Customer-class pricing by electric utilities

Thesis/Dissertation · Sat Jan 01 04:00:00 EST 1983

OSTI ID:6619284

Eckel, C M.C.

This dissertation investigates the relationship between customer demand characteristics and electric utility cost structures and pricing behavior. The predominant conjecture is that utilities divide customers into classes largely because of differences in demand characteristics or demand patterns, and that utility prices are determined by demand patterns both through their effect on cost of service and because of the pricing incentives vis a vis demand characteristics inherent in rate-or-return regulation. The approach is to develop a simple theory of customer-class pricing incorporating demand pattern effects in the context of previous research (Chapters II and III); to specify a way of testing pricing behavior that would avoid many shortcomings of previous studies (Chapter IV); to estimate the cost relationship and investigate demand-related aspects of the cost function (Chapter V); and, finally to test price discrimination and the importance of demand patterns in determining prices (Chapter IV). The major result of the theory development is that demand characteristics matter, and that a utility's pricing incentives are affected by demand characteristics. These incentives are dependent on the regulatory framework, with rate-of-return regulation distorting incentives in a predictable way. From the cost estimation, the major findings are, first, that marginal costs differ by customer class, with residential exceeding industrial marginal cost by a factor of 1.6, apparently related to demand pattern characteristics. Second, investigation of the characteristics of the cost function reveals that there are scale economies in providing electricity, apparently not related to demand pattern characteristics, but that there is no evidence for economies of scope.

• OSTI ID: 6619284
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
296000* -- Energy Planning & Policy-- Electric Power
32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION
320603 -- Energy Conservation
Consumption
& Utilization-- Municipalities & Community Systems-- Public Utilities-- (1980-)
COST
ELECTRIC POWER
ELECTRIC UTILITIES
INCOME
POWER
PRICING REGULATIONS
PUBLIC UTILITIES
RATE STRUCTURE
REGULATIONS