Utilities Included: Split Incentives in Commercial Electricity Contracts

Katrina Jessoe, Maya Papineau and David Rapson

No 7734, CESifo Working Paper Series from CESifo

Abstract: This paper quantifies a tenant-side “split incentives” problem that exists when the largest commercial sector customers are on electricity-included property lease contracts causing them to face a marginal electricity price of zero. We use exogenous variation in weather shocks to show that the largest firms on tenant-paid contracts use up to 14 percent less electricity in response to summer temperature fluctuations. The result is retrieved under weaker identifying assumptions than previous split incentives papers, and is robust when exposed to several opportunities to fail. The electricity reduction in response to temperature increases is likely to be a lower bound when generalized nationwide and suggests that policymakers should consider a sub-metering policy to expose the largest commercial tenants to the prevailing retail electricity price.

Keywords: electricity; principal-agent problem; split incentive; contracts (search for similar items in EconPapers)
JEL-codes: D22 L14 Q51 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cta, nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp7734.pdf (application/pdf)

Related works:
Journal Article: Utilities Included: Split Incentives in Commercial Electricity Contracts (2020)
Working Paper: Utilities Included: Split Incentives in Commercial Electricity Contracts (2019)
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:ces:ceswps:_7734

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().