Intertemporal Allocation of Capital Costs in Electric Utility Capacity Expansion Planning Under Uncertainty
This paper concerns marginal cost pricing in a capacity expansion problem for the electric utility industry. We develop a characterization of equipment selection and marginal capital cost allocation based on an optimal capacity plan, in the context of either a finite, discretely distributed stochastic demand forecast, or in the deterministic case of multiple users identified by temporal considerations. In either case, a two stage linear program with recourse is shown to result. The main purpose of this paper is to conduct an analysis in order to determine a marginal cost pricing strategy for sharing capital costs given an optimal capacity plan, and to provide insightful economic interpretations. Our results also generalize a special case previously studied to demonstrate how a marginal cost pricing strategy may result in some of the capacity costs being borne by off-peak users.
Volume (Year): 30 (1984)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: |
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:30:y:1984:i:1:p:1-19. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.