Consumption Under Noisy Price Signals: A Study of Electricity Retail Rate Deregulation in San Diego

James Bushnell and Erin Mansur

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Utility services employ nonlinear tariffs that attempt to convey information on cost convexities. This paper examines how customers respond to noisy and volatile tariffs by measuring deregulated retail ratesï¾’ impact on electricity consumption in San Diego. When rates doubled in 2000, consumers appear to have reacted more to recent past bills than to current price information. By summerï¾’s end, we find consumption fell 6% while lagging price increases. Even months after the utility restored low historic rates customers continued curtailing demand.Weconclude that rate structures relying upon lagged wholesale price averages produce delayed responses to scarcities or high costs.

Date: 2005-12-01
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Published in Journal of Industrial Economics, December 2005, vol. 53 no. 4, pp. 493-513

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Journal Article: CONSUMPTION UNDER NOISY PRICE SIGNALS: A STUDY OF ELECTRICITY RETAIL RATE DEREGULATION IN SAN DIEGO* (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13142

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