This paper derives Ramsey prices for the realistic situation in which bypass costs are unknown to both a regulator and an electric utility, in particular, to any useful level of precision. It is shown that the traditional inverse elasticity rule will still yield Ramsey prices that are incentive compatible. The Ramsey prices require relatively little information to implement, and we show the relevant elasticities to use. Modifications of these Ramsey prices that account for political realities are also provided. Copyright © 1996 by the IAEE. All rights reserved.
|Publication status||Published - 1996|
CitationHorowitz, I., Seeto, D., & Woo, C.-K. (1996). Ramsey pricing of electricity under unknown bypass costs. The Energy Journal, 17(2), 59-77. doi: 10.5547/ISSN0195-6574-EJ-Vol17-No2-4
- Ramsey pricing
- Bypass costs
- Electric utilities