An Econometric Analysis of Peak Electricity Demand in the Short-Run
Different functional forms for the analysis of electricity demand are developed and compared to the popular double log demand model. These functional forms are characterized by an increased sensitivity of electricity demand to price changes as prices increase and decreased sensitivity as the weather becomes more extreme. These two features capture popular notions in industry about electricity demand behaviour. On the basis of 12 different samples (corresponding to 12 different utilities) of monthly data over the 1972–76 period, these functional forms are found to provide useful alternatives to the double log demand model. Nevertheless the most important characteristic of the empirical results is their variability across utilities. The analysis is equally applicable to average and peak demand, but the discussion stresses peak demand.