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Pareto Dominance Through Self-Selecting Tariffs: The Case of TOU Electricity Rates for Agricultural Customers

Abstract:
We estimate the impact of a voluntary time-of-use (TOU) rate option for electricity used in agricultural pumping. We find that offering the TOU tariff in addition to standard, non-TOU rates increases the profits of the electric utility and Pareto dominates the offering of standard rates alone. The analysis provides an example of the fact that Pareto improvements can be obtained by judiciously expanding the set of self-selecting tariffs offered by a public utility.

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Energy Specializations: Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes: Q16: Agricultural R&D; Agricultural Technology; Biofuels; Agricultural Extension Services, Q41: Energy: Demand and Supply; Prices, Q54: Climate; Natural Disasters and Their Management; Global Warming, Q42: Alternative Energy Sources, Q24: Renewable Resources and Conservation: Land, Q21: Renewable Resources and Conservation: Demand and Supply; Prices

Keywords: TOU electricity rates, Agriculture, Self-selecting tariffs, Pareto dominance

DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No1-8


Published in Volume 10, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.