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On the Economics of Cogeneration: Pricing and Efficiency in Government Owned Utilities

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  • Jae-Cheol Kim
  • Byong-Hun Ahn

Abstract

Cogeneration has been gaining increasing importance in the pro- vision of electric power. When a utility purchases electricity produced by independent cogenerators and resells it to consumers, the question of whether or not a certain payment schedule of purchased power is "just and reasonable" becomes an immediate concern to each party concerned-- the utility, cogenerators and possibly regulatory agencies. The U.S. regulatory agencies generally have endorsed avoided cost pricing since the passage of the Public Utility Regulatory Policies Act (PURPA) in 1978, the rule requiring that the utility pay avoided costs-- the difference between total costs incurred by the utility before and after cogenerators' production. In Korea, on the other hand, a different rule has been implemented in pricing hydroelectric power purchased by the Korea Electric Power Corporation (KEPCO), Korea's only electric utility company from Korea Water Resources Corporation, a multi-reservoir dam corporation. The latter is currently paid based on actual costs incurred by its individual hydroelectric plants.

Suggested Citation

  • Jae-Cheol Kim & Byong-Hun Ahn, 1990. "On the Economics of Cogeneration: Pricing and Efficiency in Government Owned Utilities," The Energy Journal, , vol. 11(1), pages 87-100, January.
    • Handle: RePEc:sae:enejou:v:11:y:1990:i:1:p:87-100
    DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No1-8
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    References listed on IDEAS

    as
    1. Chi-Keung Woo, 1988. "Inefficiency of Avoided Cost Pricing of Cogenerated Power," The Energy Journal, , vol. 9(1), pages 103-114, January.
    2. Brown,Stephen J. & Sibley,David Sumner, 1986. "The Theory of Public Utility Pricing," Cambridge Books, Cambridge University Press, number 9780521314008, September.
    3. Chi-Keung Woo, 1988. "Inefficiency of Avoided Cost Pricing of Cogenerated Power," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 103-113.
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