Significant at:<sup>*</sup> 90% level,<sup>**</sup> 95% level,<sup>***</sup> 99% level. _Source:_ World Bank calculations using the ENCOVI 2000, Instituto Nacional de Estadística – Guatemala The model suggests that households headed by men are significantly less likely to connect to electricity, water, and sewerage services. The propensity to connect to all services increases significantly with years of education of the head of household. Furthermore, households headed by an indigenous person are substantially less likely to be connected to sewerage and fixed telephony services. The presence of a business in the dwelling is significantly correlated to being connected to the electricity network, and particularly to having fixed line telephone service, where there is an impact of 8.5 percentage points.

Monthly household expenditure also is significantly correlated with the take-up of all modern utilities, with the exception of electricity. This finding suggests that connection charges for all services may represent a barrier for lower income households. Indeed, the charges levied for connection to all services, except for electricity in urban areas, represent a substantial proportion of the monthly poverty line (Table 3.14). Furthermore, it is important to note that the cost of connecting to utility services goes beyond the connection charge. There is often a substantial complementary investment that must be made in adapting the dwelling to the new service. For example, internal wiring for electricity can cost around US$100, while internal plumbing for water and sewerage can cost several hundred dollars.

**<u>Table 3.14: Affordability of connection charges</u>**

||Electricity|Piped water|Sewerage|Fixed telephone|
|---|---|---|---|---|
|Connection charge (US$)|Urban: None<br>Rural: varies<br>by project<br>but can be<br>substantial|EMPAGUA<br>250<br>Rural areas<br><100|Rural areas<br><25|TELGUA<br>350|
|Connection charge as a percentage<br>of the budget of a 5 person<br>household living exactly on the<br>poverty line (%)|0|EMPAGUA<br>104<br>Rural areas<br><42|Rural areas<br><10|TELGUA<br>146|

_Source:_ CNE, TELGUA, IADB Finally, people living in urban areas are significantly more likely to be connected to all, except fixed phone services. This difference is exceptionally high in the case of sewerage. There are two possible explanations for this. The first is that utilities may find it particularly easy to respond to connection requests in the urban areas, and specifically the capital city, than in remote areas. The second is that the greater prevalence of services in urban areas, and especially the metropolitan area, may create other types of neighborhood effects that will lead households to connect (e.g. social pressure, lower information costs, free riding from neighbors’ lobbying efforts, etc.).

# **4.            Affordability of Modern utilities**

Evidently, there is little value in having access to a utility service if a household is unable to meet the corresponding bills. The Guatemalan government has been very conscious of the potential political and social ramifications of the tariff increases that typically result from private sector participation and sector reform. In the electricity sector, this has meant introducing socially motivated ceilings on residential tariffs. While, in the water sector, the unwillingness to raise tariffs to anything approaching cost recovery levels has been a significant barrier to reform. However well-intentioned these policies 28