Seasonal Electricity Demand and Pricing Analysis with a Variable Response Model

by Lee A. Lillard, Jan Paul Acton

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The Los Angeles Electricity Rate Study is designed to yield information on the effects of alternative pricing structures for residential consumers. This report gives the results of the behavior of 624 households in the Los Angeles area over a 23-month period under seasonal and time-invariant experimental plans. The econometric model used emphasizes differences by households in permanent consumption level and in responsiveness to weather variation. The significant variation among households' responsiveness to both hot and cold weather, as well as their permanent consumption levels, are related to household characteristics (appliances, house and family characteristics). Thus, important differences can be expected across households from introducing seasonal pricing. It is concluded that welfare gains under seasonal pricing would be quite small, and that seasonal pricing of electricity has little to offer in comparison with present rates or with time-of-day rates.

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