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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)

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.

Suggested Citation

  • Reiss, Peter C. & White, Matthew W., 2003. "Demand and Pricing in Electricity Markets: Evidence from San Diego During California's Energy Crisis," Research Papers 1829, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:1829
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    Cited by:

    1. James B. Bushnell & Erin T. Mansur, 2005. "Consumption Under Noisy Price Signals: A Study Of Electricity Retail Rate Deregulation In San Diego," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 493-513, December.
    2. Galetovic, Alexander & Muñoz, Cristián M., 2011. "Regulated electricity retailing in Chile," Energy Policy, Elsevier, vol. 39(10), pages 6453-6465, October.
    3. Peter C. Reiss & Matthew W. White, 2008. "What changes energy consumption? Prices and public pressures," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 636-663, September.
    4. J. Micha Steinhäuser & Klaus Eisenack, 2015. "Spatial incidence of large-scale power plant curtailment costs," Working Papers V-379-15, University of Oldenburg, Department of Economics, revised Jul 2015.
    5. Zhang, Fan, 2011. "Distributional impact analysis of the energy price reform in Turkey," Policy Research Working Paper Series 5831, The World Bank.
    6. 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.
    7. Matthew J. Kotchen & Laura E. Grant, 2011. "Does Daylight Saving Time Save Energy? Evidence from a Natural Experiment in Indiana," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1172-1185, November.
    8. Koichiro Ito, 2015. "Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program," American Economic Journal: Economic Policy, American Economic Association, vol. 7(3), pages 209-237, August.
    9. Fan Zhang, 2015. "Energy Price Reform and Household Welfare: The Case of Turkey," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    10. Ottavia Valentini & Nikoleta Andreadou & Paolo Bertoldi & Alexandre Lucas & Iolanda Saviuc & Evangelos Kotsakis, 2022. "Demand Response Impact Evaluation: A Review of Methods for Estimating the Customer Baseline Load," Energies, MDPI, vol. 15(14), pages 1-36, July.
    11. Steinhäuser, J. Micha & Eisenack, Klaus, 2020. "How market design shapes the spatial distribution of power plant curtailment costs," Energy Policy, Elsevier, vol. 144(C).
    12. Prasanna, Ashreeta & Mahmoodi, Jasmin & Brosch, Tobias & Patel, Martin K., 2018. "Recent experiences with tariffs for saving electricity in households," Energy Policy, Elsevier, vol. 115(C), pages 514-522.

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