Emission costs, consumer bypass and efficient pricing of electricity
- Principals, Energy and Environmental Economics, San Francisco, CA (United States); and others
Electricity generation causes external costs because of the emission of air pollutants. Pricing an electric utility`s service at the sum of the utility`s marginal generation cost and marginal emission cost, however, is inefficient due to {open_quotes}bypass{close_quote} by large industrial customers and the need to maintain the utility`s financial viability. This paper derives the optimal tax on emission and efficient prices for retail service to two customer classes, one of which has the option to self-generate. These rules are used to evaluate the pricing proposals made in a recent rate case in California. These proposals are shown to be inefficient, in that they encourage over-consumption by residential customers who do not have access to alternative sources of electricity supply. 9 refs.
- Sponsoring Organization:
- USDOE
- OSTI ID:
- 237572
- Journal Information:
- Energy Journal, Journal Name: Energy Journal Journal Issue: 3 Vol. 15; ISSN ENJODN; ISSN 0195-6574
- Country of Publication:
- United States
- Language:
- English
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