## The Distributional and Fiscal Implications of Public Utility Pricing

_IMF Working Papers, June 2, 2023_

## Source details

**Canonical URL:** [The Distributional and Fiscal Implications of Public Utility Pricing](https://www.imf.org/en/publications/wp/issues/2023/06/02/the-distributional-and-fiscal-implications-of-public-utility-pricing-534106)

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## Bibliographic details
- Authors: David Coady, Samir Jahan, Fabiana Machado, Mengfei Gu
- Published: June 2, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400243141.001

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### Summary
- The setting of public utility prices involves balancing competing government policy objectives, from equity concerns to ensuring the financial sustainability of providers and balancing public finances.
- In practice, public utility pricing often departs significantly from government objectives and tends to be characterized by unnecessarily complex price schedules, below cost-recovery tariff rates, and sectoral inefficiencies that contribute to large fiscal costs.
- Countries commonly embark on utility pricing reform in response to these heavy fiscal pressures.
- The paper discusses various reform options available to governments, with a focus on residential pricing schedules, highlighting their fiscal, financial, redistributive, and efficiency implications.

### Key findings
- Public utility price schedules are frequently unnecessarily complex.
- Tariff rates are often set below cost-recovery levels.
- Sectoral inefficiencies in utility pricing contribute to large fiscal costs.
- Utility pricing reform is commonly initiated because of heavy fiscal pressures.

### Reform focus and implications
- The paper concentrates on residential pricing schedules.
- Reform options are evaluated with respect to:
  - fiscal implications
  - financial implications for providers
  - redistributive implications for households
  - efficiency implications across sectors

### Subjects and keywords
- Subject: Commodities, Consumption, Electricity, Household consumption, Income, National accounts, Tariffs, Taxes
- Keywords: baseline tariff schedule, Consumption, cost-recovery tariff, efficiency, Electricity, equity, fiscal sustainability, Household consumption, Income, proxy-means test discount scheme, Public utility pricing, subsidy reform, Tariffs, utility pricing reform strategy

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2023/06/02/the-distributional-and-fiscal-implications-of-public-utility-pricing-534106_