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The Effects of Rivalry with Price Regulation of Electric Power Generation

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  • Braeutigam, Ronald R

Abstract

This article examines how rivalry between an electric utility and nonutility generators (NUGs) affects electricity prices, market structure and welfare. If a utility cannot break even financially when outputs are priced at marginal cost, then the Ramsey optimal price paid by a utility purchasing electricity from a NUG should be below avoided cost, in contrast to the requirements of PURPA. The analysis also compares FDC, Residual and Ramsey prices for a utility's electricity sales. It illustrates how FDC prices may force a utility to exit relatively competitive business markets, eliminating any benefits of economies of scope from serving both business and residential customers. Copyright 1997 by Kluwer Academic Publishers

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  • Braeutigam, Ronald R, 1997. "The Effects of Rivalry with Price Regulation of Electric Power Generation," Journal of Regulatory Economics, Springer, vol. 11(2), pages 119-137, March.
    • Handle: RePEc:kap:regeco:v:11:y:1997:i:2:p:119-37
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    Cited by:

    1. Sueyoshi, Toshiyuki, 1999. "Tariff structure of Japanese electric power companies: An empirical analysis using DEA," European Journal of Operational Research, Elsevier, vol. 118(2), pages 350-374, October.

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