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

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Author Info

  • 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.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 13142.

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Date of creation: 01 Dec 2005
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Publication status: Published in Journal of Industrial Economics, December 2005, vol. 53 no. 4, pp. 493-513
Handle: RePEc:isu:genres:13142

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Ugur, Mehmet, 2009. "Liberalisation in a world of second best: evidence on European network industries," MPRA Paper 17873, University Library of Munich, Germany, revised 13 Oct 2009.
  2. Koichiro Ito, 2012. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," NBER Working Papers 18533, National Bureau of Economic Research, Inc.
  3. Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential consumption of gas and electricity in the U.S.: The role of prices and income," Energy Economics, Elsevier, vol. 33(5), pages 870-881, September.
  4. Carl Danner, 2010. "Greenhouse gas policy and California electricity prices," Journal of Regulatory Economics, Springer, vol. 37(1), pages 98-106, February.
  5. Swadley, Adam & Yücel, Mine, 2011. "Did residential electricity rates fall after retail competition? A dynamic panel analysis," Energy Policy, Elsevier, vol. 39(12), pages 7702-7711.
  6. Paulo Bastos & Lucio Castro & Julian Cristia & Carlos Scartascini, 2011. "Does Energy Consumption Respond to Price Shocks? Evidence from a Regression-Discontinuity Design," Research Department Publications 4702, Inter-American Development Bank, Research Department.
  7. Christopher Knittel & Catherine Wolfram & James Bushnell & Severin Borenstein, 2006. "Inefficiencies and Market Power in Financial Arbitrage: A Study of California’s Electricity Markets," Working Papers 630, University of California, Davis, Department of Economics.
  8. David R. Bell & Ronald C. Griffin, 2011. "Urban Water Demand with Periodic Error Correction," Land Economics, University of Wisconsin Press, vol. 87(3), pages 528-544.
  9. Medina, Eva & Vicéns, José, 2011. "Factores determinantes de la demanda eléctrica de los hogares en España: una aproximación mediante regresión cuantílica/Determinants of Household Electricity Demand in Spain: An Approach through ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 29, pages 515-538, Agosto.
  10. Ben Gilbert & Joshua S. Graff Zivin, 2013. "Dynamic Salience with Intermittent Billing: Evidence from Smart Electricity Meters," NBER Working Papers 19510, National Bureau of Economic Research, Inc.
  11. Casarin, Ariel A. & Delfino, Maria Eugenia, 2011. "Price freezes, durables, and residential electricity demand. Evidence from Greater Buenos Aires," Energy Economics, Elsevier, vol. 33(5), pages 859-869, September.
  12. Borenstein, Severin & Bushnell, James & Wolfram, Catherine D, 2006. "Inefficiencies and Market Power in Financial Arbitrage: A Study of California’s Electricity Markets," Institute of Transportation Studies, Working Paper Series qt7fp26301, Institute of Transportation Studies, UC Davis.

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