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Empowering Poor Communities

In Paraísopolis, the second largest favela in São Paulo, Brazil, the quality of electricity service was cost-effectively upgraded.

November 02, 2009
November/December 2009
This article originally appeared in the November/December 2009 issue of Home Energy Magazine.
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One billion people live in poor urban and peri-urban areas, or slums, throughout the developing world. In Paraísopolis, the second largest favela (slum) in São Paulo, Brazil, the quality of electricity service was very poor as recently as four years ago. Almost all the households and businesses had illegal electricity connections, were exposed to dangerous network and wiring conditions, and did not pay for service. Households and businesses consumed on average 250 kWh per month—a large amount of electricity for this population—due to the very poor condition of household appliances and electrical equipment (especially refrigerators and electric water heaters for showers), and the lack of a price signal to encourage consumers to use electricity wisely.

This article reviews lessons learned from a pilot project conducted in Paraísopolis. It was conducted by AES Eletropaulo, the U.S. Agency for International Development (USAID), and the International Copper Association (ICA), with local community and industry partners. Their goal was to develop, test, and evaluate customized approaches to regularizing electricity service in a target area of Paraísopolis. The pilot was the first to be launched under the USAID-ICA Slum Electrification and Loss Reduction (SELR) program, which was initiated in October 2005 with the goal of regularizing (making legal) and improving electricity service to low-income communities. This project would demonstrate innovative, socially responsible, and cost-effective ways to expand access to electricity service in these poor urban neighborhoods.

The focus of the pilot project was to improve the safety and reliability of energy supply and use, and especially to promote the benefits of energy efficiency, as applied to buildings in slums. It focused on sustainability; financial analysis; socioeconomic, regulatory, and institutional factors; and technical solutions.


Paraísopolis

The target area chosen for the pilot project consisted of two neighborhoods (Antônico and Centro) within the Paraísopolis favela, which has about 20,000 households. In the target area, there are 4,365 low-income households and businesses.



Paraísopolis is an informal community, lacks many municipal services and is home to families who have migrated from rural areas. Located in a large ravine, Paraísopolis has a physically challenging geography. Most of the houses are hand-constructed out of brick, and are densely occupied (the houses have two, three, or four stories each). The average household income is around US$300. Figures 1 and 2 show levels of education and employment in Paraísopolis.

The first step in the project was for Eletropaulo to work with community leaders, on the scope and scale of the project. (Leaders in this community are not elected officials; they are recognized as leaders because they help people with social problems). The utility then held a series of community meetings to introduce residents to the program, teach them about paying their bills, electricity consumption and how to reduce their consumption.

Identifying and registering the individual households and businesses was a challenging task, given the narrow, winding streets and alleys; the fact that many families often live in a single home; the lack of street names; and the fact that parallel registration efforts were being made by the municipality and other service companies.


Community Involvement

Fifteen campaigns were carried out over several months. They were supplemented by door-to-door visits by community agents hired by Eletropaulo, and by utility staff to each household both pre- and post regularization. As residents had not previously had to pay for electricity (except in some cases to get their illegal connection), these visits helped to educate them on the importance of reducing costs by reducing consumption.

Eletropaulo undertook the registration of all customers and the numbering of the houses. Technolight conducted miniaudits in more than 4,000 houses and 70 businesses, and finally USAID conducted a customer satisfaction survey.


Upgrading the Distribution Network

Under the project, the distribution network was upgraded and households and businesses were metered. The households were not charged a connection fee, and any debts owed were forgiven. A key component of the SELR program was the use of new technologies and techniques to reduce theft and to improve the energy efficiency and reliability of the distribution network. These included
  • using bicoaxial cable in the new service drop to each meter;
  • introducing electronic metering for large commercial consumers to allow easy disconnect, or social cutting, in the case of nonpayment: 475 electronic meters with remote control were installed; and
  • replacing 12 conventional and overloaded distribution transformers with energy-efficient transformers.

Technology

Improvements varied according to need and included a secondary network with twisted cable, or with coaxial cable to be installed in the future, as required;
  • bicoaxial antitheft copper drop cable;
  • energy-efficient transformers; and
  • electronic metering.

Reducing Consumption

The density of housing, the irregularity of the residents’ occupations, and the cultural habits are factors that contribute to high energy consumption. Control of electricity use is key in the success of regularization, since energy bills should be low enough for the residents to afford. In Paraísopolis, efficiency improvement measures were adopted to ensure that this would be the case. Technolight performed energy audits of every household to identify opportunities to save. The following measures were then implemented:
  • Nine thousand five hundred and eighty-eight 40–200W incandescent lamps were replaced with CFLs.
     
