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The Welfare Impact of Rising Block Pricing: Electricity in Colombia

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.

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Energy Specializations: Electricity – Markets and Prices ; Energy Access – Energy Poverty and Equity

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q43: Energy and the Macroeconomy, D11: Consumer Economics: Theory, D12: Consumer Economics: Empirical Analysis, D22: Firm Behavior: Empirical Analysis, D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

Keywords: Electricity pricing, Welfare, Colombia, Energy poverty

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No4-4


Published in Volume 12, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.