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Power Factors and the Efficient Pricing and Production of Reactive Power

Sanford V. Berg with the assistance of Jim Adams and Bob Niekum

Year: 1983
Volume: Volume 4
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol4-NoSI-6
No Abstract



Service Reliability and the Optimal Interruptible Rate Option in Residential Electricity Pricing

Chi-Keung Woo and Nate Toyama

Year: 1986
Volume: Volume 7
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No3-10
View Abstract

Abstract:
Recent research on electricity pricing extends the traditional peak load pricing problem in many directions. Some notable studies include the time-of-use (TOU) papers by Crew and Kleindorfer (1976, 1978); the cycling analysis by Dansby (1977); the Demand Subscription Service (DSS) studies by Tschirhart and Jen (1979), Panzar and Sibley (1978), and Marchand (1974). Central to these papers is the role played by demand uncertainty in determining the optimal electricity rate structure and capacity planning. With the exception of Tschirhart and Jen and Marchand, these papers do not directly address the question of service reliability from the customer's perspective. Moreover, the supply-side uncertainty caused by random plant outages (as indicated by Chao, 1983) is largely ignored. Finally, these studies, though elegant and innovative, do not analyze the problem of residential rate options, which recently have gained considerable popularity in the United States, especially in California.



Optimal Off-Peak Incremental Sales Rate Design in Electricity Pricing

Chi-Keung Woo and Dewey Q. Seeto

Year: 1988
Volume: Volume 9
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-No1-8
View Abstract

Abstract:
Nonlinear pricing has recently become a subject of intense research in utility pricing. This research begins with the work on multipart tariffs which points out the superiority of nonlinear pricing over linear pricing and the importance of self-selection in regulatory pricing (see e.g., Brown and Sibley (1986), Faulhaber and Panzar (1977), Willig (1978) and Mirman and Sibley (1980)). That is, by providing a menu of rate options from which a ratepayer chooses what he most prefers, the utility and the ratepayers are both better off than when only one linear rate schedule is available (e.g., a non-time differentiated energy charge).



The Welfare Impact of Rising Block Pricing: Electricity in Colombia

Rodney Maddock and Elkin Castano

Year: 1991
Volume: Volume 12
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No4-4
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Abstract:
In Medellin, Colombia, electricity prices follow an unusual system of rising block prices. The stated objective of the policy is to redistribute income. In this paper we calculate the degree of redistribution achieved relative to that of a horizontal price schedule. We also calculate the efficiency cost of discrimination. The data come from a survey of over 1000 residential users of electricity.



Emission Costs, Consumer Bypass and Efficient Pricing of Electricity

Chi-Keung Woo, Benjamin Hobbs, Ren Orans, Roger Pupp and Brian Horii

Year: 1994
Volume: Volume15
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No3-3
View Abstract

Abstract:
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 "bypass" 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.



Zonal Pricing in a Deregulated Electricity Market

Mette Bjorndal and Kurt Jornsten

Year: 2001
Volume: Volume22
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No1-3
View Abstract

Abstract:
In the deregulated Norwegian electricity market a zonal transmission pricing system is used to cope with network capacity problems. In this paper we illustrate some of the problems with the zonal pricing system as it is implemented in Norway. Using small network examples we illustrate the difficulties involved in defining the zones, the redistribution effects of the surplus that a zonal pricing system has, as well as the conflicting interests concerning zone boundaries that are present among the various market participants. We also show that a zone allocation mechanism based on nodal prices does not necessarily lead to a zone system with maximal social surplus. Finally, we formulate an optimization model that when solved yields the zone system that maximizes social surplus given a pre-specification of the number of zones to be used.



