Analyzing Small Industrial and Commercial User Demand for Electricity
- 1 Corporate Planning Department, El Paso Electric Company, El Paso, USA
- 2 Department of Economics & Finance, University of Texas at El Paso, USA
Abstract
This study employs duality theory to develop a theoretical model for small commercial and industrial (CIS) electricity usage. The CIS production function is posited such that output is a function of three variable inputs (electricity, natural gas, and labor) and one fixed input (capital). A profit function dual to this production function is specified using a normalized quadratic functional form. CIS profits are functionally dependent upon output price, an electricity input price, and natural gas and labor input prices for a fixed quantity of capital. The derived input-demand equation results from differentiating the profit function with respect to the price of electricity. The input-demand equation for electricity is dependent upon the own-price of electricity, the CIS output price, and input cross-prices. The model may be of use to utilities and regulators for the analysis of CIS electricity usage.
- Roback, J. (1982) Wages, Rent, and the Quality of Life. Journal of Political Economy, 90, 1257-1278. https://doi.org/10.1086/261120
- Voith, R. (1991) Capitalization of Local and Regional Attributes into Wage and Rents: Differences Across Residential, Commercial and Mixed-Use Communities. Journal of Regional Science, 31, 127-145. https://doi.org/10.1111/j.1467-9787.1991.tb00138.x
- Fullerton, T.M., Jr., Juarez, D.A. and Walke, A.G. (2012) Residential Electricity Consumption in Seattle. Energy Economics, 34, 1693-1699. https://doi.org/10.1016/j.eneco.2012.02.004
- Bildirici, M.E. (2013) The Analysis of Relationship Between Economic Growth an Electricity Consumption in Africa by ARDL Method. Energy Economics Letters, 1, 1-14. http://www.aessweb.com/pdf-files/EEl%201(1),%201-14..pdf
- Fullerton Jr., T.M., Macias, D.R. and Walke, A.G. (2016) Residential Electricity Demand in El Paso: 1977-2014. Journal of Regional Analysis & Policy, 46, 154-167. http://www.jrap-journal.org/pastvolumes/2010/v46/jrap_v46_n2_a4_fullerton_etal.pdf
- Halvorsen, R. (1977) Energy Substitution in U.S. Manufacturing. Review of Economics and Statistics, 59, 381-388. https://doi.org/10.2307/1928702
- Halvorsen, R. (1978) Econometric Models of U.S. Energy Demand. Lexington Books, Lexington.
- Diewert, W.E. and Ostensoe, L. (1988) Flexible Functional Forms for Profit Functions and Global Curvature Conditions. In: Barnett, W.A., Berndt, E.R. and White, H., Eds., Dynamic Econometric Modeling: Proceedings of the Third International Symposium in Economic Theory and Econometrics, Cambridge University Press, Cambridge, 43-51. https://doi.org/10.1017/CBO9780511664342.004
- Dupont, D.P. (1991) Testing for Input Substitution in a Regulated Fishery. American Journal of Agricultural Economics, 73, 155-164. https://doi.org/10.2307/1242891
- Lusk, J., Featherstone, A. and Abdulkadri, A. (1999) An Examination of the Empirical Properties of Duality between the Restricted Profit, Unrestricted Profit, and Production Function. American Agricultural Economics Association 1999 Annual Meeting, Nashville, 8-11 August 1999. http://ageconsearch.umn.edu/record/21718/files/sp99lu02.pdf
- Fullerton Jr., T.M. and Huffman, W.E. (1995) Supply Functions for Fresh Market Vegetables. Studies in Regional Science, 25, 1-17. https://doi.org/10.2457/srs.25.2_1
- Yamaura, K. and Featherstone, A.M. (2016) Estimating the Effect of Monopsony Power on Elasticity Estimates. Applied Economics, 48, 179-189. https://doi.org/10.1080/00036846.2015.1076148