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Priority Pricing of Interruptible Electric Service with an Early Notification Option

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  • Todd Strauss
  • Shmuel Oren

Abstract

Priority pricing of interruptible electric service induces each customer to self-select a rationing priority that matches the rank order of its interruption loss. This paper extends the theory by considering the possibility of early notification, an option offered by many electric utilities. The proposed tariff structure allows a customer to choose either early notification and pay a fixed fee, or select no advance notification along with a level of compensation when interrupted. The chosen compensation determines customer service priority and corresponding price. Service priority is interpreted as an externality component of the marginal cost of system shortfall.

Suggested Citation

  • Todd Strauss & Shmuel Oren, 1993. "Priority Pricing of Interruptible Electric Service with an Early Notification Option," The Energy Journal, , vol. 14(2), pages 175-196, April.
    • Handle: RePEc:sae:enejou:v:14:y:1993:i:2:p:175-196
    DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No2-9
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    References listed on IDEAS

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    1. Panzar, John C & Sibley, David S, 1978. "Public Utility Pricing under Risk: The Case of Self-Rationing," American Economic Review, American Economic Association, vol. 68(5), pages 888-895, December.
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