notion of costs of efficient operations; otherwise, all losses and under-collections would be captured inherently in cost recovery. For sector reform, hidden-cost calculations are important—reducing losses and improving collections are integral to sector reform—but they are not synonymous with subsidies. Because reducing these hidden costs is vital for long-term sustainability of the sector, many utilities and regulatory agencies routinely measure and monitor collection efficiency and combined technical and non-technical losses.

As with natural gas, calculating benchmark connection charges is not straightforward and many simplifying assumptions have to be made. They include average distance to the closest network and the number of other new consumers being connected.

# **Actual prices and quantities**

It would be a rare country that has one price for each fuel throughout the country for all consumers and a straightforward tariff structure for electricity, natural gas, or district heating. If there are different prices for similar or even same grades of fuel, consumption of each is needed to calculate the total subsidy. Complications for liquid fuels include the following:

- Subsidizing one grade of a given fuel but not other grades of the same fuel (diesel in India and gasoline in Malaysia until recently, gasoline and diesel in Indonesia).

- Offering different amounts of subsidy for the same fuel depending on the grade (gasoline and diesel in Egypt, diesel in Tunisia).

- Having one or more prices for the same fuel grade by consumer category, sometimes with rationing of the lowest-priced fuel (gasoline and diesel in the Islamic Republic of Iran; diesel in Kazakhstan and Malaysia; kerosene in India; LPG in Argentina, India, Indonesia, Thailand, and Tunisia).

Pricing structures for network energy are usually far more complicated. Key elements include an initial cost of connecting new customers to the system, a recurring fee to remain connected, and a variety of pricing structures for the energy consumed. Connection charges may be a function of several factors, such as the distance from the network system or the installed capacity. While emerging economies may have a simple pricing schedule, most markets have multiple schedules even for residential consumers. The charge per unit may increase with consumption (an increasing block electricity tariff, used to encourage conservation or to facilitate lifeline services to the poor) or decrease with consumption (a decreasing block electricity tariff, often employed to provide bulk discounts to large industrial customers). Electricity tariffs in Burkina Faso, for example, have three increasing blocks each for 12 different residential consumer categories that vary with load and other supply characteristics (www.sonabel.bf/statist/tarif.htm). Tariffs for large industrial consumers are often consumer-specific and bilaterally negotiated. The wide variation in charge schedules makes analysis of tariff-revenue data intensive. If there is a single utility in the country, approaching that utility to provide the requisite data should be sufficient in principle. Where there are many utilities (such as Namibia), data requirements can multiply.

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