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Loan Management: Rationing Versus Peak Load Pricing

Sanford V. Berg

Year: 1981
Volume: Volume 2
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol2-No1-6
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Abstract:
Rising costs in the electric utility industry have focused attention on ways to control or adjust kilowatt-hours (kWh) consumed during certain hours of the day. The economist's solution has tended to involve support for peak load pricing (PLP). In theory, PLP structures are supposed to reflect the opportunity cost to society of providing electricity at particular hours. However, the problem of measuring marginal opportunity costs is difficult at best, and few electricity-pricing schemes that have been proposed set prices equal to marginal opportunity costs. Furthermore, there are costs involved in using price signals: monitoring hourly electricity consumption involves further capital expenditures; consumer acceptance and understanding of complex pricing schemes is questionable; and, even if the "correct" signals are given, it is not clear that residential (and other) consumers are responsive to higher prices during periods of peak usage, and this ambiguity complicates the electric utility planning process.



Capacity Rationing and Fixed Cost Collection

Chi-Keung Woo

Year: 1991
Volume: Volume 12
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No2-9
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Abstract:
This paper proposes a simple load management program with a two-part tariff to ration an electric utility's installed capacity and to collect its fixed costs under asymmetric information and demand uncertainty. Because of its simplicity, the program is a practical alternative to spot pricing and rationing schemes with highly nonlinear rate structures.





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