Price Discrimination and the Adoption of the Electricity Demand Charge

John Neufeld ()

The Journal of Economic History, 1987, vol. 47, issue 3, 693-709

Abstract: Between 1905 and 1915, as state price regulation became widespread, electric utilities in the United States faced severe competition. The primary source of electricity for industry then was not utilities but self-generation by the user in an “isolated plant.” The demand-charge rate structure first became widespread during this period. The demand-charge rate structure has been interpreted as a misapplication of the peak-load pricing principle, a view which has made its popularity a puzzle. Instead it was adopted as a sophisticated mechanism which institutionalized profit-maximizing price discrimination given the competition from isolated plants.

Date: 1987
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