An empirical case study about the reform of tiered pricing for household electricity in China

The reform of tiered pricing for household electricity (TPHE) in China was implemented nationwide in July 2012. The main purpose of the policy is to promote reasonable resource allocation and utilization. Based on the micro household-level survey data, this paper investigates the effect of the TPHE on achieving the twin objectives of efficiency and equity respectively. Results demonstrate that under the current scheme of the TPHE, the incentives for electricity conservation are effective and the distortion of cross-subsidies in electricity tariffs in China has been reduced. However, price sensitivities of household electricity demand across different income groups are influenced by various factors. Future policy should concentrate on the design and improvement of the TPHE to establish a comprehensive pricing mechanism. Meanwhile, complementary policies should be enacted to support the TPHE, which will be helpful for further improvement of the TPHE and the establishment of other pricing mechanisms of resource-products in the residential sector. (C) 2015 Elsevier Ltd. All rights reserved.