IDEAS home Printed from https://ideas.repec.org/p/ira/wpaper/201828.html
   My bibliography  Save this paper

“Major Reforms in Electricity Pricing: Evidence from a Quasi-Experiment”

Author

Listed:
  • Xavier Labandeira

    (Rede, Universidade de Vigo and Economics for Energy)

  • Jose M. Labeaga

    (Departamento de Análisis Económico II, UNED and Economics for Energy.)

  • Jordi J. Teixidó

    (Department of Econometrics-Public Policy, Universitat de Barcelona)

Abstract

The global energy mix is being redefined, and with it the power industry’s cost structure. In many countries, electricity-pricing systems are being revamped so as to guarantee fixed-cost recovery, often by raising the fixed charge of two-part tariff (TPT) schemes. However, consumer misperception of TPTs threatens to undermine the policy’s outcome and puts the sector’s much-needed transformation in jeopardy. We conduct a quasi-experiment with data from a major electricity price reform recently implemented in Spain and find robust evidence that consumers are failing to distinguish between fixed and marginal costs. As a result, the policy goal of cost recovery is not being achieved.

Suggested Citation

  • Xavier Labandeira & Jose M. Labeaga & Jordi J. Teixidó, 2018. "“Major Reforms in Electricity Pricing: Evidence from a Quasi-Experiment”," IREA Working Papers 201828, University of Barcelona, Research Institute of Applied Economics, revised Dec 2018.
    • Handle: RePEc:ira:wpaper:201828
    as

    Download full text from publisher

    File URL: http://www.ub.edu/irea/working_papers/2018/201828.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gilbert, Ben & Graff Zivin, Joshua, 2014. "Dynamic salience with intermittent billing: Evidence from smart electricity meters," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 176-190.
    2. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    3. Severin Borenstein & James B. Bushnell, 2022. "Do Two Electricity Pricing Wrongs Make a Right? Cost Recovery, Externalities, and Efficiency," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 80-110, November.
    4. Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages 159-171.
    5. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-752, September.
    6. Frank A. Wolak, 2011. "Do Residential Customers Respond to Hourly Prices? Evidence from a Dynamic Pricing Experiment," American Economic Review, American Economic Association, vol. 101(3), pages 83-87, May.
    7. James Bushnell & Kevin Novan, 2018. "Setting with the Sun: The Impacts of Renewable Energy on Wholesale Power Markets," NBER Working Papers 24980, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Navajas Fernando, 2023. "Electricity rate structure design in Latin America: Where do we stand? Where should we go?," Asociación Argentina de Economía Política: Working Papers 4676, Asociación Argentina de Economía Política.

    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. Michael K. Price, 2014. "Using field experiments to address environmental externalities and resource scarcity: major lessons learned and new directions for future research," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(4), pages 621-638.
    2. Hindriks, Jean & Serse, Valerio, 2022. "The incidence of VAT reforms in electricity markets: Evidence from Belgium," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    3. Csereklyei, Zsuzsanna & Qu, Songze & Ancev, Tihomir, 2019. "The effect of wind and solar power generation on wholesale electricity prices in Australia," Energy Policy, Elsevier, vol. 131(C), pages 358-369.
    4. Gilbert, Ben & Graff Zivin, Joshua S., 2020. "Dynamic corrective taxes with time-varying salience," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    5. Werthschulte, Madeline, 2023. "Present focus and billing systems: Testing ‘pay-as-you-go’ vs. ‘pay-later’," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 108-121.
    6. Houde, Sébastien & Myers, Erica, 2021. "Are consumers attentive to local energy costs? Evidence from the appliance market," Journal of Public Economics, Elsevier, vol. 201(C).
    7. Singhal, Puja & Pahle, Michael & Kalkuhl, Matthias & Levesque, Antoine & Sommer, Stephan & Berneiser, Jessica, 2022. "Beyond good faith: Why evidence-based policy is necessary to decarbonize buildings cost-effectively in Germany," Energy Policy, Elsevier, vol. 169(C).
    8. Stefan Lamp & Mario Samano, 2023. "(Mis)allocation of Renewable Energy Sources," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(1), pages 195-229.
    9. Becka Brolinson, 2019. "Does Increasing Block Pricing Decrease Energy Use? Evidence from the Residential Electricity Market," Working Papers gueconwpa~19-19-06, Georgetown University, Department of Economics.
    10. Freier, Julia & von Loessl, Victor, 2022. "Dynamic electricity tariffs: Designing reasonable pricing schemes for private households," Energy Economics, Elsevier, vol. 112(C).
    11. Brühl, Johanna & Smith, Grant & Visser, Martine, 2019. "Simple is good: Redesigning utility bills to reduce complexity and increase understanding," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    12. Mills, Andrew & Wiser, Ryan & Millstein, Dev & Carvallo, Juan Pablo & Gorman, Will & Seel, Joachim & Jeong, Seongeun, 2021. "The impact of wind, solar, and other factors on the decline in wholesale power prices in the United States," Applied Energy, Elsevier, vol. 283(C).
    13. Saur, Marc P. & Schlatterer, Markus G. & Schmitt, Stefanie Y., 2022. "Limited perception and price discrimination in a model of horizontal product differentiation," Games and Economic Behavior, Elsevier, vol. 134(C), pages 151-168.
    14. Macedo, Daniela Pereira & Marques, António Cardoso & Damette, Olivier, 2020. "The impact of the integration of renewable energy sources in the electricity price formation: is the Merit-Order Effect occurring in Portugal?," Utilities Policy, Elsevier, vol. 66(C).
    15. Percebois, Jacques & Pommeret, Stanislas, 2019. "Storage cost induced by a large substitution of nuclear by intermittent renewable energies: The French case," Energy Policy, Elsevier, vol. 135(C).
    16. Königsheim, C. & Lukas, M. & Nöth, M., 2019. "Salience theory: Calibration and heterogeneity in probability distortion," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 477-495.
    17. Palmer, Karen & Walls, Margaret, 2015. "Does Information Provision Shrink the Energy Efficiency Gap? A Cross-City Comparison of Commercial Building Benchmarking and Disclosure Laws," RFF Working Paper Series dp-15-12, Resources for the Future.
    18. 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.
    19. Concettini, Silvia & Creti, Anna & Gualdi, Stanislao, 2022. "Assessing the regional redistributive effect of renewable power production through a spot market algorithm simulator: The case of Italy," Energy Economics, Elsevier, vol. 114(C).
    20. Nibedita, Barsha & Irfan, Mohd, 2022. "Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market," Renewable Energy, Elsevier, vol. 194(C), pages 538-551.

    More about this item

    Keywords

    Fixed-cost recovery; Residential electricity demand; Renewables; quasi-experiment; two-part tariff. JEL classification:C99; D12; L11; L94; L98; Q41; Q48;
    All these keywords.

    JEL classification:

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ira:wpaper:201828. 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: Alicia García (email available below). General contact details of provider: https://edirc.repec.org/data/feubaes.html .

    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.