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“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
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    File URL: http://www.ub.edu/irea/working_papers/2018/201828.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    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:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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