Electricity Prices and “Green Economy” Regulation
What is the relationship between pursuing an aggressive renewable portfolio standard and residential electricity prices? Here is what the San Francisco Chronicle (not a Romney newspaper) has to say:
Going green: San Francisco’s plan to “go green” will likely cost the typical city consumer about $9 more a month – with most of the money going to Shell Energy, which will be providing the renewable energy. Under the plan approved by City Hall, 50,000 to 90,000 households will automatically be enrolled in the green program, but all will have four opportunities to opt out at no cost. Those who decide to go green can expect to see their electric bills rise by 23 percent.
But because everyone will theoretically benefit from environmental goals of going green, the controller is suggesting a tax be put on the electric bills of those who opt to stay with PGE to help balance out the costs and get them to conserve. Any tax like that would have to be approved by the voters.
There are at least two interesting points to make here. First note the setting of the “default”. You participate unless you “opt out”. You don’t have to be Bridgette Madrian to see that there is a nice paper to write here. Building on my work with Dora Costa, a researcher could test whether San Francisco’s few Republicans are more likely to opt out while liberal environmentalists will like the “default option” (that they are enrolled in green power) and due to inertia wouldn’t want to bother to change their behavior.
Now, does the 23% increase sound large to you? When consumers face this price increase, how will they change their consumption behavior in the short term and medium term?
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About Matthew
Matthew E. Kahn is a Professor at the UCLA Institute of the Environment, the Department of Economics, and the Department of Public Policy. He is a research associate at t…
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The more interesting point is your second one: the columnists provide no basis for the number, so it is fair to be suspicious of it.
That said, allowing for an opt-out would put people in the position of setting their reservation price. It’s sort of like rebates for consumer products: if people really want the rebate, they have to go through the pain in the neck of filling out the paperwork. If they can’t be bothered to do that, then maybe they are actually okay with the price increase. We’ll see: if in fact it is true.
The more interesting point is your second one: the columnists provide no basis for the number, so it is fair to be suspicious of it.
That said, allowing for an opt-out would put people in the position of setting their reservation price. It’s sort of like rebates for consumer products: if people really want the rebate, they have to go through the pain in the neck of filling out the paperwork. If they can’t be bothered to do that, then maybe they are actually okay with the price increase. We’ll see: if in fact it is true.