  • Four hundred and ninety-seven old energy hog refrigerators were replaced with new energy-efficient models in the poorest households. The old models consumed as much as 150 kWh per month. The replacements meet Class A, the highest energy efficiency label based on the Procel standard, the Brazilian national electricity conservation program within Eletrobras (Brazil’s power utility), and are rated at 23 kWh per month for a 300-liter volume. The average measured savings were 48 kWh per month per customer. Old refrigerators were removed for recycling.
     
  • Four hundred and ninety-six houses were rewired to better-than-code-sized wiring (2.5 mm2 for supply, 4 mm2  for water heating). This saved on average 11 kWh per month and guaranteed a safe supply of power.
  • Five hundred and five public lighting points were installed. This not only helped to reduce energy consumption in the neighborhood but also increased the residents’ sense of security.
Technolight also audited a sample of commercial customers. This provided the project with the information needed to recommend efficiency measures to these customers.


The Outcome

Data on pilot project results are shown in Table 1, Summary of Pilot Results. A consumer poll, conducted after the completion of the project and several months of billing, showed that the majority of the families in the pilot project were highly satisfied with their service, and with the assistance they received in improving household energy efficiency and safety.

Of the 400 households surveyed, 62% rated their overall satisfaction with the project as 9 or 10 on a scale of 1 to 10. Not surprisingly, this figure increased to 98% for those who received a new refrigerator and rewiring, and to 80% for those who were only rewired. The majority (88%) of the households considered the quality of the electricity service to be good or very good after project implementation, compared to only 17% before the project. Eighty-nine percent of the households would recommend the program to other residents.

The energy efficiency measures taken in the households and distribution network are expected to yield annual energy savings of over 2 million kWh. Until recently, bills to households and businesses were capped at 150 kWh to help households transition to paying for service, as well as to educate them about their actual consumption levels and charges once the cap is removed. It is expected that additional savings will accrue (but additional bad debt may also occur) when larger consumers start to experience the true cost of their consumption.

After project implementation, AES Eletropaulo began to collect a significant amount of new revenue from people who had not previously paid for their electricity. Annual billing is expected to reach over $920,000; currently, the bad debt rate is about 33%. This bad debt rate is relatively high; it is attributable to the large number of commercial customers with high consumption levels that are unable or unwilling to pay. The bad debt rate is expected to decrease, based on Eletropaulo’s experience in other areas; the company maintains an office and some agents to help commercial customers to reduce their consumption, and in the future will implement its social cutting program to enforce collections.

However, while survey results show that nearly a third of households said they “made a great effort” to pay their electricity bill, 56% said that if their budget was tight, they would choose not to pay. This is a challenge to project sustainability—a challenge that Eletropaulo must take into account as it rolls out the SELR program to hundreds of thousands more favela households over the next few years. To meet this challenge, the company plans to sustain its dialogue with, and education of, these communities.


A Project Worth Replicating

Total investment in the pilot project was about US$1.8 million. The financial analysis (Table 2) shows a simple payback of 1.36 years, with a range, depending on optimistic and pessimistic projections of local conditions, of 1.2 years to 1.6 years. It is clear, then, both from the outcome and from the financial analysis, that even assuming the worst-case scenario, regularizing electricity service in the slums by involving the community, by addressing safety and energy efficiency, and by creating a broad partnership of public and private stakeholders, is a successful approach, and one that can be easily replicated in other parts of the world. In fact, the Brazilian regulator ANEEL has proposed a similar program to replace as many as ten million inefficient refrigerators in the country.

The unique partnership created to develop and implement the pilot project could serve as a model for other communities, not just in Brazil but throughout the world. AES Eletropaulo and other Brazilian utilities are continuing programs to regularize electricity service in the slums, and to reduce the technical and commercial losses of electrical energy. 

John R. Mollet is Vice President of the International Copper Association, Ltd. (ICA). Glycon Garcia Jr. is Leader of Sustainable Electrical Energy Program of International Copper Association (ICA) in Latin America. Jose Cavaretti, AES Eletropaulo’s New Market Development Manager and Simone Lawaetz, an Energy Specialist with USAID’s Energy Team, contributed to this article.

For more information:
About Procobre’s work in other countries in Latin America, Africa, and Asia, go to: www.procobre.org/procobre/cobre_para_especialistas/improving_electricity.html.

For a full report, go to: http://www.leonardo-energy.org/transforming-electricity-consumers-customers-case-study-slum-electrification-and-loss-reduction.
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