Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

This paper investigates the heterogeneity of household electricity consumption caused by income level. Also, we propose the desirable way of electricity pricing reform. The empirical analysis results, based on analyzing the cross-sectional data for urban residential electricity consumption in South Korea, show that the kind of perception price, price elasticity size and the effects of other factors are different according to household income level. Especially, households whose monthly income is less than 1.5million won, respond to average price of electricity. On the other hand, households earning monthly more than 1.5million won consume their electricity depending on not average price but marginal price. In addition, we find that electricity price elasticity of low income household is inelastic compared to that of high income household. Pricing reform simulation results imply that reducing increasing block phase induces electricity consumption saving and reinforcing increasing block rate is appropriate in the aspects of income redistribution equity.