IDEAS home Printed from https://ideas.repec.org/a/kap/atlecj/v33y2005i3p311-323.html
   My bibliography  Save this article

Residential Consumer Switching and Electricity Restructuring Policy: The Pennsylvania Power Market

Author

Listed:
  • Chien-Ping Chen

Abstract

Without significant price reduction, high consumer switching rates to competitive power suppliers have been criticized as a result of either the artificially high price to compare (PC) acting as the benchmark price that competitive generators must meet, or the critical mass effect from switching consumers. This paper builds a simple model to explore how the restructuring policy determines residential switching behavior. When the PC increases over time, whether it reflects the rising wholesale price adequately or not, a consistent price reduction policy will naturally induce an early-stage high switching rate. In contrast, a required switching rate policy that is associated with both an artificial price cut at the early stage and a longer period of stranded cost recovery can accelerate switching effectively. Two high-cost Pennsylvania utilities, which demonstrate opposite movements of residential switching rate under different restructuring policies, are examined to confirm that the high switching rate just results from the policy design, not from the subsidy in PC discussed in (Joskow, Paul L. “Why Do We Need Electricity Retailers? Or, Can You Get It Cheaper Wholesale?” Center for Energy and Environmental Policy Research, MIT, Revised discussion draft, 2000b), or the critical mass effect concluded in (Reitzes, James D., Lisa V. Wood, J. A. Quinn, and Kelli L. Sheran. “Designing Standard-Offer Service to Facilitate Electric Retail Restructuring.” The Electricity Journal 15, 9, 2003, pp. 34–51). Switching rates play no role in evaluating the success or failure of a restructuring. Copyright International Atlantic Economic Society 2005

Suggested Citation

  • Chien-Ping Chen, 2005. "Residential Consumer Switching and Electricity Restructuring Policy: The Pennsylvania Power Market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(3), pages 311-323, September.
    • Handle: RePEc:kap:atlecj:v:33:y:2005:i:3:p:311-323
    DOI: 10.1007/s11293-005-0028-x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11293-005-0028-x
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11293-005-0028-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Littlechild, Stephen C, 2003. "Wholesale Spot Price Pass-Through," Journal of Regulatory Economics, Springer, vol. 23(1), pages 61-91, January.
    2. Berry, S. Keith, 2002. "Generation search costs and Ramsey pricing in a partially deregulated electric utility industry," Journal of Economics and Business, Elsevier, vol. 54(3), pages 331-343.
    3. Faye Steiner, 2004. "The Market Response to Restructuring: A Behavioral Model," Journal of Regulatory Economics, Springer, vol. 25(1), pages 59-80, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Neuhoff, Karsten & De Vries, Laurens, 2004. "Insufficient incentives for investment in electricity generations," Utilities Policy, Elsevier, vol. 12(4), pages 253-267, December.
    2. Mirza, Faisal Mehmood & Bergland, Olvar, 2012. "Pass-through of wholesale price to the end user retail price in the Norwegian electricity market," Energy Economics, Elsevier, vol. 34(6), pages 2003-2012.
    3. Guerriero, Carmine, 2013. "The political economy of incentive regulation: Theory and evidence from US states," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 91-107.
    4. Littlechild, Stephen, 2006. "Residential energy contracts and the 28 day rule," Utilities Policy, Elsevier, vol. 14(1), pages 44-62, March.
    5. Paul L. Joskow, 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Working Papers 0308, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    6. Nils-Henrik M. von der Fehr & Petter Vegard Hansen, 2010. "Electricity Retailing in Norway," The Energy Journal, , vol. 31(1), pages 25-46, January.
    7. Bigerna, Simona & Bollino, Carlo Andrea, 2016. "Ramsey prices in the Italian electricity market," Energy Policy, Elsevier, vol. 88(C), pages 603-612.
    8. Littlechild, Stephen, 2006. "Competition and contracts in the Nordic residential electricity markets," Utilities Policy, Elsevier, vol. 14(3), pages 135-147, September.
    9. Stephen Littlechild, 2008. "Municipal aggregation and retail competition in the Ohio energy sector," Journal of Regulatory Economics, Springer, vol. 34(2), pages 164-194, October.
    10. Sun, Chuanwang & Lin, Boqiang, 2013. "Reforming residential electricity tariff in China: Block tariffs pricing approach," Energy Policy, Elsevier, vol. 60(C), pages 741-752.
    11. Defeuilley, Christophe, 2009. "Retail competition in electricity markets," Energy Policy, Elsevier, vol. 37(2), pages 377-386, February.
    12. Guerriero, Carmine, 2011. "Accountability in government and regulatory policies: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 453-469.
    13. Littlechild Stephen C., 2002. "Competition in Retail Electricity Supply," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(2), pages 1-26, June.
    14. Wang, Chen & Zhou, Kaile & Yang, Shanlin, 2017. "A review of residential tiered electricity pricing in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 533-543.
    15. Stephen Littlechild, 2019. "Promoting competition and protecting customers? Regulation of the GB retail energy market 2008–2016," Journal of Regulatory Economics, Springer, vol. 55(2), pages 107-139, April.
    16. Johnsen, Tor Arnt & Olsen, Ole Jess, 2011. "Regulated and unregulated Nordic retail prices," Energy Policy, Elsevier, vol. 39(6), pages 3337-3345, June.
    17. Fontana, Magda & Iori, Martina & Nava, Consuelo Rubina, 2017. "Switching Behavior and the Liberalization of the Italian Electricity Retail Market. Logistic and Mixed Effect Bayesian Estimations of Consumer Choice," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201721, University of Turin.
    18. Bassanini, Andrea & Brunello, Giorgio, 2011. "Barriers to entry, deregulation and workplace training: A theoretical model with evidence from Europe," European Economic Review, Elsevier, vol. 55(8), pages 1152-1176.
    19. Esplin, Ryan & Davis, Ben & Rai, Alan & Nelson, Tim, 2020. "The impacts of price regulation on price dispersion in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 147(C).
    20. Almeida, Lucila de & Esposito, Fabrizio & van Zeben, Josephine, 2022. "When indicators fail electricity policies: Pitfalls of the EU's retail energy market Barrier Index," Energy Policy, Elsevier, vol. 165(C).

    More about this item

    Keywords

    L5; L9;

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:33:y:2005:i:3:p:311-323. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.