Electricity is one of the essential resources in people’s daily lives. It is needed both in non-residential premises to perform many tasks and in residential ones to ensure the vital activity of the population. Electricity is necessary for everyone, and people need to pay for it, and the issue of pricing is an acute problem in this case. Although states are trying to regulate the price policy for electricity, the issue is still important because the electricity demand depends on the cost.
First, consumption elasticity is the load schedule of equipment that consumes or produces electricity, and it can be shifted in time without disrupting the main processes. Elasticity reflects the willingness of people to pay for a product or service while assessing their income. For example, in El Paso, people have a low income and are not ready to pay money for electricity, which is why there is insufficient demand.
Second, an important issue facing companies selling electricity is the problem of average and marginal prices. Some people need to know how much they consume electricity to correlate this consumption with the final amount they will have to pay. Thus, the study revealed that the presence of displays in homes displaying information about the amount of electricity consumed reduces consumption by 3-13% (Fullerton et al., 2016). This means that consumers want to save money on electricity.
Third, in order to get savings in electricity consumption, the residents of El Paso preferred to use natural gas. Even though natural gas is a defective product, people continue to use it and actively connect various electrical appliances (Fullerton et al., 2016). Unfortunately, the latest technologies in household appliances do not allow using natural gas as power for these devices, which makes people lean in favor of conventional electricity.
Fourth, the state helps the residents of El Paso to improve the situation with energy conservation. For example, this happens by investing in items for residential buildings that make it possible to save electricity. This policy leads to a drop in demand for electricity and an increase in rates, which ultimately affects only deterioration. Nevertheless, despite the general decline in prices, electricity consumption will only grow in the long term.
Fifth, for the reduction in the price of electricity to be accurate, it is necessary to build additional equipment that will generate this electricity. Another option for saving electricity is the establishment of new electricity tariffs, which will reduce the use of local citizens. In addition, local governments in El Paso may impose fines on the use of solar panels to generate demand for locally produced electricity. Fullerton et al. (2016) claim that such a policy is very different from the policy in other cities. Over time, it can lead to various kinds of consequences.
In conclusion, there is no doubt that there is a need for electricity in residential buildings. The cost of electricity also affects the intensity with which people will use it. In El Paso, when the tariff is reduced, people begin to use electricity actively, and state assistance is also received for residents. This assistance is aimed at helping to save on electricity, but it only leads to an increase in the tariff. The state needs to think about pricing taking into account the average incomes of residents since El Paso is a low-income city.
Reference
Fullerton, T., Macias, D. & Walke, A. (2016). Residential Electricity Demand in El Paso. The Journal of Regional Analysis and Policy, 46(2), 154-167. Web.