Who Will Pay for Legacy Utility Costs? / Lucas W. Davis, Catherine Hausman.

Format:

Book

Author/Creator:

Davis, Lucas W.

Contributor:

National Bureau of Economic Research.

Hausman, Catherine.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28955.

NBER working paper series no. w28955

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

The growing "electrify everything" movement aims to reduce carbon dioxide emissions by transitioning households and firms away from natural gas toward electricity. This paper considers what this transition means for the customers who are left behind. Using historical evidence from growing and shrinking U.S. natural gas utilities, we show that utilities add pipelines but rarely remove them, even when the customer base from which to recover costs is shrinking. Correspondingly, we find that utility revenues decrease less than one-for-one when a customer base is shrinking, consistent with higher bills for remaining customers. We then use our empirical estimates to predict how customer bills might increase in the future for different levels of building electrification. We highlight the equity implications of our results and conclude by discussing alternative utility financing options such as recouping fixed costs through taxes rather than prices.

Notes:

Print version record

June 2021.