Demand (Economic theory), Econometrics, Elasticity (Economics), Time series analysis, Prices, Electric power consumption, Electricity, and Households
Measurement of residential demand for electricity has taken on increased importance with the rapid increase in real energy prices and the identification of the electricity sector as a central focus of energy policymaking. Reliable analysis of proposals to revise electricity rate structures and projections of future supply needs must be based on quantitative judgments about price and income elasticities as well as the effects of other major variables. To date, virtually all econometric studies of household demand have used aggregate time-series or cross-section data and some measure of the average residential price per kilowatt -hour of electricity. Because the marginal price per unit of electricity is not constant under the declining-block rates used by utilities, such studies may contain biases that can be especially serious when analyzing the effect of any change in rate structure. The empirical research reported in the article is based on micro-level data for 3825 geographic areas throughout the county of Los Angeles, California. By adopting this disaggregated approach to estimating demand equations, authors are able to measure the marginal price faced by households, control for eight major appliances, and include the important influence of weather.