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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Laura Fernàndez-Villadangos, 2006. "Are two-part tariffs efficient when consumers plan ahead?: An empirical study," Working Papers CREAP2006-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2006.
    • Handle: RePEc:xrp:wpaper:creap2006-04
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    File URL: http://www.xreap.cat/RePEc/xrp/pdf/CREAP2006-04.pdf
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    File URL: http://www.xreap.cat/RePEc/xrp/pdf/CREAP2006-04.pdf
    File Function: Revised version, 2006
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    References listed on IDEAS

    as
    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.
    2. Soren Leth-Petersen, 2002. "Micro Econometric Modelling of Household Energy Use: Testing for Dependence between Demand for Electricity and Natural Gas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 57-84.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Anna Matas Prats & José Luís Raymond Bara & José Luís Raymond Bara, 2008. "Job accessibility and employment probability," Working Papers XREAP2008-05, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2008.
    2. Christian Durán Weitkamp & Mónica Martín Bofarull & Federico Pablo Martí, 2008. "Economic effects of road accessibility in the Pyrenees: user perspective," Working Papers XREAP2008-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Jan 2008.

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    More about this item

    Keywords

    Regulation; electricity; consumer behavior: empirical analysis.;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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