WILLINGNESS TO PAY FOR IMPROVED ELECTRICITY USE AMONG RURAL HOUSEHOLDS: THE CASE OF HARAMAYA DISTRICT, EAST HARARGE ZONE, OROMIA REGIONAL, ETHIOPIA

Abstract

This study investigates the willingness of rural households in Haramaya District, East Hararge Zone, Oromia Regional State, Ethiopia, to pay for improved electricity services. With electricity being essential for residential, agricultural, and commercial activities, its availability and reliability play a critical role in economic growth and quality of life. Using a sample of 274 households selected through random sampling from three kebeles with electricity access, the research applied the Contingent Valuation Method (CVM) with a double-bounded dichotomous choice format and an open-ended follow-up question to assess households' willingness to pay (WTP) for more reliable electricity. Data was collected through structured interviews, with bivariate probit and seemingly unrelated bivariate probit models applied to identify significant determinants of WTP and estimate mean WTP. The results show that Education positively impacted the probability of accepting the initial bid, while the initial bid price and age had a negative effect. In the second bid (WTP2): age (AGE) and the cost of electricity (CCE), both positively impacting WTP, while energy consumption (ECONS) and the second bid price (IB2) had negative effects. The mean WTP for improved electricity was estimated at 7.56 ETB per kWh with the bivariate probit model and 7.04 ETB per kWh with the open-ended format. Findings suggest a high willingness among rural households to invest in reliable electricity, underscoring the need for policy interventions focused on infrastructure improvement and efficient tariff structures. This study’s insights can guide policymakers in formulating strategies to enhance electricity access, supporting economic development and environmental sustainability in rural Ethiopia.