The effect of price on the residential demand for electricity: A statistical study

The statistics of the demand for electricity and the relationship between the price of electricity and the demand are examined through analysis of the monthly consumption statistics of a community of owner-occupied, almost identical townhouses. The average yearly demand for electricity grew from 1971 until 1973 and then decreased by less than 2% a year for the next three years. In spite of price increases, demand for electricity during the heating season (the units are heated by a forced-air natural gas furnace) increased steadily but slightly over the six years of observation. A simple statistical model is used to split the cooling season demand for electricity into air-conditioner demand and the demand for lights and appliances. The non-cooling portion of the demand decreased from 1974 to 1975, but otherwise increased each year from 1971 to 1976. The portion of the demand that we estimate is used for cooling appears to have increased between 1971 and 1974 and then decreased between 1974 and 1976. The evolution of the electricity-rate schedule for this community is considered and then two simple statistical models, which relate demand to price, are estimated. These indicate that, although the marginal price has doubled (in current dollars), these changes in price have had little effect on demand.