Central Asia Regional Economic Cooperation (CAREC)

Central Asia Regional Economic Cooperation (CAREC) Energy Reform Atlas Vulnerable Consumer Toolkit A Marsden Jacob Presentation

Vulnerable Consumer Toolkit Cameron O Reilly Lead Consultant CAREC Energy Reform Atlas - Vulnerable Consumer Toolkit 2

Context Energy in CAREC Region CAREC region has over 1.7 billion consumers Consumer Distribution in CAREC CAREC region average residential electricity price is US5c KW/h significantly below global average of US 14c kw/h 7% Electricity prices for business customers are also low China (1.4bil) 12% Pakistan (200mil) Current energy pricing involves use of subsidies Access to electricity in the CAREC region is generally very high Remaining countries (130mil) 81% Affordability and access prioritised over reliability 3 CAREC Energy Reform Atlas - Vulnerable Consumers

The Energy Trilemma Affordability/price is only one aspect of the Energy Trilemma of affordable, reliable and sustainable electricity Reliability of energy in CAREC has been impacted by the focus on affordability Sustainability varies in CAREC - most common low carbon energy source being hydro 4 CAREC Energy Reform Atlas - Vulnerable Consumers

Current challenges for energy systems of CAREC Subsidies are expensive to governments, and have a high opportunity cost they impact expenditure on other government priorities like health and education Subsidies have led to a lack of investment and reduced reliability Reliability is critical to consumers including vulnerable consumers In many CAREC countries, the energy system is carbon intensive and subject to climate change and regulatory risk Market based reforms are at an early stage Reform of government utilities and introduction of competition is limited 5 CAREC Energy Reform Atlas - Vulnerable Consumers

40% Policy Considerations for Energy Reform Of global respondents said protection of vulnerable consumers needs the most attention in their country Consumers International Energy is an essential service and a universal right Under-pricing of energy does not encourage efficient use Universal energy subsidies are captured by those who spend the most Low-income consumers spend a higher percentage of their income on energy So, Targeted measures to mitigate price impact of reforms on vulnerable consumers are justified Targeted support for vulnerable consumers is less costly and distortionary than universal subsidies It is vital to clearly define vulnerable consumers 6 CAREC Energy Reform Atlas - Vulnerable Consumers

Vulnerable Consumers - Definition A customer is vulnerable due to long term measures of disadvantage vs rest of society that disadvantage is beyond the control of the consumer Defining who is vulnerable can be a challenge broad definitions will be too costly A customer can be vulnerable due to an event so may not always be vulnerable . Measures for long- term vulnerability are most important for reform Vulnerable Consumer Identification Common demographic characteristics Other Characteristics Age Income Employment status Health/disability Education levels Housing situation (renter or owner) Gender, Urban/rural location Immigration status (e.g. refugee) Household size Climate 7 CAREC Energy Reform Atlas - Vulnerable Consumers

Options to Support Vulnerable Consumers Approach Interventions Specific pricing for vulnerable customers Social tariffs Financial support from government for customers who meet vulnerable criteria Energy rebates, vouchers or government income support to vulnerable consumers Regulations specific to vulnerable customers Disconnection bans, hardship policies Capital investments focused on vulnerable customer locations Energy efficient investments insulation, LED lighting Public information to vulnerable consumers Advice on energy efficient practices Technology solutions Pre-payment meters, rooftop solar Supplier competition for consumers Tariff comparison services for vulnerable 8 CAREC Energy Reform Atlas - Vulnerable Consumers

Table of Interventions Long-term Vulnerable Consumers Type of intervention Examples Who implements Advantage Disadvantage Complicates pricing- targeting of measure difficult, cross subsidy, regulatory cost Confined to eligible vulnerable consumers Specific pricing Social tariff Regulator energy company Operates with cost-reflective pricing, can work with competitive markets, lower regulatory cost Budget cost, dampens price signals, can be spent on other uses if not energy specific Rebate, voucher or general low-income support Financial Government Regulatory cost, scamming of regulation, increases supplier risk of vulnerable consumers Disconnection ban, payment relief/plans for vulnerable Targeted to vulnerable, non- price intervention Regulatory Regulator, energy company Rebound effect (efficiency savings lead to higher consumption), budget cost Insulation, energy efficient lighting, appliances incentives One off expenditure, potential high pay-back Capital Government, energy company Energy efficiency advice, energy literacy Government, regulators, charities Rebound effect, uncertain outcome Behavioural Targeted measure Pre-payment meters, interactive meters/apps, in home displays, solar PV One-off cost, relies on consumer uptake, digital literacy Can be targeted, potential high pay-back Technology Energy company 9 CAREC Energy Reform Atlas - Vulnerable Consumers

Conclusions Reform/removal of subsidies is hard but delivers benefits to energy system and consumers Energy reform will have distributional impacts if prices rise Targeted measures directed to vulnerable consumers can be justified in equity terms It is important to establish clear criteria to define vulnerable consumers An effective vulnerable consumer strategy can help ensure acceptance of energy reforms because; All consumers benefit from an energy system that is more reliable and sustainable All consumers benefit when removal of energy subsidies allows more expenditure on services like health and education (vulnerable consumers are likely to benefit the most) 10 CAREC Energy Reform Atlas - Vulnerable Consumers