‘Retail Electricity Competition’
AbstractWe explore the implications of load profiling of consumers whose traditional meters do not allow for measurement of their real time consumption. We find the competitive equilibrium does not support the Ramsey two-part tariff. By contrast, when consumers are billed on real time prices and consumption, retail competition yields the Ramsey prices even when consumers can only partially respond to variations in real time prices. We then examine the incentive competitive retailers have to install one of two types of advanced metering equipment. Competing retailers overinvest in real time meters compared to the Ramsey optimum, but investment incentives are constrained optimal given load-profiling and retail competition. Finally, we consider the effects of physical limitations on the ability of system operators to cut off individual customers. Competing retailers have no incentive to determine the aggregate value of non-interruption of consumers, preferring instead to free-ride on other retailers serving the same zone.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0430.
Date of creation: May 2004
Date of revision:
Note: CMI44, IO
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Other versions of this item:
- Joskow, Paul & Tirole, Jean, 2004. "Retail Electricity Competition," IDEI Working Papers 311, Institut d'Économie Industrielle (IDEI), Toulouse.
- Paul L. Joskow & Jean Tirole, 2004. "Retail Electricity Competition," NBER Working Papers 10473, National Bureau of Economic Research, Inc.
- Paul Joskow & Jean Tirole, 2004. "Retail Electricity Competition," Working Papers 0409, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-COM-2004-05-26 (Industrial Competition)
- NEP-LAM-2004-05-26 (Central & South America)
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