Association Webinars: Consumption and Non-Payment Responses to Retail Electricity Prices in India



We estimate the short- and long-run responses of retail electricity consumption and bill payment to electricity prices in Delhi, India from 2015 to 2019. Using billing data from one of Delhi's three private electricity distribution utilities, we reconstruct payment histories for more than 1.5 million retail residential, commercial, and small industrial customers. Our empirical strategies exploit features of the regulated electricity price schedule that generate short- and long-run variation in the average price of electricity for these customers. We find that residential demand is very inelastic to large billing shocks in the short run. Large but transient increases in arrears following these shocks suggest that non-payment may play a role in dampening the magnitude of these elasticities. In contrast, we find large long-run elasticities across the customer base, ranging from about -.6 in the top decile of consumption for informal settlement customers to -1.99 in the top quintile of consumption for industrial customers. In addition to providing annual demand elasticity estimates, we find evidence that non-payment rates increase when prices rise in the long run. The effects are particularly large for the poorest informal customers, for whom arrears more than double in response to a doubling in the average electricity price. The results suggest that reducing retail subsidies in order to improve utility finances and increase service quality would come at the cost of exacerbating non-payment.

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Shefali Khanna is a Research Associate in Energy and Environmental Economics in the Department of Economics and Public Policy at Imperial College London. Her research interests lie in energy and environmental economics and policy. Her current research focuses on understanding the drivers of energy demand in the residential and industrial sectors and on evaluating the design and impact of climate policies. She earned a Ph.D. in Public Policy from Harvard University, where she was a Pre-Doctoral Fellow of the Harvard Environmental Economics Program and a Ph.D. Student Affiliate of Evidence for Policy Design at the Center for International Development. Prior to her Ph.D., she was a Research Assistant at Resources for the Future and received a B.A. in Economics with Departmental Honors from the University of Maryland, College Park.

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Event Date: August 24, 2022

Event Time: 10:00 - 11:00 AM Eastern Time

Topic: Consumption and Non-Payment Responses to Retail Electricity Prices in India

Speaker: Shefali Khanna

Price: FREE

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