An Empirical Study of Electricity Theft from Electricity Distribution Companies in Pakistan

In: The Pakistan development review: PDR, Band 53, Heft 3, S. 239-254

Abstract

Electricity theft is a common problem in many countries and
energy worth billions of dollars is stolen annually from electricity
grids. The problem has socioeconomic, political, environmental and
technical roots, but the solution is generally sought solely through
technical measures. This paper empirically investigates the effects of
various factors including electricity price, per capita income,
probability of detection, fines collected from offenders, weighted
temperature index and load shedding, that may explain the theft. The
study employed annual panel data obtained from nine electricity
distribution companies in Pakistan for the period 1988–2010. The study
estimates the Fixed Effects models through the least squares dummy
variable (LSDV) technique and Generalised Method of Moments (GMM). Our
results indicate that per capita income has significant negative and
electricity price a positive effect on electricity theft with
sufficiently high coefficient values. The probability of detection
variable appears with a positive sign in both estimations indicating a
poor deterrence. The results of LSDV show a positive impact of fine on
conviction on electricity theft. But in GMM estimation, this variable
appears with a right sign. The results from both models are robust in
the case of load shedding and temperature variables. The findings show
that economic variables are most significant in explaining electricity
theft. The findings may also be applicable in other developing countries
where hefty amounts of revenues are lost due to electricity theft.
Keywords: Electricity Theft, Fixed Effects Model, Pakistan