Services Quality, System Losses and Electricity Supply: Empirical Evidence from Electricity Distribution Utilities in Pakistan

Abstract

This study estimates the effect of services quality and system losses on the electricity supply using data from eight electricity distribution utilities in Pakistan. One-step system GMM estimation results find a negative and statistically significant effect of services quality on electricity supply by the electricity distribution utilities. The results further confirm the existence of the non-linear relationship between system losses and electricity supply. The estimated threshold level of system losses is 7 percent which is below the current level of losses at 18 percent. Our results reinforce that services quality standards for distribution utilities at their current level are not being determined accurately by NEPRA. NEPRA is suggested to revise its required performance standards and use the threshold level of system losses as a benchmark to set the targeted losses for each utility.