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

  • Peter C. Reiss
  • Matthew W. White
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    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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    File URL: http://www.nber.org/papers/w9986.pdf
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    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
    Note: IO EEE
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. 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.
    2. Paul L. Joskow, 2001. "California's Electricity Crisis," NBER Working Papers 8442, National Bureau of Economic Research, Inc.
    3. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
    4. 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.
    5. 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.
    6. Peter C. Reiss & Matthew W. White, 2001. "Household Electricity Demand, Revisited," NBER Working Papers 8687, National Bureau of Economic Research, Inc.
    7. 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.
    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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