Customer Risk from Real-Time Retail Electricity Pricing: Bill Volatility and Hedgability

Severin Borenstein

Year: 2007
Volume: Volume 28
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-5
View Abstract

Abstract:
One of the most critical concerns that customers have voiced in the debate over real-time retail electricity pricing is that they would be exposed to risk from fluctuations in their electricity cost. The concern seems to be that a customer could find itself consuming a large quantity of power on the day that prices skyrocket, resulting in a high monthly bill. I analyze the magnitude of this risk, using demand data from 1142 large industrial customers, and then ask how much of this risk can be eliminated through various straightforward financial instruments. I find that very simple hedging strategies�forward purchase contracts that are already used with many RTP programs�can eliminate more than 80% of the bill volatility that would otherwise occur. I then show that a slightly more sophisticated application of these forward power purchases can significantly enhance their effect on reducing bill volatility.



Wealth Transfers Among Large Customers from Implementing Real-Time Retail Electricity Pricing

Severin Borenstein

Year: 2007
Volume: Volume 28
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-6
View Abstract

Abstract:
Adoption of real-time electricity pricing�retail prices that vary hourly to reflect changing wholesale prices removes existing cross-subsidies to those customers that consume disproportionately more when wholesale prices are highest. If their losses are substantial, these customers are likely to oppose RTP initiatives unless there is a supplemental program to offset their loss. Using data on a sample of 1142 large industrial and commercial customers in northern California, I show that RTP adoption would result in significant transfers compared to a flat-rate tariff. When compared to the time-of-use rates (simple peak/offpeak tariffs) that these customers already face, however, the transfers drop by up to 45%; even under the more extreme price volatility scenario that I examine, 90% of customers would see changes of between a 4% bill reduction and an 8% bill increase. Though customer price responsiveness reduces the loss incurred by those with high-cost demand profiles, I also demonstrate that this offsetting effect is unlikely to be large enough for most customers with costly demand patterns to completely offset their lost cross-subsidy. The analysis suggests that adoption of real-time pricing may be difficult without a supplemental program that compensates the customers who are made worse off by the change. I examine possible �two-part RTP� programs, which allow customers to purchase a baseline quantity at regulated TOU rates, and show they can be used to greatly reduce the transfers associated with adoption of RTP.



Stability versus Sustainability: Energy Policy in the Gulf Monarchies

Jim Krane

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.jkra
View Abstract

Abstract:
Over the past half-century, production from vast reserves of hydrocarbons has transformed the once destitute Persian Gulf monarchies into developed states with comfortable lifestyles. However, longstanding policies that stimulate energy demand in these states are diverting an ever-larger share of resource production into domestic markets, threatening the region's chief export and biggest contributor to GDP. Five of these six sheikhdoms must soon choose between maintaining energy subsidies and sustaining exports. Rising domestic demand for natural gas, once considered nearly free, has already forced some states to shift to higher-cost resources, including imports. For now, governments have absorbed these costs and insulated consumers from higher prices. This practice only intensifies the pressure on exportable resources. As hydrocarbon production reaches a plateau, domestic consumption will gradually displace exports. Politically difficult reforms that moderate consumption can therefore extend the longevity of exports, and perhaps, the regimes themselves.



Residential End-use Electricity Demand: Implications for Real Time Pricing in Sweden

Mattias Vesterberg and Chandra Kiran B. Krishnamurthy

Year: 2016
Volume: Volume 37
Number: Number 4
DOI: 10.5547/01956574.37.4.mves
View Abstract

Abstract:
Using a unique and highly detailed data set on energy consumption at the appliance-level for 200 Swedish households, seemingly unrelated regression (SUR)based end-use specific load curves are estimated. The estimated load curves are then used to explore possible restrictions on load shifting (e.g. the office hours schedule) as well as the cost implications of different load shift patterns. The cost implications of shifting load from "expensive" to "cheap" hours, using the Nord pool spot prices as a proxy for a dynamic price, are computed to be very small; roughly 2-4% reduction in total daily cost from shifting load up to five hours ahead, indicating small incentives for households (and retailers) to adopt dynamic pricing of electricity. Keywords: Direct Metering, Residential Electricity Demand, Real time electricity pricing




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