The effects of progressive pricing on household electricity use

Abstract

This paper proposes a model to calculate the magnitude of the reduction in household electricity use that results from a progressive pricing policy, relative to the case where uniform pricing is implemented. To quantify such an effect, a theoretical model is developed for household electricity use, and then it is applied to the progressive pricing policy for electricity in Seoul, South Korea, to empirically derive the magnitude of the reduction in household electricity use. The results suggest that progressive pricing reduces the elasticity in demand for household electricity in the summer. That is, the progressive pricing policy has a curbing effect. 'Therefore, households would consume a higher amount of electricity in the summer without progressive pricing. (C) 2016 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.