Working Paper: NBER ID: w8687
Authors: Peter C. Reiss; Matthew W. White
Abstract: Recent efforts to restructure and partially deregulate electricity markets have renewed interest in understanding how consumers respond to price changes. Several interrelated problems complicate demand analyses of these markets, including nonlinear pricing, heterogeneity in households' price sensitivities, and data aggregation. This paper formulates a model of household electricity demand that addresses these difficulties. We estimate the model using data for a representative sample of California households, and summarize how electricity demand elasticities vary in that state. We then use the model to analyze the electricity consumption and expenditure effects of recent tariff structure changes in California.
Keywords: Electricity demand; Nonlinear pricing; Tariff structure; Consumer behavior
JEL Codes: C4; L5; L9
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nonlinear tariff designs (D49) | consumer behavior (D19) |
| tariff design (D49) | household consumption behavior (D10) |
| five-part tariff structure (F14) | energy conservation (Q41) |
| five-part tariff structure (F14) | utility revenue (L97) |
| tariff design (D49) | variation in electricity demand elasticities (D12) |
| customer sorting problem (C69) | specification errors (C20) |