The Impact of Electricity Price Increases on Income Groups

Western United States and California

by Morton B. Berman, Morlie Hammer Graubard, Dennis P. Tihansky

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An exploration of the ramifications of increased electricity prices on residential consumers of different income groups. Other research showed that a doubling of the price of electricity is expected to lead to a 50 percent reduction in overall consumption in the residential sector. This study finds that the long-term ability of a consumer to reduce electricity consumption increases with income level. High-income consumers are more responsive because they own more devices that have other energy substitutes. Further, they are able to sustain higher outlays for such items as insulation that reduce their electricity consumption. Governmental policies that might increase the price of electricity can be tailored to exempt lower income groups without substantially reducing the overall reduction in consumption. Low-income users represent only a small portion of total consumption and are relatively unresponsive to electricity price increases.

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