ECONOMIC COST OF ELECTRIC POWER INTERRUPTION ON SMALL AND MEDIUM ENTERPRISES BUSINESS IN THE CASE OF HADIYA ZONE SOUTHERN ETHIOPIA

Abstract

In most developing countries electricity supply is highly not sustainable. The primary objective of this study is to analyze the economic cost of the electric power interruption on the SME business in a case of Hadiya zone, Ethiopia. These estimates rely on a cross sectional data collected from Respondents through questioners and face-to-face interviews. Using a conditional logit and the binary logistic regression models, to be associated with consumers’ willingness to pay for improve power interruption. The study findings show that Family size and size of enterprise have no statistical significant and negative marginal effect of willingness to pay electricity improvement. In addition, Maintained cost of alternative sources, distance of manufacturing area to sale/services and satisfactions level with electricity service is insignificant effects for choosing of willingness to pay additional cost to avoid electricity interruption. also, the results reveals that power interruption variables (measured using frequency of power interruption in a per days and monthly electricity expenditure) have a positive and significant effect on the estimated willingness to pay or causes for economic costs on small and medium enterprise, but Alternative source of power supply equipment has negative and significant at 5% level of significance effects on willing to pay for improved services. One strong outcome of the study is that the power interruption in study area has imposed significant additional costs on the services/business sector in SMEs. The bulk of these additional costs relate to the enterprises’ acquisition of very expensive alternative power source to cushion them against the even larger losses arising from frequent and long power fluctuations. Therefore, the paper suggests that there is need for the Ethiopia or regional government to come up with ways of improving energy generation and supply, as well as proper maintenance of electricity infrastructure in the study area.