Emission costs, consumer bypass and efficient pricing of electricity

Chi Keung WOO, Benjamin HOBBS, Ren ORANS, Roger PUPP, Brian HORII

Research output: Contribution to journalArticle

4 Citations (Scopus)

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. Copyright © 1994 by the IAEE. All rights reserved.

Original languageEnglish
Pages (from-to)43-54
JournalEnergy Journal
Volume15
Issue number3
DOIs
Publication statusPublished - Jul 1994

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Electricity
Costs
Electric utilities
Taxation
Pricing
Air
Air pollutants
Electricity generation
Viability
External costs
Electricity supply
Retail services
Optimal tax
Marginal utility

Citation

Woo, C.-K., Hobbs, B., Orans, R., Pupp, R., & Horii, B. (1994). Emission costs, consumer bypass and efficient pricing of electricity. The Energy Journal, 15(3), 43-54. doi: 10.5547/ISSN0195-6574-EJ-Vol15-No3-3

Keywords

  • Efficient electricity pricing
  • Electric utilities
  • Customer bypass
  • Customer behavior