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Shock Value: Bill Smoothing and Energy Price Pass‐Through

Author

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  • Catherine Hausman

Abstract

Energy prices are volatile, affect every consumer and industry in the economy, and are impacted by regulations including gas taxes and carbon pricing. Like the pass‐through literature in general, the growing energy pass‐through literature focuses on marginal prices. However, multi‐part pricing is common in energy retail pricing. I examine the retail natural gas market, showing that while marginal prices exhibit full or nearly full pass‐through, fixed fees exhibit negative pass‐through. This is consistent with the stated desire by utilities and regulators to prevent ‘bill shock.’ I discuss implications for pass‐through estimation and for proposed alternative pricing structures for regulated utilities.

Suggested Citation

  • Catherine Hausman, 2019. "Shock Value: Bill Smoothing and Energy Price Pass‐Through," Journal of Industrial Economics, Wiley Blackwell, vol. 67(2), pages 242-278, June.
    • Handle: RePEc:bla:jindec:v:67:y:2019:i:2:p:242-278
    DOI: 10.1111/joie.12200
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    Cited by:

    1. Severin Borenstein & James B. Bushnell, 2022. "Headwinds and Tailwinds: Implications of Inefficient Retail Energy Pricing for Energy Substitution," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 3(1), pages 37-70.
    2. Chen, Jiawei & Jiang, Lai & Syed Shah, Saad Andalib, 2022. "An empirical model of the effects of “bill shock” regulation in mobile telecommunication markets," International Journal of Industrial Organization, Elsevier, vol. 83(C).
    3. repec:ces:ceswps:_10944 is not listed on IDEAS
    4. Brandon Schaufele, 2022. "Curvature and competitiveness: Carbon taxes in cattle markets," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1268-1292, August.
    5. Singer, Gregor, 2024. "Complementary inputs and industrial development: can lower electricity prices improve energy efficiency?," LSE Research Online Documents on Economics 122365, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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