Regulation of the Electricity Industry in Bolivia: Its Impact on Access to the Poor, Prices and Quality

consumer pays for the commodity. Figure 3.6 illustrates the evolution of prices in the three major
departments of the country, La Paz, Cochabamba and Santa Cruz.

Figure 3.6

Average Household Prices in La Paz, Cochabamba and Santa Cruz
(cents $/kWh)

♦ La Paz H Santa Cruz A Cochabamba

Source: INE

There is a convergence of prices paid by households in these three departments as they
continuously more upwards. The increase in tariffs during the regulation period is expected
because even though transformation of the industry may have caused (i) greater productive
efficiency; (ii) the appearance of scale economies; and (iii) utilization of better technology,
subsidies (direct or otherwise) were bound to be phased out in order to assure a more efficient
allocation of resources, which would put upward pressure on prices. The newly private
companies would also be expected to charge tariffs that would guarantee their financial viability
and would induce them to expand service coverage to previously unattended areas. However
reasonable the arguments behind the continuous increases in prices, it does not change the fact
that they have indeed increased continuously throughout the period analyzed.

A more interesting picture is observed when one compares the evolution of prices during the
same period for parts of urban and rural Bolivia. Figure 3.7 below illustrates household prices for
urban and rural La Paz.

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