DOING BUSINESS 2014 Indicators on Getting Electricity Caroline Frontigny Research Analyst Doing Business Project

1. The Doing Business report

What does Doing Business measure?

How does Doing Business define SMART business regulations? S STREAMLINED—regulations that accomplish the desired outcome in the most efficient way M MEANINGFUL—regulations that have a measurable positive impact in facilitating interactions in the marketplace A ADAPTABLE—regulations that adapt to changes in the environment R RELEVANT—regulations that are proportionate to the problem they are designed to solve T TRANSPARENT—regulations that are clear and accessible to anyone who needs to use them 4

Following Doing Business best practices would significantly decrease the time to start a business 16 In the 107 economies covered by both Doing Business and the World Bank’s Entrepreneurship Database, an estimated 3.1 million limited liability companies were newly registered in 2012 alone. Because not all economies followed best practice, entrepreneurs spent an extra 45.4 million days satisfying bureaucratic requirements. Days to start a business (millions) Source: World Bank’s Entrepreneurship Database ; Doing Business database.

Best performers on the Doing Business ranking 1. Singapore 2. Hong Kong SAR, China 3. New Zealand 4. United States 5. Denmark 6. Malaysia 7. Korea, Rep. 8. Georgia 9. Norway 10. United Kingdom 11. Australia 12. Finland 13. Iceland 14. Sweden 15. Ireland 16. Taiwan, China 17. Lithuania 18. Thailand 19. Canada 20. Mauritius 21. Germany 22. Estonia 23. United Arab Emirates 24. Latvia 25. Macedonia, FYR 26. Saudi Arabia 27. Japan 28. Netherlands 29. Switzerland 30. Austria 6

Latin America and Caribbean economies on average rank near the middle in the global ease of doing business OECD High income 29 Eastern Europe & Central Asia 73 East Asia & Pacific 86 Latin America & Caribbean 97 Middle East & North Africa 98 South Asia 121 Sub-Saharan Africa South America Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Uruguay, Venezuela RB 105 Caribbean Community Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Trinidad and Tobago 95 Central America Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama 104 7

Pace of reforms remains strong in 2012/13: share of economies with at least one reform making it easier to do business OECD high Income Europe and Central Asia Middle East and North Africa South Asia East Asia and Pacific Sub-Saharan Africa Latin America & the Caribbean Worldwide, 114 economies implemented 238 reforms in 2012/2013, 18% rise with respect to 2011/ % 40% 75% 60% 58% 53% 73% 1

Business reforms in the Caribbean The Bahamas, Jamaica, and Trinidad and Tobago took steps to improve their business regulatory environment over the past year. Jamaica led the way in the Caribbean by adopting new legislation for private credit bureaus, reducing the corporate income tax rate, and streamlining procedures for starting a new business. Since 2005, 11 of 12 economies in the region have implemented regulatory reforms making it easier to do business in the areas measured by Doing Business. Jamaica implemented the most reforms in the region with 13 reforms during this period, followed by the Dominican Republic with 12.

2. The Getting Electricity indicator

Based on Enterprise Surveys in 118 economies around the world Direct responses from representative samples of the private sector Access to finance, electricity and informality are the top obstacles across the developing world Percent of firms identifying the problem as the main obstacle to their business activity 11 Electricity is a major obstacle to business activity

Getting Electricity focuses on interactions between an entrepreneur and distribution utility

13 The indicator distinguishes between 3 types of connection works

14 Getting Electricity indicators – of what use are they to policy makers? Distribution utilities retain monopolistic positions even in otherwise liberalized markets  Customers are captive  Benchmarking utility performance helps regulators help customers Great majority of distribution utilities surveyed are only “game in town”  Benchmarking against utilities in other countries needed Regulatory agencies often have to rely on self-reporting of utilities:  Limits effective monitoring of utility performance (especially in such areas as quality of service regulation)  Independent benchmarking can fill a gap Time and cost to obtain an electricity connection are negatively correlated with the electrification rate. The cost to obtain an electricity connection is negatively correlated with the % of transmission and distribution losses Simpler connection processes are associated with higher firm sales, in particular in industries with high electricity needs Getting Electricity correlates with other sector challenges…. …and can support regulators in their dialogue with the utility……

