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On the Inequity of Flat-rate Electricity Tariffs

Proposals to reform default 'flat-rate' electricity tariffs are rarely met with enthusiasm by consumer groups or policymakers because they produce winners and losers. Proposals to initiate more cost-reflective time-of-use rates will be met with cautious interest if the basis of customer participation is 'opt-in'. Using the smart meter data of 160,000 residential customers from the Victorian region of Australia's National Electricity Market, our tariff model reveals that households in financial hardship are the most adversely affected from existing flat-rate structures. Even after network tariff rebalancing, Hardship and Concession & Pensioner Households are, on average, beneficiaries of more cost-reflective tariff structures once Demand Response is accounted for.

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Energy Specializations: Nuclear Power – Markets and Prices; Coal – Policy and Regulation; Energy and the Economy –Economic Growth and Energy Demand; Electricity – Markets and Prices ; Electricity – Generation Technologies

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
O13 - Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
D42 - Market Structure, Pricing, and Design: Monopoly
Q2 -

Keywords: Dynamic Pricing, Electricity Tariffs, Smart Meters

DOI: 10.5547/01956574.37.3.psim

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Published in Volume 37, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.