Residential electricity pricing in Texas's competitive retail market

D. P. BROWN, C.H. TSAI, Chi Keung WOO, J. ZARNIKAU, S. ZHU

Research output: Contribution to journalArticlespeer-review

Abstract

Using a large sample of residential retail electricity plans advertised on the Public Utility Commission of Texas's Power-to-Choose website between January 2014 to December 2018, we analyse how a retail price quote varies with its per MWh procurement cost forecast based on wholesale prices and other product attributes. Our panel regression analysis finds that a retail price quote partially passes through 43% to 47% of a wholesale price forecast changes and embodies a risk premium that increases with wholesale price forecast volatility. Prepayment and time-of-use plans contain price premia. The price premia associated with higher-than-average renewable energy contents in the early years of our sample have largely vanished by 2018. Longer contract terms come at a higher price. Finally, increased one-month lagged customer switching tends to be associated with reduced retail price quotes. Copyright © 2020 Elsevier B.V.
Original languageEnglish
Article number104953
JournalEnergy Economics
Volume92
Early online date25 Sep 2020
DOIs
Publication statusPublished - Oct 2020

Citation

Brown, D. P., Tsai, C. H., Woo, C. K., Zarnikau, J., & Zhu, S. (2020). Residential electricity pricing in Texas's competitive retail market. Energy Economics, 92. Retrieved from https://doi.org/10.1016/j.eneco.2020.104953

Keywords

  • Retail electricity pricing
  • Procurement cost pass-through
  • Risk premium
  • Renewable premium
  • ERCOT

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