Change in consumer sensitivity to electricity prices in response to retail deregulation: A panel empirical analysis of the residential demand for electricity in the United States

Nakajima, Tadahiro; Hamori, Shigeyuki

doi:10.1016/j.enpol.2009.12.041

Cited by 67 publications

(29 citation statements)

References 25 publications

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“…International and local studies estimated the price elasticity of aggregate (but also residential) electricity within the range of À2-0 and income elasticity between 0 and 2 (Taylor, 1975;Nakajima and Hamori, 2010;Inglesi, 2010). So, it is of high importance to mention that our results for the price and income elasticities are within the previously estimated ranges.…”

Section: Resultssupporting

confidence: 69%

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The evolution of price elasticity of electricity demand in South Africa: A Kalman filter application

Inglesi‐Lotz

2011

Energy Policy

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a b s t r a c tIn South Africa, the electricity mismatch of supply and demand has been of major concern. Additional to past problems, the 2008 electricity crisis made the solution crucial after its damaging consequences to the economy. The disagreement on the need and consequences of the continuous electricity price hikes worsens the situation.To contribute to the recent electricity debate, this paper proposes a time-varying price elasticity of demand for electricity; the sensitivity of electricity consumption to price fluctuations changes throughout the years. The main purpose of this study is the estimation of the price elasticity of electricity in South Africa during the period 1980-2005 by employing an advanced econometric technique, the Kalman filter.Apart from the decreasing effect of electricity prices to consumption (À 71.8% in the 1990s and À 94.5% in the 2000s in average), our results conclude to an important finding: the higher the prices (for example in the 1980s) the higher the sensitivity of consumers to price fluctuations.Thus, further increases of the electricity prices may lead to changes in the behaviour of electricity consumers, focusing their efforts on improving their efficiency levels by introducing demand-side management techniques or even turning to other sources of -cheaper -energy.

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Section: Resultssupporting

confidence: 69%

“…(8) includes standard variables, used in international and local literature (Inglesi, 2010;Nakajima and Hamori, 2010;Dilaver and Hunt, 2010) such as prices of electricity and output of the economy, to explain the electricity consumption.…”

Section: Theoretical Modelmentioning

confidence: 99%

The evolution of price elasticity of electricity demand in South Africa: A Kalman filter application

Inglesi‐Lotz

2011

Energy Policy

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“…However, this need not be a result of competition. Nakajima and Hamori (2010) do not find significant differences in the price elasticity of demand between regulated and deregulated states. Using panel data for cross sections of the US including (i) all states (plus DC), (ii) all regulated states and (iii) all deregulated states, they suggest, "It can be said…retail electricity market deregulation has not made ordinary electricity consumers more sensitive to electricity rates, and that retail deregulation policies are not the cause of price elasticity differences between deregulated and non-deregulated states" (p. 2475).…”

Section: Introductioncontrasting

confidence: 54%

Retail competition in electricity supply—Survey results in North Carolina

McDaniel¹,

Groothuis²

2012

Energy Policy

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Residential retail competition in electricity supply was introduced in many countries and some US states as part of electricity industry deregulation. Following problems in the electricity market in California in 2000/2001 many US states, including North Carolina, suspended their deregulation agenda. Recent technological advances have made competition more viable, so we ask if NC should reconsider deregulation and retail competition. The welfare benefits will depend on consumers' willingness to switch suppliers and the potential for value added innovations. In electricity and industries such as pay-tv and telecommunications consumers are 'sticky', remaining with their current supplier even though rivals offer savings. Moreover, some analysts question the likelihood of significant welfare improvements from retail competition. We survey residents in two NC counties focusing on: (i) households' knowledge of and interest in retail competition, (ii) factors that would encourage them to switch suppliers and (iii) the required savings to encourage switching. About 50-65% of respondents would favor retail competition in NC. Demographic variables and experience switching in other industries affect opinions and the savings required to incent switching. We conclude the estimated rate reduction to encourage competitive switching will be hard to achieve in NC as long as rates remain below the national average.

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“…The results show that much instability in price and income elasticities is observed during the period before regulation while the regulation period is characterized by more stable and declining sensitivity of electricity demand. During this latter period, the estimates of price and income elasticities are even found to be within the empirical ranges of -2-0 for price and 0-2 for income (see Inglesi-Lotz, 2011 as well as Nakajima and Hamori, 2010).…”

Section: 2hansen Test Resultsmentioning

confidence: 69%