Emission costs, consumer bypass and efficient pricing of electricity

Journal Article · Sat Dec 31 04:00:00 EST 1994 · Energy Journal

DOI:https://doi.org/10.5547/ISSN0195-6574-EJ-Vol15-No3-3· OSTI ID:237572

Woo, C K; Orans, R; Pupp, R ^[1]

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1. 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

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
COST
ELECTRIC POWER
FOSSIL-FUEL POWER PLANTS
GASEOUS WASTES
MATHEMATICAL MODELS
PRICES