Regional variations in electricity demand elasticities: The situation in the Central United States

Within the sizable literature on electricity demand relatively little attention is given to regional variations in electricity demand elasticities. This paper investigates 39 electric utility companies having a total of 93 separate operating regions in order to assess the nature of regional electricity demand elasticity variations. Residential, commercial, and industrial demand functions are estimated for each operating region using a flow adjustment model of demand. The resulting electricity price, measure of economic activity, and natural gas price elasticities vary regionally, but not in a systematic manner. The demand elasticities found in each sector range from highly inelastic to highly elastic with the pattern of elasticity variations exhibiting few spatial trends or relationships. Comparisons between operating region results and more aggregated statewide results indicate that statewide and national analysis of electricity demand masks much regional detail — a result which has important implications for energy policy making.