Residential demand for energy. Volume I. Final report

This study focuses on the residential demand for energy over the period 1956 to 1972, with principal emphasis on the residential demand for electricity; primarily, it deals with decreasing block pricing in the sale of electricity in a manner that is appropriate theoretically and sound econometrically. To this end, a completely new price data set was constructed that is derived from actual residential rate schedules published in the National Electric Rate Book. The price of electricity is represented in the econometric demand functions as the marginal price plus a measure of intramarginal expediture. The basic unit of observation is the state, and the models are estimated using the variance-components technique pioneered by Balestra and Nerlove. Two types of dynamic models are estimated, logarithmic flow-adjustment models in which appliance stocks do not appear explicitly, and stock-adjustment models in which they do. The latter models employ annual estimates for the years 1960 to 1972 of 11 types of electrical appliances that were constructed by Data Resources, Inc., specifically for the project. Results of the study indicate that: (1) the amount of electricity used in homes is important; (2) approaching the demand of electricity (and natural gas) in a two-part tariff framework wouldmore » seem firmly to be established; and (3) the long-run price elasticity for residential demand may not be as large as previous studies have indicated.« less