Getting Electricity Methodology

What does Getting Electricity measure?

The Doing Business North America report collects information related to the accessibility, reliability and cost of electricity. The Doing Business North America project uses the Annual Electric Power Industry Report produced by the U.S. Energy Information Administration to collect information on the number of providers for a given state. In addition, two metrics of electricity reliability are collected: the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI). Finally, this project measures the cost of electricity by measuring the average price for a kilowatt-hour (kWh) of electricity for use in a commercial property.

To make the data comparable across economies, several assumptions about the property, the electricity connection, type of electricity, and consumption of energy are used.

Assumptions about the Property

To make the data comparable across economies, several assumptions about the property, the electricity connection, type of electricity, and consumption of energy are used.

The property:

  • Is located in the economy’s largest business city.
  • Is located in an area where similar commercial properties are typically located. In this area, a new electricity connection is not eligible for a special investment promotion regime.
  • Is located in an area with no physical constraints. For example, the property is not near a railway.
  • Operates 30 days a month from 9:00 a.m. to 5:00 p.m. with equipment utilized at 80% capacity on average and that there are no electricity cuts.

Assumptions about the Electricity Connection

The electricity connection:

  • Is a permanent one.
  • The annual energy consumption is 322,560 kilowatt-hours (kWh); monthly energy consumption is 26,880 kWh; hourly consumption is 112 kWh.
  • Prices of electricity are treated as constant throughout the course of a year; no seasonal, monthly, or day-time adjustments due to demand are applied.
  • If multiple electricity suppliers exist, the property is served by the cheapest supplier.
  • No renewable energy sources are used in electricity generation or electricity consumption.
  • Secondary energy sources are used exclusively.
  • No renewable energy tax incentives are considered or applied.

Indicators

Cost of Electricity Used in Commercial Property (per Kilowatt-Hour)

Doing Business North America measures the price of electricity used by commercial properties by measuring the cost of electricity for a single kilowatt-hour (kWh) measured in U.S. cents. It is important to note that a kilowatt-hour is a very small unit; it is assumed that the commercial property uses 112 kWh per hour, and 322,560 kWh per year.

This granular type of data provides the opportunity to calculate other means of representing the cost of electricity (such as the second approach used for this variable). However, the costs associated with completing the procedures necessary to connect a commercial property or warehouse to an electrical source are not recorded when using this new method. Important up-front and administrative costs are therefore not included in this version of the report.

More Than One Electricity Provider

This binary indicator measures whether there is more than one electricity provider available for the given location. It is used as an initial proxy to indicate whether there is a de facto monopoly electricity provider for commercial property across the state. The raw number of providers is available in the data-set, but only the binary indicator is used in calculating this indicator’s score.

Average Outage Duration (SAIDI)

The System Average Outage Duration Index (SAIDI) measures the average duration of power outages for a given location across all electricity providers. It is measured in minutes. This information is derived from the U.S. Energy Information Administration’s Annual Electric Power Industry Report. This report provides information for both ‘Major Event Days’ and ‘Non-Major Event Days’. Non-Major event days do not include natural events related to outages (such as flooding, earthquakes, tornadoes, etc.). Only Non-Major event days are used in this report.

Average Outage Frequency (SAIFI)

The System Average Outage Frequency Index (SAIFI) measures the average frequency of power outages for a given location across all electricity providers. It is measured by the number of occurrences. This information is derived from the U.S. Energy Information Administration’s Annual Electric Power Industry Report. This report provides information for both ‘Major Event Days’ and ‘Non-Major Event Days’. Non-Major event days do not include natural events related to outages (such as flooding, earthquakes, tornadoes, etc.). Only Non-Major event days are not used in this report. For the purposes of this report, a full instance of a power outage is recorded only after a location has been without power for over 5 minutes.

How the ‘Getting Electricity’ Category is Ranked and Scored

The Getting Electricity category was ranked and scored using the following four indicators:

Topic and Indicator

Highest Performer

Lowest Performer

Cost (¢ per kWh)                                 31¢
More Than One Electricity Provider                        Yes No
Average Interruption Duration (SAIDI)                44.19 minutes 448.3 minutes
Average Interruption Frequency (SAIFI)                  0.49 instances 2.98+ instances


For each indicator, there is a top performer and a bottom performer. Economies with the best performance for a given indicator are awarded 10 “points,” or a score of 10. Cities at the level of bottom performance, or cities at or below two standard deviations from the mean, are awarded a score of 0. All the cities in between are scored based on their distance to the frontier. For each city, the number of awarded points across all indicators is aggregated, then divided by the number of indicators for which we had data. This is done because not all locations have complete data across all indicators, and doing so allows for all locations to be included in comparison.

For more information on how indicators, indexes, and groups are scored, how the ranking and scoring system for a category works, or how the overall Ease of Doing Business rank and score were derived, please read the first section of this methodology.

Sources

Data for this category was obtained from each country’s department of electricity and census bureaus.

To request more specific sources, contact: economicliberty@asu.edu