Estimation of Functions of Demand for Electricity in Khuzestan Province (Residential - Industrial)

In view of the fact that electric power is of considerable significance in the development of human societies and to the role played by demand for electricity in policy–making as well as decision–making regarding production, distribution and supply of this vital material, it is essential that the market for electric power and the direction of demand for it be studied. On this basis, in the present research, balanced functions and long–run demand functions for residential and industrial electricity in Khuzestan has been estimated for the period 1971 – 2001 using ARDL method. Firstly, for both residential and industrial demand for electricity, stable and balanced functions were obtained. Secondly, the results showed that the variable of price energy has been statistically insignificant. Thirdly, price and income elasticity of demand for electricity are suggestive of non-elasticity of house demand for electricity proportional to price and income and non – elasticity of industrial demand for electricity in proportion to price as well as elastic in proportion to value added of industrial sector in Khuzestan. Fourthly, an estimation of error–correction model is indicative of speed adjustment of electricity demand model towards long-run equilibrium.