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Service Reliability and the Optimal Interruptible Rate Option in Residential Electricity Pricing

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  • Chi-Keung Woo
  • Nate Toyama

Abstract

Recent research on electricity pricing extends the traditional peak load pricing problem in many directions. Some notable studies include the time-of-use (TOU) papers by Crew and Kleindorfer (1976, 1978); the cycling analysis by Dansby (1977); the Demand Subscription Service (DSS) studies by Tschirhart and Jen (1979), Panzar and Sibley (1978), and Marchand (1974). Central to these papers is the role played by demand uncertainty in determining the optimal electricity rate structure and capacity planning. With the exception of Tschirhart and Jen and Marchand, these papers do not directly address the question of service reliability from the customer's perspective. Moreover, the supply-side uncertainty caused by random plant outages (as indicated by Chao, 1983) is largely ignored. Finally, these studies, though elegant and innovative, do not analyze the problem of residential rate options, which recently have gained considerable popularity in the United States, especially in California.

Suggested Citation

  • Chi-Keung Woo & Nate Toyama, 1986. "Service Reliability and the Optimal Interruptible Rate Option in Residential Electricity Pricing," The Energy Journal, , vol. 7(3), pages 123-136, July.
    • Handle: RePEc:sae:enejou:v:7:y:1986:i:3:p:123-136
    DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No3-10
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    References listed on IDEAS

    as
    1. Chi-Keung Woo, 1985. "An Application of the Expenditure Function in Electricity Pricing: Optimal Residential Time-of-Use Rate Option," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 89-99.
    2. Hung-po Chao, 1983. "Peak Load Pricing and Capacity Planning with Demand and Supply Uncertainty," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 179-190, Spring.
    3. Arun P. Sanghvi, 1983. "Household Welfare Loss Due to Electricity Supply Disruptions," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
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