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Electricity Tariff Design: A Survey (Policy)

Author

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  • Afia Malik

    (Pakistan Institute of Development Economics, Islamabad.)

  • Amena Urooj

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

In a perfectly competitive market, electricity is priced at the Marginal Cost (MC); MC pricing guarantees economic efficiency (Gunatilake, et al. 2008). In other words, efficient electricity tariffs consider all power supply costs. To a great degree, it also accounts for capital investments for future expansion and up-gradation (Kojima, et al. 2014). In a free market, market forces of demand and supply pushed for MC recovery. In contrast, for a regulated market, the regulator sets the tariff according to the costs and reasonable return determined through the regulatory process. The regulator followed pre-determined guidelines, parameters, and standards set by the government; it may or may not be MC pricing.

Suggested Citation

  • Afia Malik & Amena Urooj, 2022. "Electricity Tariff Design: A Survey (Policy)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 61(4), pages 663-680.
    • Handle: RePEc:pid:journl:v:61:y:2022:i:4:p:663-680
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    Cited by:

    1. Afia Malik & Ghulam Mustafa, 2024. "Power Sector Debt and Pakistan’s Economy," PIDE-Working Papers 2024:2, Pakistan Institute of Development Economics.

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