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Peak-Load Pricing and Reliability under Uncertainty

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  • Kleindorfer, Paul R
  • Fernando, Chitru S
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    Abstract

    This paper develops the welfare foundations of peak-load pricing under uncertainty, building on Brown and Johnson (1969), Crew and Kleindorfer (1976), and Chao (1983). The context is that of a welfare-maximizing public enterprise facing uncertain and nondeferrable demand, and uncertain supply. The paper first describes various elements of outage cost, including rationing costs, disruption costs, and surplus losses due to unsatisfied demand. Exact welfare-optimal results are then derived, in contrast to the earlier approximations by Turvey and Anderson (1977) and Chao (1983). The results are generalized to take account of diverse technologies and multiple planning periods, and their implications for utility pricing and investment in an integrated resource planning context are discussed. Copyright 1993 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 5 (1993)
    Issue (Month): 1 (March)
    Pages: 5-23

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    Handle: RePEc:kap:regeco:v:5:y:1993:i:1:p:5-23

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    Web page: http://www.springerlink.com/link.asp?id=100298

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    Cited by:
    1. Lindsey, Robin, 2009. "Cost recovery from congestion tolls with random capacity and demand," Journal of Urban Economics, Elsevier, vol. 66(1), pages 16-24, July.
    2. Serra, Pablo J., 1997. "Energy pricing under uncertain supply," Energy Economics, Elsevier, vol. 19(2), pages 209-223, May.
    3. Niels Haldrup & Morten O. Nielsen, 2004. "A Regime Switching Long Memory Model for Electricity Prices," Economics Working Papers 2004-2, School of Economics and Management, University of Aarhus.
    4. Serra, Pablo & Fierro, Gabriel, 1997. "Outage costs in Chilean industry," Energy Economics, Elsevier, vol. 19(4), pages 417-434, October.
    5. Alfredo Garcia & Juan Alzate & Jorge Barrera, 2012. "Regulatory design and incentives for renewable energy," Journal of Regulatory Economics, Springer, vol. 41(3), pages 315-336, June.
    6. Dina Mohamed Yousri, 2011. "The Egyptian Electricity Market: Designing a Prudent Peak Load Pricing Model," Working Papers 29, The German University in Cairo, Faculty of Management Technology.
    7. Fred Schroyen & Adekola Oyenuga, 2011. "Optimal pricing and capacity choice for a public service under risk of interruption," Journal of Regulatory Economics, Springer, vol. 39(3), pages 252-272, June.
    8. María Angeles García Valiñas, 2004. "Eficiencia y equidad en el diseño de precios óptimos para bienes y servicios públicos," Hacienda Pública Española, IEF, vol. 168(1), pages 95-119, march.
    9. Haldrup Niels & Nielsen Morten Ø., 2006. "Directional Congestion and Regime Switching in a Long Memory Model for Electricity Prices," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-24, September.
    10. Chao, Hung-po, 2011. "Efficient pricing and investment in electricity markets with intermittent resources," Energy Policy, Elsevier, vol. 39(7), pages 3945-3953, July.
    11. Yang, Liu & Dong, Ciwei & Wan, C.L. Johnny & Ng, Chi To, 2013. "Electricity time-of-use tariff with consumer behavior consideration," International Journal of Production Economics, Elsevier, vol. 146(2), pages 402-410.

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