Author(s)

Keighton R. Allen¹, Thomas M. Fullerton, Jr.²

¹Corporate Planning Department, El Paso Electric Company, El Paso, USA.
²Department of Economics & Finance, University of Texas at El Paso, USA.

This study employs duality theory to develop a theoretical model for small commercial and industrial (CIS) electricity usage. The CIS production function is posited such that output is a function of three variable inputs (electricity, natural gas, and labor) and one fixed input (capital). A profit function dual to this production function is specified using a normalized quadratic functional form. CIS profits are functionally dependent upon output price, an electricity input price, and natural gas and labor input prices for a fixed quantity of capital. The derived input-demand equation results from differentiating the profit function with respect to the price of electricity. The input-demand equation for electricity is dependent upon the own-price of electricity, the CIS output price, and input cross-prices. The model may be of use to utilities and regulators for the analysis of CIS electricity usage.

Duality Theory, Derived Demand, Electricity, Small Industrial and Commercial

Allen, K. and Fullerton, Jr., T. (2018) Analyzing Small Industrial and Commercial User Demand for Electricity. Theoretical Economics Letters, 8, 3109-3115. doi: 10.4236/tel.2018.814193.