1. AN ADL MODEL AN ADL MODEL FOR ELECTRICITY AND NATURAL GAS DEMAND IN COLORADO LEILA DAGHER, PHD AMERICAN UNIVERSITY OF BEIRUT

2.  Introduction  Literature Review  Model  Data and Methodology  Results  Conclusions OUTLINE

3. Primary Goal: estimate dynamic price elasticities. Secondary Goals End-use impact Price elasticity stability Correct price variable INTRODUCTION

4. Elasticities are used by utilities and government agencies for: Forecasting Policy making There is a renewed interest in elasticities as a result of the increased concern in energy pollution the rise in energy prices.

5. INTRODUCTION Capital Intensive → Huge Savings Elasticities are region specific Existing estimates for Colorado are inconsistent with economic theory Stability of estimates

6. Xcel Energy Service Territory

7. Electricity Natural Gas

8. LITERATURE REVIEW PRODUCTUSOTHERTOTAL ELECTRICITY184221405 NATURAL GAS8795182 TOTAL271316587

9. LITERATURE REVIEW Omission of standard errors especially for the LR elasticities Wide-ranging estimates o Consumer sectors o Sample periods o Modeling variables o Level of analysis o Modeling methods and data types

10. ADL DEMAND MODEL

12. Unit-root testing Co-integration testing Multicollinearity Data were averaged and logged Deflator CO CPI Lagged prices Frequency conversion Customers variables were smoothed using an IV DATA AND METHODOLOGY

13. ESTIMATION ISSUES Spurious Regression Statistical Inference Price Endogeneity Inconsistent Estimates

14. METHODOLOGY OLS regression and choose the ARDL model that has uncorrelated errors while optimizing the SIC. T and F statistics on this model are valid

15. METHODOLOGY Lag selection Residual Diagnostics Saturation/efficiency indices Test for model and coefficient stability and price asymmetries Monthly bill Dynamic elasticities

16. RESULTS Electric Small Commercial VariableCoefficientStd. Errort-StatisticProb. C7.9821.3385.9650.000 Q e (-1)0.5180.0826.3470.000 Q e (-2)-0.4660.095-4.8980.000 Q e (-3)0.3460.0973.5830.000 Q e (-4)-0.1440.096-1.5060.135 Q e (-5)0.1180.0791.4860.140 P e (-1) -0.065 Є LR= -0.104 0.028 0.043 -2.2800.024

17. RESULTS Electric Small Commercial obsQeQe SE 1994M07-0.06510.0284 1994M08-0.09860.0429 1994M09-0.08590.0377 1994M10-0.08590.0374 1994M11-0.09400.0406 1994M12-0.09630.0407 1995M01-0.09950.0415 1995M02-0.10140.0423 1995M03-0.10050.0420 1995M04-0.10110.0421 1995M05-0.10230.0426 1995M06-0.10270.0427 1995M07-0.10300.0428

18. RESULTS Electric Small Commercial

19. RESULTS Summary Table Sector Price Elasticity SRLR Electric Residential -0.015 (0.028) -0.028 (0.075) Electric Small Commercial-0.065* (0.028)-0.103* (0.043) Electric Large Commercial-0.015 (0.010)-0.016 (0.011) Natural Gas Residential-0.028 (0.019)-0.070 (0.049) Natural Gas Small Commercial-0.003 (0.021)-0.016 (0.072)

20. SENSITIVITY ANALYSIS Data aggregation Seasonal differencing Different models Lag selection Selection criterion Sample periods

21. Demand is highly inelastic Surcharges for DSM or RE Customers do not respond to joint bill LR range DE useful tool for end users CONCLUSIONS & IMPLICATIONS

22. THANK YOU!