Spatial Peak-load Pricing
This article extends the traditional electricity peak-load pricing model to include transmission costs. In the context of a two-node, two-technology electric power system, where suppliers face inelastic demand, we show that when the marginal plant is located at the energy-importing center, generators located away from that center should pay the marginal capacity transmission cost; otherwise, consumers should bear this cost through capacity payments. Since electric power transmission is a natural monopoly, marginal-cost pricing does not fully cover costs. We propose distributing the revenue deficit among users in proportion to the surplus they derive from the service priced at marginal cost.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Claude Crampes & Jean-Jaques Laffont, 2001. "Transport Pricing in the Electricity Industry," Oxford Review of Economic Policy, Oxford University Press, vol. 17(3), pages 313-328.
- Oren, Shmuel S. & Spiller, Pablo T. & Varaiya, Pravin & Wu, Felix, 1995. "Nodal prices and transmission rights: A critical appraisal," The Electricity Journal, Elsevier, vol. 8(3), pages 24-35, April.
- Green, Richard, 1997. "Electricity transmission pricing: an international comparison," Utilities Policy, Elsevier, vol. 6(3), pages 177-184, September.
- José Pablo Arellano, 2004. "Principios para Tarificar la Transmisión Eléctrica," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(123), pages 231-253.
- Fischer, Ronald & Serra, Pablo, 2003.
"Energy prices in the presence of plant indivisibilities,"
Elsevier, vol. 25(4), pages 303-314, July.
- Ronald Fischer & Pablo Serra, 2001. "Energy prices in the presence of plant indivisibilities," Documentos de Trabajo 108, Centro de Economía Aplicada, Universidad de Chile.
- Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
- Yves Balasko, "undated". "Theoretical perspectives on three issues of electricity economics," GSIA Working Papers 2000-E46, Carnegie Mellon University, Tepper School of Business.
- Yves Balasko, "undated". "Theoretical Perspectives on three Issues of Electricity Economics," GSIA Working Papers 2001-E18, Carnegie Mellon University, Tepper School of Business.
- Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-242, September.
- Hogan, William W., 2003. "Transmission Market Design," Working Paper Series rwp03-040, Harvard University, John F. Kennedy School of Government.
- Crew, Michael A & Fernando, Chitru S & Kleindorfer, Paul R, 1995. "The Theory of Peak-Load Pricing: A Survey," Journal of Regulatory Economics, Springer, vol. 8(3), pages 215-248, November.
- Neufeld, John L., 1987. "Price Discrimination and the Adoption of the Electricity Demand Charge," The Journal of Economic History, Cambridge University Press, vol. 47(03), pages 693-709, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:edj:ceauch:199. 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: ()
If references are entirely missing, you can add them using this form.