Private Utilities and Poverty Alleviation

Private Utilities and Poverty Alleviation

Market Initiatives at the Base of the Pyramid

Edited by Patricia Márquez and Carlos Rufín

Drawing on cases from electricity distribution and other infrastructure industries, and from experiences spanning Asia, Africa and Latin America, this book examines new business models to bring basic utility services to the four billion people comprising the base of the socio-economic pyramid.

Chapter 10: One Step Toward Citizenship: The Slum Electrification and Loss Reduction Pilot Project in São Paulo, Brazil

Ivar Pettersson

Subjects: development studies, development economics, economics and finance, development economics, industrial economics, public sector economics


Ivar Pettersson Urban concentration in Brazil continues to increase more rapidly than the budgets for public services. In this context, providing electricity to low-income urban communities poses great challenges. At the same time, access to reliable and affordable electricity is central to stimulating economic growth and social development in excluded neighborhoods and slums. Thus, a key question for electricity distribution companies in Brazil and other developing countries today is: how can we best meet the electricity demands of the growing urban population at the base of the pyramid (BOP)? Historically, utility companies have learned to expect low or negative returns in providing services to low-income people. Company managers have little knowledge about the attempts of low-income communities to overcome problems associated with living in slums, such as lack of land tenure, poor infrastructure and crime. Companies do not understand slum residents’ sense of being excluded from society, and their imperative to survive even if it entails connecting illegally to the electricity distribution network. Poor enforcement of regulations, difficulties in providing access to services and infrastructure, and the complexity of the technical and administrative solutions required to contend with theft and fraud in services can all increase a company’s challenge in serving the base of the pyramid. This chapter showcases the experience of AES Eletropaulo and its business strategy for supplying public utility services to BOP communities on a financially sustainable basis. To address the needs of these communities, the company had to develop commercial policies, technologies and relationships compatible with...

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