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Substitution between Bundled and Unbundled Products after Deregulation in Electricity Generation

Author

Listed:
  • S. Keith Berry

    (Department of Economics and Business, Hendrix College)

Abstract

With partial electric utility deregulation, regulators will continue to regulate transmission and distribution (T&D) rates, while generation prices are unregulated and stochastic. Consumers will migrate between bundled and unbundled rate classes depending on individual rates of trade-off between generation price and generation price variance. In the linear pricing case, with large variance and increasing returns to scale, the unbundled class should have the lower T&D price. In a non-linear (two-part rates) stochastic model, the per unit rates of both bundled and unbundled classes should be set less than marginal cost.

Suggested Citation

  • S. Keith Berry, 2000. "Substitution between Bundled and Unbundled Products after Deregulation in Electricity Generation," Eastern Economic Journal, Eastern Economic Association, vol. 26(4), pages 455-468, Fall.
    • Handle: RePEc:eej:eeconj:v:26:y:2000:i:4:p:455-468
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume26/V26N4P455_468.pdf
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    More about this item

    Keywords

    Deregulation; Electricity;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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