Reforming electricity rates: Benefits to low-income households

Abstract

The electricity rate reforms proposed in the Public Utility Regulatory Policies Act reflect the quest for an energy policy which encourages conservation, efficiency, and equity. Focusing on equity concerns, this research examines the relative effectiveness of lifeline and time-of-day rates in easing the burden of rising household energy prices among the low-income population. Lifeline rates establish a minimum number of kilowatt hours (kWh) required for basic necessities and a special low rate for these kWh. Time-of-day rates provide lower electricity prices to those households using electricity during off-peak generating hours. The data indicate that lifeline rates would assist low-income households in general, with the greatest benefits going to poor households with small numbers of members and older heads of household. Time-of-day rates would immediately benefit smaller households and those with older household heads. Some lifestyle changes, in the form of appliance use patterns, would be required among the low-income population if they are to benefit from time-of-day rates.