference in revenues then measures the QFD.

> 2 The term hidden cost is used in other contexts for the energy sector. For example, in the evaluation of externalities of power generation (Biegler 2009), and of costs of power cuts and battery backups (Seetharam et al. 2013).

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