An Empirical Analysis of Ramsey Pricing in Japanese Electric Utilities

Matsukawa, Isamu; Madono, Seishi; Nakashima, Takako

doi:10.1006/jjie.1993.1015

Cited by 27 publications

(7 citation statements)

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“…Pindyck (1979), the first researcher to employ Japanese data, revealed extremely low price elasticity (−0.12) for Japan's industrial electricity demand. Matsukawa et al (1993) conducted an empirical analysis using pooled data from Japan's electric power companies (excluding Okinawa Power) for 1980-1988 and obtained a price elasticity value of −0.63 for manufacturing electricity demand. Japan's Cabinet Office (2001,2003,2007) estimated overall electricity demand functions (residential as well as industrial and commercial) for nine regions (excluding Okinawa) and obtained price elasticity values of −0.44, −0.47, and −0.37, respectively, for the fiscal years 1981-1998, 1986-2002, and 1986-2005.…”

Section: Literature Reviewmentioning

confidence: 99%

Demand for industrial and commercial electricity: evidence from Japan

Otsuka

2015

Economic Structures

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This study aims to estimate electricity demand functions in Japan's industrial and commercial sectors. We adopt data from the Energy Consumption Statistics by Prefecture by the Ministry of Economy, Trade and Industry, Japan, to delineate the demand between the industrial and commercial sector. The results reveal that in both sectors, the price elasticity of demand is extremely low in the short and long run and production elasticity is greater than price elasticity. Thus, price elasticity is not a key determinant in electricity demand fluctuations. Furthermore, an analysis of the factors influencing changes in electricity demand in the industrial sector suggests that the declining demand growth in large metropolitan areas is mainly attributable to declining production factors, not increasing electricity rates. By contrast, the commercial sector is experiencing an increasing demand for electricity and significant growth nationwide, which can be attributed to an increase in commercial floor space and advances in office automation.JEL Classification: C33; C36; Q41; Q43; Q48 Keywords: Electricity demand; Industrial sector; Commercial sector; Demand price elasticity; Dynamic panel model; Japan BackgroundIn Japan, the industrial and commercial sectors account for a significant portion of electricity demand (about 70 %). Against this background and given that the nation's recent power market reforms increasingly focus on such users, understanding the demand for electricity in the two sectors is crucial from a regulatory policy viewpoint. In particular, determining the extent to which the demand for electricity in Japan fluctuates in response to a rate hike by each supplier company is a key political concern for energy policy makers. Moreover, changes in the composition of electric power generation, following the suspension of nuclear power plants and the introduction of renewable energy sources, are likely to increase electricity rates in the future. Therefore, determining the effects of fluctuating electricity rates on electricity demand in each region is critical for energy policy formulation in Japan.That electricity demand is inelastic is conventional wisdom, and thus, related research has often hypothesized that the price elasticity of electricity demand is significantly low (e.g., −0.1 or almost 0). For instance, Kanemoto et al. (2006) and Tanaka (2007) conducted simulations using a general equilibrium model for electricity market deregulations and hypothesized a price elasticity of −0.1 for electricity demand,

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Section: Literature Reviewmentioning

confidence: 99%

Demand for industrial and commercial electricity: evidence from Japan

Otsuka

2015

Economic Structures

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“…Efficiency scores of Japanese water utilities for the CRS and VRS models (in descending order of efficient CRS) 566 / JOURNAL OF WATER RESOURCES PLANNING AND MANAGEMENT © ASCE / MAY 2014 water charge; (11) outsourcing; (12) subsidies; (13) gross domestic product (GDP); and (14) time. Customer mix, although important (Renzetti and Dupont 2009), was not investigated because these utilities primarily supply residential customers: unlike other utility industries in Japan, customer mix is not a relevant variable (Matsukawa et al 1993). The results are presented in Fig.…”

Section: Impacts Of Exogenous Variablesmentioning

confidence: 99%

Nonparametric Benchmarking of Japanese Water Utilities: Institutional and Environmental Factors Affecting Efficiency

Marques

Berg

Yane

2014

J. Water Resour. Plann. Manage.

126

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Although the Japanese water sector is economically and socially important, few empirical studies are available to help analysts and policy-makers understand the performance patterns in the industry. This study applies data envelopment analysis to 5,538 observations of 1,144 utilities that supplied drinking water between 2004 and 2007. With a comprehensive census of utilities, the present study controls for many factors affecting efficiency: region, prefecture, ownership/governance, water source, vertical integration (purchased or produced alone), water or integrated system, production, treatment, transport and distribution of water), peak factor, per capita consumption, customer density, water losses, monthly water charge, outsourcing, subsidies, gross prefecture product, and time. Thus, this study derives comprehensive conclusions regarding efficiency patterns in Japan. The analysis finds that the average level of inefficiency (weighted by volume) is 57% in the constant return to scale model, but only 24% for the (more flexible) variable return to scale model. Improving sector efficiency and transferring funds to more innovative sectors rather than using scarce funds to subsidize water distribution would benefit citizens. Thus, the application of advanced quantitative techniques to Japanese water utilities improves the understanding of efficiency patterns and underscores the importance of in-depth studies of the individual factors examined in this study.

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“…In the case of Japan, Pindyck's study, where electric power demand was considered as one of the energy inputs, found that the price elasticity of power demand was 0.12. Using regional data for Japan, Matsukawa et al (1993) estimated the price elasticity of the power demand of the manufacturing sector. They assumed translog energy cost functions with four energy inputs (oil, gas, coal, and electricity).…”

Section: Literature Surveymentioning

confidence: 99%