How Efficient China’s Tiered Pricing Is for Household Electricity: Evidence from Survey Data

Abstract

Due to the wide coverage of first-tier electricity consumption and the small price difference between different tiers, the current tiered pricing for household electricity (TPHE) cannot give full play to the advantages of the increasing block electricity tariffs (IBTs). Based on the microscopic survey data provided by the Chinese General Social Survey (CGSS) in 2015, this paper innovatively uses the predicted average electricity price as the instrumental variable of electricity price to explore the influencing factors of household electricity consumption in order to solve the possible endogenous problems. Simultaneously, the samples are further grouped by income and electricity consumption, and the electricity consumption characteristics of different groups are discussed separately. The results show that, for low-income groups, the price elasticity of electricity consumption is relatively low because the electricity consumption of low-income households is concentrated on meeting the energy demand necessary for basic life, while the price elasticity of high-income groups is relatively high because the electricity consumption of the high-income households is mostly the energy demand generated by improving the quality of life.