Who Will Pay for Legacy Utility Costs?

Lucas Davis and Catherine Hausman

No 28955, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The growing “electrify everything” movement aims to reduce carbon dioxide emissions by transitioning households and firms away from natural gas toward electricity. This paper considers what this transition means for the customers who are left behind. Using historical evidence from growing and shrinking U.S. natural gas utilities, we show that utilities add pipelines but rarely remove them, even when the customer base from which to recover costs is shrinking. Correspondingly, we find that utility revenues decrease less than one-for-one when a customer base is shrinking, consistent with higher bills for remaining customers. We then use our empirical estimates to predict how customer bills might increase in the future for different levels of building electrification. We highlight the equity implications of our results and conclude by discussing alternative utility financing options such as recouping fixed costs through taxes rather than prices.

JEL-codes: L95 L97 Q40 Q48 R11 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ene and nep-reg
Note: EEE
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published as Lucas W. Davis & Catherine Hausman, 2022. "Who Will Pay for Legacy Utility Costs?," Journal of the Association of Environmental and Resource Economists, vol 9(6), pages 1047-1085.

Downloads: (external link)
http://www.nber.org/papers/w28955.pdf (application/pdf)

Related works:
Journal Article: Who Will Pay for Legacy Utility Costs? (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:28955

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28955

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().