Improved Electricity Supply: What Factors Determine How Much Domestic Customers are willing to Pay in Tamale Urban and Peri-Urban Areas?

Abstract

The paper estimates households’ willingness to pay (WTP) for improved supply of electricity in Tamale Urban and Peri-Urban Communities. A contingent valuation method (CVM) was used to determine the stated WTP amount and its determinants. The results from the CVM indicate that households are willing to pay an additional amount of Ghȼ0.2232 (US$0.0698) for 1kWh of improved electricity.  From the double-logarithmic econometric model results, education, residential ownership status, age of household head, household size, household’s monthly income, monthly blackout duration and monthly electricity bill are factors that significantly influence the WTP amount for uninterrupted supply of electricity. It is therefore important for the electricity service providers in the study area to improve their services and increase the electricity tariff by Ghȼ0.2232 (US$0.0698) per kWh since domestic customers are willing to pay such amount for quality services. Private organisations which have the capacity to provide reliable supply of electricity should capitalise on the poor services provided by Volta River Authority of Northern Electricity Department Corporation (VRA-NEDCo) and supply reliable electricity so as to enjoy the higher tariff that households are willing to pay. Also, it is recommended that social intervention programmes which aim at increasing the level of household incomes should be implemented to help them increase their WTP amount.