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The Equity and Efficiency Effects of Electricity Network Tariff Reform: Evidence From Ireland

Author

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  • Niall Farrell
  • Tensay Hadush Meles

Abstract

We estimate the welfare implications of reforming residential electricity network tariffs to incorporate cost-reflective “Coasian†principles. For an Irish case study, we find that current Distribution Use of System (DUoS) tariffs deviate considerably from those that incorporate cost-reflective principles. In aggregate, positive welfare effects are largely canceled out by negative welfare effects. This results in a relatively small net welfare impact of up to around €33 million. However, there is a regressive distribution of incidence at the household level. Households in the lowest income decile incur losses of up to around €40 per annum, on average, while households in the highest income decile benefit by up to €63 per annum, on average. We show that inefficient DUoS tariffs represent a costly redistribution policy. We demonstrate that it is more efficient to counter the regressive effects through the tax-benefit system. JEL Classification: L94, L98, Q42, Q48, Q51, Q53, Q54, Q55

Suggested Citation

  • Niall Farrell & Tensay Hadush Meles, 2025. "The Equity and Efficiency Effects of Electricity Network Tariff Reform: Evidence From Ireland," The Energy Journal, , vol. 46(5), pages 1-23, September.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:5:p:1-23
    DOI: 10.1177/01956574251334363
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    References listed on IDEAS

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    1. Covington, Hannah & Woo-Shem, Brian & Wang, Chenli & Roth, Thomas & Nguyen, Cuong & Liu, Yuhong & Fang, Yi & Lee, Hohyun, 2024. "Method for evaluating fairness of electricity tariffs with regard to income level of residential buildings," Applied Energy, Elsevier, vol. 353(PB).
    2. Gorman, Will & Jarvis, Stephen & Callaway, Duncan, 2020. "Should I Stay Or Should I Go? The importance of electricity rate design for household defection from the power grid," Applied Energy, Elsevier, vol. 262(C).
    3. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
    4. Schittekatte, Tim & Momber, Ilan & Meeus, Leonardo, 2018. "Future-proof tariff design: Recovering sunk grid costs in a world where consumers are pushing back," Energy Economics, Elsevier, vol. 70(C), pages 484-498.
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    Keywords

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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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