Household electricity demand analysis under mandatory energy efficiency programs

This dissertation deals with the effects of mandatory energy efficiency programs on the demand for electricity on the part of households. Such programs may not, in fact, reduce the consumption of electricity of an individual household due to their indirect effects on the consumption technology with which the household operates. Current engineering models used by utilities for predicting electricity demand savings are therefore not appropriate. These models assume that the equipment and appliances a household uses remain unaffected by changes in the energy efficiency programs. A household electricity consumption model is developed in this study, in which the household consumes two commodity bundles, housing services and non-housing services. As a utility company implements an energy efficiency program under the current state utility regulation, our model shows that a household may, in fact, increase its electricity consumption. The outcomes of the policies as contained in the effectiveness of energy efficiency programs are also compared with other traditional policy alternatives such as taxing the energy input, increasing the price of energy input, and subsidy schemes. The empirical study presented here is based on an electric utility company\u27s recent cases filed with Iowa Utility Board. To consider all the impacts on households electricity demand other than energy efficiency programs, a regression relation of households electricity demand on weather and economic activity is estimated by pooling cross-section and time-series data. The households\u27 normalized electricity demand by excluding impact on sales from different other factors is calculated given the estimated regression. Electricity demand savings due to energy efficiency programs are generated by comparing the actual electricity demand with the estimated normalized demand. The econometric analysis introduced in this study not only suggests a new approach to estimate the household electricity demand savings for regulatory procedures but also serves as a test for the theoretical results regarding the household electricity consumption behavior under the mandatory energy efficiency programs