Price Elasticity, Block Pricing, and Saving Behaviour of Residential Electricity Consumers in Pakistan: Investigation Based on Household-Level Primary Data
Keywords:Residential electricity consumption, Increasing electricity blocks pricing, Price elasticity, Household-level primary data
The purpose of this paper is to explore the efficacy of increasing block electricity pricing (IBEP) which was imposed in 2013 by Pakistani government. The main objective of this policy is rational resource allocation and to lower the cross subsidization to residential sector by two other major sectors such as commerce and industry. The study is based on primary data which is collected through questionnaires from four tehsils of district Sargodha in rural as well as urban region. About 54.6% households understand the electricity price scheme (IBEP) in urban users are more aware as compare to rural but urban electricity consumption is higher due to high use of home appliances. By using regression model the elasticity of residential electricity consumption is estimated for heterogeneous consumers. The upper blocks of electricity consumption are more sensitive to price increases except in fifth block which indicates that higher income group pays more attention to standard of living. The increase in number of trees also affects price elasticity of residential electricity use and positively influence saving behavior. The policy which was implemented with welfare point of view has achieved its target to certain extent. Future guidelines for the upgradation of electricity pricing reform in residential sector are thus proposed.
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