Impact of the automatic adjustment clause on fuel-purchase and -utilization practices in the US electric utility industry

Journal Article · Fri Jan 01 04:00:00 EST 1982 · South. Econ. J.; (United States)

DOI:https://doi.org/10.2307/1058660· OSTI ID:5595826

Kaserman, D L ^[1]; Tepel, R C

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1. Univ. of Tennessee, Knoxville

The purpose of this paper is to examine the combined influence of the search and switching effects of the automatic fuel-adjustment clause on the prices paid by utilities for the aggregate-fuel input. Then, given this combined effect, an attempt is made to separate the individual influences of the two-component effects. Findings indicate that the presence of an automatic fuel-adjustment clause leads the regulated firm to pay a higher price for the aggregate-fuel input than would be paid in the absence of the clause. The severity of this aggregate-fuel input than would be paid in the absence of the clause. The severity of this aggregate-fuel price differential is estimated to be on the order of 6 cents/10/sup 6/ Btu, or approximately 10% of the average fossil-fuel price. Moreover, this aggregate effect is found to result from the induced disincentive to switch to less-expensive fuels rather than the payment of higher prices for the individual-component fuels. 21 references, 5 tables.

• OSTI ID: 5595826
• Journal Information: South. Econ. J.; (United States), Journal Name: South. Econ. J.; (United States) Vol. 48:3; ISSN SECJA
• Country of Publication: United States
• Language: English

Related Subjects

20 FOSSIL-FUELED POWER PLANTS
200106 -- Fossil-Fueled Power Plants-- Economics
29 ENERGY PLANNING, POLICY, AND ECONOMY
296000* -- Energy Planning & Policy-- Electric Power
ECONOMIC IMPACT
ELECTRIC UTILITIES
FUEL ADJUSTMENT MECHANISMS
FUEL SUBSTITUTION
PRICES
PUBLIC UTILITIES
RATE STRUCTURE