Who Will Pay for Legacy Utility Costs?

Lucas Davis and Catherine Hausman

Journal of the Association of Environmental and Resource Economists, 2022, vol. 9, issue 6, 1047 - 1085

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 US 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.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://dx.doi.org/10.1086/719793 (application/pdf)
http://dx.doi.org/10.1086/719793 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Who Will Pay for Legacy Utility Costs? (2021)
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:ucp:jaerec:doi:10.1086/719793

Access Statistics for this article

More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().