Where is getting electricity easy – and where not?  In economies where getting electricity is most efficient, requiring fewer interactions with authorities and less time, utilities often carry out the external connection works themselves.  They also obtain the necessary approvals and streamline procedures with other agencies. Where is it easier to get electricity ? a Iceland Korea, Rep Germany United Arab Emirates Hong Kong, China Singapore Taiwan, China SwitzerlandSweden San Marino

Latin America reformed more than in other years and focused on Improving efficiency of the utility

Type of reforms since 2009

3. Getting Electricity in the Caribbean region

Good practices in the Caribbean in making it easy to get an electricity connection PracticeCountries Streamlining approval processes (utility obtains excavation permit or right of way if required) Antigua and Barbuda, Bahamas, Belize, Dominica, Dom. Republic, Guyana, St. Lucia, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago Providing transparent connection costs and processes Barbados, Guyana, Jamaica, St. Lucia, Trinidad & Tobago Reducing financial burden of security deposit for new connections Antigua & Barbuda, St. Kitts & Nevis, Trinidad & Tobago, Barbados, Belize, Jamaica, Puerto Rico, St. Lucia Ensuring safety of internal wiring process by regulating the electrical profession rather than connection process Puerto Rico

Caribbean Countries – Time to get electricity Average : 55 days

Caribbean Countries – Cost to get electricity in USD Average : 25,000 USD

Caribbean Countries – Cost to get electricity in GNI per capita

Cost structure : variable and fixed connection fees

Tackling High Costs for Getting Electricity: Trinidad and Tobago’s New Approach  The most effective regulatory systems govern connection costs in a way that is cost effective for utilities and fair for customers.  Trinidad and Tobago lowered connection costs by introducing a capital contribution scheme to resolve the “free rider” issue (which occurs when first customers fund the entire construction works, to the benefit of future customers).  The new scheme was implemented through extensive collaboration among multiple stakeholders, including the regulator, electricity utility and entrepreneurs.

Connection costs are spread amongst new and future customers

Recommendations from the capital contribution working group Introducing a reimbursement scheme. To ensure that connection costs are more widely spread across different users, assets eventually shared by customers connecting later must be reimbursed to initial customers by T&TEC. Setting connection costs with revenue from electricity supply. T&TEC is required to show that a connection is not commercially viable without a capital contribution and that it should be no more than what it would cost to be commercially viable. This approach allows a balanced allocation of costs because a new connection is also a source of future revenue. But large industrial customers still bear the full capital costs of connecting to the network, and connection costs are small relative to the company’s turnover. Involving the private sector. Customers can use T&TEC employees or contractors for conducting connection works. But T&TEC should prepare a list of prequalified contractors for customers, specify technical criteria and inform customers about the average costs of works in various areas. Many economies have opened their electricity markets to prequalified contractors—offering more options to customers and helping utilities meet the demand for new connections in a timely, cost-effective way.

Getting Electricity in Trinidad and Tobago

Caribbean countries – Ranking in Getting Electricity Economies Ranking for Getting Electricity in 2013 Trinidad and Tobago 10 St. Kitts and Nevis 19 Antigua and Barbuda 20 St. Vincent and the Grenadines 25 St. Lucia 31 Puerto Rico 38 Suriname 40 Bahamas, The 45 Belize 57 Dominica 64 Haiti 67 Grenada 71 Barbados 83 Dominican Republic 127 Jamaica 132

Caribbean countries – some common features Multiple inspections conducted by utility as well as other agencies – causing delays in the connection process 12 out of 15 Caribbean economies charge a security deposit for new connections, and in only 5 economies, the security deposit can be settled with a bond or bank guarantee. Transparency – in only 4 out of 15 Caribbean economies, the electricity fees are easily accessible (published online or available in brochures) Distribution systems often lack spare capacity – new connection requires expansion of network, and customers have to shoulder additional capital investments.

Good practices : Transparency of new electrical connection cost Getting a new electricity connection costs more than twice as much in economies where information on the connection fees is more difficult to access  Similar results were found for the fees to register property and to obtain a construction permit.

Quality of supply – power outages Quality of Supply - Total hours of power outages per year

32 Thank You Questions