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Texas Interconnection Grid: Economic Optimal Capacity Utilization Rate Evidence

Author

Listed:
  • Eric L. Prentis

    (School of Accounting and Finance, Wenzhou-Kean University, Wenzhou, China.)

Abstract

For the fi rst time in the literature, the supply and demand model, with 2011-2014 data, is used to analyze the Texas Interconnection grid electricity market. The electric utility industry s production function, fi xed, variable and total cost (TC) curve represents the supply curve. The demand curve is the electricity price in the assumed perfectly competitive electricity market. The effi cient scale of production is established located where the U-shaped average TC curve reaches a minimum and using marginal analysis, where marginal revenue equals marginal cost, to determine the economic optimal capacity utilization rate that maximizes electric utility industry profi ts. This paper s aggregate results on the economics of the electric utility market are meaningful, insightful and well-timed having important electric utility policy implications

Suggested Citation

  • Eric L. Prentis, 2015. "Texas Interconnection Grid: Economic Optimal Capacity Utilization Rate Evidence," International Journal of Energy Economics and Policy, Econjournals, vol. 5(3), pages 686-692.
    • Handle: RePEc:eco:journ2:2015-03-07
    as

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    References listed on IDEAS

    as
    1. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
    2. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
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    More about this item

    Keywords

    Economic Optimal Capacity Utilization Rate; Effi cient Scale of Production; Capacity Planning. Electric Utility Policy;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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