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Are two-part tariffs efficient when consumers plan ahead?: An empirical study

  • Laura Fernàndez-Villadangos

    ()

    (Grup de Recerca en Polítiques Públiques i Regulació Económiques (GPRE), Institut de Recerca d'Economia Aplicada (IREA), Departament de Política Econòmica i EEM, Universitat de Barcelona)

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    During the last two decades there has been an increase in using dynamic tariffs for billing household electricity consumption. This has questioned the suitability of traditional pricing schemes, such as two-part tariffs, since they contribute to create marked peak and offpeak demands. The aim of this paper is to assess if two-part tariffs are an efficient pricing scheme using Spanish household electricity microdata. An ordered probit model with instrumental variables on the determinants of power level choice and non-paramentric spline regressions on the electricity price distribution will allow us to distinguish between the tariff structure choice and the simultaneous demand decisions. We conclude that electricity consumption and dwellings’ and individuals’ characteristics are key determinants of the fixed charge paid by Spanish households Finally, the results point to the inefficiency of the two-part tariff as those consumers who consume more electricity pay a lower price than the others.

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    File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/CREAP2006-04.pdf
    File Function: First version, 2006
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    File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/CREAP2006-04.pdf
    File Function: Revised version, 2006
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    Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number CREAP2006-04.

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    Length: 29 pages
    Date of creation: Oct 2006
    Date of revision: Oct 2006
    Handle: RePEc:xrp:wpaper:creap2006-04
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    Web page: http://www.pcb.ub.edu/xreapEmail:


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    1. Anna Matas & Josep Lluís Raymond, 2006. "Economic development and changes in car ownership patterns," Working Papers CREAP2006-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Jun 2006.
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