RESIDENTIAL AND INDUSTRIAL DEMAND FOR ELECTRICITY IN NEBRASKA: AN ECONOMETRIC STUDY

The residential demand for electricity in Nebraska is analyzed with a flow-adjustment model for the period 1961-1977. The model makes an analytical distinction between the short-run and the long-run. The arguments in the demand function include variables representing real average prices of electricity and gas, real total personal disposable income, and lagged consumption of electricity. The demand equation is estimated by the Wallis\u27 method to correct for serial correlation in the error terms. The most interesting result from the model is that the price of electricity is not a significant determinant of electricity demand; price of gas and real income are found to be more important determinants. The real average price of electricity fell appreciably over the sample period, and it is concluded that this phenomenon may have rendered its impact insignificant. The industrial demand for electricity in Nebraska is derived from a translog price possibility frontier. The degree of substitution between electricity and five other fuels is analyzed for the period 1960-1977. The fuel cost shares derived from the translog price possibility frontier are estimated by the Iterative Zellner Estimation Technique. Results from the model suggest that the industrial electricity demand is price-inelastic and that natural gas and distillate fuel oil are substitutes for electricity, while LPG is a complement of electricity. The study also finds substantial differences in elasticity estimates between the national and regional demand for electricity. Thus, the formulation of regional energy policies may not be very meaningful on the basis of national elasticity estimates