This paper studies the effect of electricity on income, using the Nepal Living Standards Survey-III (NLSSIII), carried out in the years 2010-11. To account for endogeneity issues, we use Three Stage Least Squares (3SLS), and Two Stage Probit Least Squares (2SPLS) models. We find that causality runs both ways. That is, income explains whether a household is connected to electricity, but also, a household being connected to electricity has a very large and significant effect on income. A household being connected to electricity increases consumption per capita by 18% on average.