Electricity Demand in Multi-Family, Renter-Occupied Residences

This paper focuses on multi-family, renter-occupied housing where the landlord provides major appliances, a large residential sector that has not received widespread attention in the literature. Experimental data are used from a test where one group of households was billed directly for the electricity they consumed, while a control group had unlimited electric service included as part of the monthly rent. The empirical analysis yields short-run demand estimates that satisfy to a remarkable extent the ceteris paribus assumptions of demand analysis. This is the case for two reasons: (1) the households did not individually execute the appliance choice decision at various (unknown) times in the past, and (2) the stock of appliances upon which the derived short-run demand is conditional is identical for all households in the sample. A second important feature is emphasis on functional form. Examined in some detail is the question of the appropriate functional form for residential electricity demand. Finally, empirical results of the analysis are used to investigate the cost-effectiveness and welfare effects of installing submeters in existing multi-family residences.