Shock Value: Bill Smoothing and Energy Price Pass‐Through

Catherine Hausman

Journal of Industrial Economics, 2019, vol. 67, issue 2, 242-278

Abstract: Energy prices are volatile, affect every consumer and industry in the economy, and are impacted by regulations including gas taxes and carbon pricing. Like the pass‐through literature in general, the growing energy pass‐through literature focuses on marginal prices. However, multi‐part pricing is common in energy retail pricing. I examine the retail natural gas market, showing that while marginal prices exhibit full or nearly full pass‐through, fixed fees exhibit negative pass‐through. This is consistent with the stated desire by utilities and regulators to prevent ‘bill shock.’ I discuss implications for pass‐through estimation and for proposed alternative pricing structures for regulated utilities.

Date: 2019
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https://doi.org/10.1111/joie.12200

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Working Paper: Shock Value: Bill Smoothing and Energy Price Pass-Through (2018)
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