Marginal Energy Prices - RECS97 Update

The original estimation of residential marginal energy prices at the individual household level (as reported in

the Marginal Energy Prices Report, http://www.eren.doe.gov/buildings/codesstandards/applbrf/pdfs/marginal

energy price.pdf) was based on household energy billing data from EIA's 1993 RECS survey. When the 1997 RECS

survey data became available, LBNL updated its estimation of residential marginal energy prices at the individual

household level using that data. In addition, LBNL incorporated several refinements (as described below) to the

marginal price estimation method it had originally developed.

Presented below are the:

• RECS97-based results.

• Refinements to LBNL's marginal price estimation method.

• RECS93-based results re-calculated using the refined marginal price estimation method that was applied to the

RECS97 data.

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Marginal Energy Prices - Summary of RECS97 Results

Table 1. Marginal Residential Electricity Prices - RECS97

Electricity - RECS97 Prices (0/kWh, in 1997$) % Difference between

(Weighted Mean) Marginal Price and Average Price

Annual

MARGINAL AVERAGE Weighted Mean Range

Households Summer 9.1 -2.5% -76.1% to +288.9%

w/Acceptable 9.4

Seasonal Prices Non-Summer 8.5 -10.0% -72.2% to +73.3%

Households w/o Acceptable

Seasonal Prices 9.0 9.6 -4.5% -55.3% to +397.5%

All Households 8.7 9.4 -6.9%

Table 2. Marginal Residential Natural Gas Prices - RECS97

Natural Gas - RECS97 Prices (¢/ccf, in 1997$) % Difference between

(Weighted Mean) Marginal Price and Average Price

Annual

MARGINAL AVERAGE Weighted Mean Range

Households Winter 70.1 -4.4% -96.5% to +179.4%

w/Acceptable 76.5

Seasonal Prices Non-Winter 63.7 -15.3% -81.6% to +57.9%

Households w/o Acceptable

Seasonal Prices 66.4 82.4 -14.5% -90.8% to +33.7%

All Households 66.0 78.5 -12.6%

Note for Tables I and 2: For any household, a negative percent difference between marginal price and average price

indicates that the household's marginal price is smaller than the household's average price. A positive percent

difference between marginal price and average price indicates that the household's marginal price is larger than the

household's average price.

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Refinements to LBNL's Marginal Price Estimation Process

For RECS97, LBNL made several refinements to its marginal price estimation process in the following areas:

• seasonal prices for gas as well as electric

• criterion for accepting regression line slopes

• source of average household prices

Each of these three refinements is explained below.

I) Seasonal prices for gas as well as electric:

For RECS97, natural gas billing data was split into seasons in a manner parallel to electricity data. The "peak"

winter season was defined as those billing periods whose midpoint fell in any of the following four months:

November, December, January, February. The remaining eight months constitute the non-winter season.

For RECS93, natural gas prices were estimated on an annual basis only; that is, seasonal data were not

examined.

2) Criterion for accepting regression line slopes:

For RECS97, the criterion for accepting regression line slopes as marginal prices was established using an rz

cutoff of 0.90. That is, regression slopes of household billing data were not accepted as household marginal

prices unless the r2 value was at least 0.90. This criterion was used with both the electricity and natural gas

billing data.

For RECS93, the criterion for accepting regression line slopes was based on rejecting extreme values of the

regression slopes themselves. For electricity, regression line slopes were rejected if they were either less than

or equal to zero or if they were greater than 22 cents/kWh. For natural gas, regression line slopes were

rejected if they were either less than or equal to zero or if they were greater than $3.20/therm.

3) Source of average household prices:

For RECS97, average prices were calculated for each RECS household using the available billing data for that

household. Those average prices were then used to calculate the percent difference between marginal price

and average price for that household. Weighted means of the percent difference between marginal price and

average price were also calculated for the set of households with acceptable seasonal prices, the set of

households without acceptable seasonal prices, and for all of the households.

For RECS93, the average price reported in the RECS database for each RECS household was used; individual

household average prices were not calculated using the RECS billing data itself. The average price reported

in the RECS database for each household is the average price for the local utility, not the household's own

average price. Use of these reported average prices in the calculation of the percent difference between

marginal price and average price does not yield as accurate a value of the percent difference between marginal

price and average price as does use of each household's own directly-calculated average price.

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Marginal Energy Prices - Summary of RECS93 Results. Re-calculated Using LBNL's Refined

Marginal Price Estimation Method

For comparison purposes, we have re-calculated marginal and average prices and the percent difference between

marginal price and average price for the RECS93 households using our refined marginal price estimation process.

Table 3. Marginal Residential Electricity Prices - RECS93

Electricity - RECS93 Prices (0/kWh) % Difference between

(Weighted Mean) Marginal Price and Average Price

Annual

MARGINAL AVERAGE

Weighted

1993$ 1997$ 1993$ 1997$ Mean Range

Households Summer 9.0 9.1 -2.0% -239.4% to +176.7%

w/Acceptable 9.2 9.4

Seasonal Prices Non-Summer 8.5 8.6 -8.6% -72.2% to +70.5%

Households w/o Acceptable

Seasonal Prices 8.7 8.8 9.2 9.3 -5.3% -76.6% to +136.4%

All Households 8.7 8.8 9.2 9.4 -6.1%

The factor that converts electricity prices in 1993$ to electricity prices in 1997$ is 1.013.

Table 4. Marginal Residential Natural Gas Prices - RECS93

Natural Gas - RECS93 Prices (¢/ccf) % Difference between

(Weighted Mean) Marginal Price and Average Price

Annual

MARGINAL AVERAGE

1993$ 1997$ 1993$ 1997$

Weighted

Mean Range

Households Winter 57.9 65.2 -10.2% -79.7% to +54.2%

w/Acceptable 65.8 74.1

Seasonal Prices Non-Winter 55.1 62.1 -14.7% --78.9% to +38.0%

Households w/o Acceptable

Seasonal Prices 57.6 64.9 71.4 80.5 -14.1% -89.0% to +27.5%

All Households 56.3 63.5 66.9 75.3 -13.4%

The factor that converts natural gas prices in 1993$ to natural gas prices in 1997$ is 1.127.

Note for Tables 3 and 4: For any household, a negative percent difference between marginal price and average price

indicates that the household's marginal price is smaller than the household's average price. A positive percent difference

between marginal price and average price indicates that the household's marginal price is larger than the household's

average price.

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