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Demand and Pricing in Electricity Markets: Evidence from San Diego During California's Energy Crisis

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  • Reiss, Peter C.

    (Stanford U)

  • White, Matthew W.

    (U of Pennsylvania)

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    Abstract

    We study the electricity consumption of San Diego-area households following a series of price changes and related events during California's energy crisis in 2000-01. The analysis uses a five-year panel of disaggregate billing and weather data for a random sample of 70,000 households. In contrast to prior work, these data allow us to proceed without behavioral assumptions regarding a consumer's knowledge of energy prices. We find that after a rapid price increase in summer 2000, consumption fell substantially over about 60 days, averaging 12 to 13% per household; consumption then rebounded to within 3% of pre-crisis levels after a price cap was imposed. Under the price cap, public appeals for energy conservation and a remunerative voluntary conservation program had significant, but transitory, effects. Further, a large share of households reduced electricity consumption substantially (over 10%) but saved small monetary amounts ($10 or less). Overall, the results indicate consumers may be far more responsive to pecuniary and non-pecuniary incentives for altering their energy use than is commonly believed.

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1829.pdf
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    Bibliographic Info

    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1829.

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    Date of creation: Sep 2003
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    Handle: RePEc:ecl:stabus:1829

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Parks, Richard W. & Weitzel, David, 1984. "Measuring the consumer welfare effects of time-differentiated electricity prices," Journal of Econometrics, Elsevier, vol. 26(1-2), pages 35-64.
    2. Paul L. Joskow, 2001. "California's Electricity Crisis," NBER Working Papers 8442, National Bureau of Economic Research, Inc.
    3. Paul Joskow & Edward Kahn, 2001. "A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000," NBER Working Papers 8157, National Bureau of Economic Research, Inc.
    4. Caves, Douglas W. & Christensen, Laurits R., 1980. "Econometric analysis of residential time-of-use electricity pricing experiments," Journal of Econometrics, Elsevier, vol. 14(3), pages 287-306, December.
    5. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
    6. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
    7. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
    8. Carl Blumstein & Lee Friedman & Richard Green, 2002. "The History of Electricity Restructuring in California," Journal of Industry, Competition and Trade, Springer, vol. 2(1), pages 9-38, June.
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    Cited by:
    1. Galetovic, Alexander & Muñoz, Cristián M., 2009. "Estimating deficit probabilities with price-responsive demand in contract-based electricity markets," Energy Policy, Elsevier, vol. 37(2), pages 560-569, February.
    2. Galetovic, Alexander & Muñoz, Cristián M., 2011. "Regulated electricity retailing in Chile," Energy Policy, Elsevier, vol. 39(10), pages 6453-6465, October.

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