Using Data to Improve Market Efficiency in Honduras' Power System

HN_power_img

By Yalda Amini and Daniel Barjum, March 2018

For the better part of this decade, Honduras’s electricity sector has been continuously facing various challenges. Electricity costs to consumers is generally low, electricity losses are high, and the state-owned power company (ENEE) is highly indebted. This large deficit has become a concern to the central government. Both in 2013 and 2017, the Honduras issued sovereign bonds to cover the financial losses of ENEE. Even with this intervention, ENEE’s financial losses have continued to rise, its current liability levels are equivalent to 9.87% of Honduras’s GDP and its balance sheets are constantly negative.

Past studies have identified the principal challenges in the sector, but do not go much into the details as to how the government should address them. In response, the government has made attempts to resolve the issues in the electricity sector. In previous years, the government has: i) provided financial support to the national power company, ii) incentivized renewables, iii) changed legislation to further open the electricity market, and iv) hired a private distribution company. Even though these actions were taken in the hopes to alleviate sector inefficiencies, this has not happened.

Clean and reliable data is a barrier to further analysis and subsequent policy recommendations. We take on the challenge of collecting and cleaning data that is spread throughout the Honduran electricity sector. This policy paper, through the use of data analysis, dives deep into exploring the issues being confronted by the power company and the government to: i) shed light on what are the underlying causes of the sector’s inefficiencies, and ii) learn what the analysis of large datasets can do for a power sector.

Our principal recommendations are the following:

  1. Collect on delinquent users: The commercial sector and public entities are not paying for electricity which together represent a debt of $155.81 Million.
  2. Address electricity losses: Electricity losses between 2012 and 2018 have been 32.14% on average, this has represented a financial loss equivalent to 6.4% of 2017 GDP. We recommend a rigorous remote metering program in the commercial sectors in the northwest and center-south regions of the country as a starting point to address losses.
  3. Identify indirect subsidies: There are direct and indirect subsidies given in the sector, yet there is no clear data on how subsidies are structured. We recommend this process is made clear.
  4. Collect additional data: Our analysis raised new questions that could not be addressed with the level of data collected. We describe the data that is needed to answer these questions and recommend that future studies focus on this.