Residential Electricity Consumption in Las Cruces, New Mexico, USA

Abstract

This study examines how residential electricity consumption (KWHC) reacts to changes in the price of electricity, the price of natural gas, real income per capita, heating degree days, and cooling degree days. Annual frequency data analyzed are for Las Cruces, the second largest metropolitan economy in New Mexico. The sample period is 1977 to 2016. An AutoregressiveDistributed Lag model (ARDL) is employed to obtain long-run and short-run elasticities. In the long-run, residential consumption does not respond in a statistically reliable manner to any of the explanatory variables. All of the coefficient signs are as expected and those for real per capita income and total degree days appear plausible. In the short-run, residential consumption responds reliably to variations in all of the variables except per capita income. Somewhat surprisingly, the short-run results also include an own-price elasticity that is close to zero, implying that residential electricity has a horizontal demand curve in Las Cruces.

Small Firm Electricity Demand in Las Cruces, New Mexico, USA

“…This result runs counter, however, to what is reported for CIS demand in nearby El Paso by Allen and Fullerton (2019) and for commercial firms nationally by Contreras et al (2011). It also runs counter to what is reported for residential customers in Las Cruces by Fullerton and Mejia (2020). Bildirici and Kayikci (2016) obtain positive long-run price coefficients for total usage, including commercial and industrial demand, in the cases of Poland, the Czech Republic, and Slovakia.…”

“…That is substantially longer than the 2.5 year period required for full dissipation for CIS usage in El Paso (Allen and Fullerton, 2019). While it is also much longer than what is required for equilibrium re-attainment by residential electricity consumption in Las Cruces itself (Fullerton and Mejia, 2020), it is very similar to what is reported for total usage in seven different European countries by Bildirici and Kayikci (2016). The slow rate of equilibrium re-attainment is likely due to a low degree of factor substitutability for electricity inputs in Las Cruces CIS firms, as well as potential dynamic inefficiencies in the sector (Antonov, 1991-92).…”