Estimating the Short-term Price Elasticity of Residential Electricity Demand in Iran

Excessive electricity consumption causes severe problems in the electricity sector and consequently in load curtailment. This paper estimates the short-term price elasticity of electricity demand for the Iranian household sector by monthly panel dataset. The estimated short-term price elasticity of electricity demand was −0.048. We use abrupt change in electricity price due to targeting subsidy on December 18th, 2010. The results show significant heterogeneity in electricity price elasticity between the various levels of consumption. Due to the heterogeneity of consumers’ electricity price elasticity, we can categorize residential consumers into four groups. Hence, policymakers are suggested to manage peak loads in the electricity network by estimating consumer responsiveness and reforming electricity pricing considering equality issues and tariff design.