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The Redistributional Impact of Nonlinear Electricity Pricing

Severin Borenstein ()

American Economic Journal: Economic Policy, 2012, vol. 4, issue 3, 56-90

Abstract: Electricity regulators often mandate increasing-block pricing (IBP)—i.e., marginal price increases with the customer's average daily usage—to protect low-income households from rising costs. IBP has no cost basis, raising a classic conflict between efficiency and distributional goals. Combining household-level utility billing data with census data on income, I find that IBP in California results in modest wealth redistribution, but creates substantial deadweight loss relative to the transfers. I also show that a common approach to studying income distribution effects by using median household income within census block groups may be misleading. (JEL D31, L11, L51, L94, L98, Q41, Q48)

JEL-codes: D31 L11 L51 L94 L98 Q41 Q48 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/pol.4.3.56
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Working Paper: The Redistributional Impact of Non-linear Electricity Pricing (2010) Downloads
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Handle: RePEc:aea:aejpol:v:4:y:2012:i:3:p:56-90