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Consumption Under Noisy Price Signals: A Study of Electricity Retail Rate Deregulation in San Diego

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  • Bushnell, James
  • Mansur, Erin T.

Abstract

Utility services employ nonlinear tariffs that attempt to convey information on cost convexities. This paper examines how customers respond to noisy and volatile tariffs by measuring deregulated retail ratesï¾’ impact on electricity consumption in San Diego. When rates doubled in 2000, consumers appear to have reacted more to recent past bills than to current price information. By summerï¾’s end, we find consumption fell 6% while lagging price increases. Even months after the utility restored low historic rates customers continued curtailing demand.Weconclude that rate structures relying upon lagged wholesale price averages produce delayed responses to scarcities or high costs.

Suggested Citation

  • Bushnell, James & Mansur, Erin T., 2005. "Consumption Under Noisy Price Signals: A Study of Electricity Retail Rate Deregulation in San Diego," Staff General Research Papers Archive 13142, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:13142
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    References listed on IDEAS

    as
    1. Robert H. Patrick & Frank A. Wolak, 2001. "Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices," NBER Working Papers 8213, National Bureau of Economic Research, Inc.
    2. 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.
    3. Peter C. Reiss & Matthew W. White, 2003. "Demand and Pricing in Electricity Markets: Evidence from San Diego During California's Energy Crisis," NBER Working Papers 9986, National Bureau of Economic Research, Inc.
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