The Efficiency and Distributional Effects of Alternative Residential Electricity Rate Designs

Abstract

We thank, without implicating, Carlos Batlle, Richard Schmalensee, Paul Joskow, and Bentley Clinton for their support and insights. We thank Dave Kolata and Jeff Zethmayr for their support in accessing the data used in this study. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Electricity rate redesign in an African context: getting ready for the prosumer age

“…In economic theory it is well known that volumetric end-user charges should be set at the marginal cost of electricity production, while residual costs should be recuperated through fixed charges (Burger et al, 2020;Joskow et al, 1989). Ideally, the volumetric charge should only reflect the utility's avoided cost, that is a system of spot pricing representing the value of electricity with its spatial and temporal granularity (Joskow et al, 1989;Schweppe et al, 1988).…”

“…Applying the game-theoretical model using Egyptian data, we compute these regulatory metrics for the increasing block tariff (IBT) design, which is in use now, and a proposed alternative, in which we allocate an important share of the regulated costs via fixed charges to the end-user. Inspired by Battle et al (2020), Borenstein (2020), and Burger et al (2020), the proposed fixed charges are differentiated based on historical consumption levels proxying income. We compute Robert Schuman Centre for Advanced Studies Working Papers the results under two BTM technology cost scenarios to test the robustness of the alternative end-user rate designs.…”

The Economics of Explicit Demand-Side Flexibility in Distribution Grids: The Case of Mandatory Curtailment for a Fixed Level of Compensation

“…There are many academic papers on network tariff design (e.g. Burger et al (2020) and Schittekatte and Meeus (2020)) yet they do not look at the interaction between network tariffs and explicit demand-side flexibility. At the same time, the above-mentioned papers on demand-side flexibility do not include network tariffs in their models, leaving a gap in the literature.…”

The Economics of Explicit Demand-side Flexibility in Distribution Grids: The Case of Mandatory Curtailment for a Fixed Level of Compensation

“…There are many academic papers on network tariff design (e.g. Burger et al (2020) and Schittekatte and Meeus (2020)) yet they do not look at the interaction between network tariffs and explicit demand-side flexibility. At the same time, the above-mentioned papers on demand-side flexibility do not include network tariffs in their models, leaving a gap in the literature.…”