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

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  • Peter C. Reiss
  • Matthew W. White
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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% 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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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9986.

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    Date of creation: Sep 2003
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    Handle: RePEc:nbr:nberwo:9986

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    1. Paul L. Joskow, 2001. "California's Electricity Crisis," NBER Working Papers 8442, National Bureau of Economic Research, Inc.
    2. 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.
    3. 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.
    4. 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.
    5. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
    6. Peter C. Reiss & Matthew W. White, 2001. "Household Electricity Demand, Revisited," NBER Working Papers 8687, National Bureau of Economic Research, Inc.
    7. 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.
    8. White, Matthew W. & Reiss, Peter C., 2001. "Household Electricity Demand, Revisited," Research Papers 1715, Stanford University, Graduate School of Business.
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    Cited by:
    1. 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.
    2. Galetovic, Alexander & Muñoz, Cristián M., 2011. "Regulated electricity retailing in Chile," Energy Policy, Elsevier, vol. 39(10), pages 6453-6465, October.
    3. 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.

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