The Redistributional Impact of Nonlinear Electricity Pricing
AbstractElectricity regulators often mandate increasing-block pricing (IBP)—i.e., marginal price increases with the customer's average daily usage—to protect low-income households from rising costs. IBP has no cost basis, raising a classic conflict between efficiency and distributional goals. Combining household-level utility billing data with census data on income, I find that IBP in California results in modest wealth redistribution, but creates substantial deadweight loss relative to the transfers. I also show that a common approach to studying income distribution effects by using median household income within census block groups may be misleading. (JEL D31, L11, L51, L94, L98, Q41, Q48)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Economic Policy.
Volume (Year): 4 (2012)
Issue (Month): 3 (August)
Other versions of this item:
- Borenstein, Severin, 2010. "The Redistributional Impact of Non-Linear Electricity Pricing," Working paper 602, Regulation2point0.
- Severin Borenstein, 2010. "The Redistributional Impact of Non-linear Electricity Pricing," NBER Working Papers 15822, National Bureau of Economic Research, Inc.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
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