Electricity Prices and the Poor: What Are the Effects and What Can We Do

摘要

Now we are abruptly against an important policy question: Do we have two laudable goals which are fundamentally inconsistent with one another. Is it possible to blunt the impact of rapidly rising energy prices on some of the customers without subverting the goals of prudent use in the long term. To answer this question we must step back and look at fundamental empirical evidence of the relationship between prices and the use of electricity; that is the subject of the first section. Second, we look especially at the evidence of differential impact by level of use or level of income. Finally, we will review in particular an electricity lifeline rate that was adopted in Los Angeles and evaluate it against these two social objectives of efficiency and improved well-being of lower income individuals. Without intending to give away the plot, I will tell you at the outset that there will be some pleasant surprises. Our analysis indicates that, at least under some circumstances, public policies can be designed to help the poor through the pricing mechanism without destroying the efficiency gains that are generally found with market prices that reflect the full costs of production and supply.