Substitution between Bundled and Unbundled Products after Deregulation in Electricity Generation

Keith Berry ()
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Keith Berry: Department of Economics and Business, Hendrix College

Eastern Economic Journal, 2000, vol. 26, issue 4, 455-468

Abstract: With partial electric utility deregulation, regulators will continue to regulate transmission and distribution (T&D) rates, while generation prices are unregulated and stochastic. Consumers will migrate between bundled and unbundled rate classes depending on individual rates of trade-off between generation price and generation price variance. In the linear pricing case, with large variance and increasing returns to scale, the unbundled class should have the lower T&D price. In a non-linear (two-part rates) stochastic model, the per unit rates of both bundled and unbundled classes should be set less than marginal cost.

Keywords: Deregulation; Electricity (search for similar items in EconPapers)
JEL-codes: L51 L94 L98 (search for similar items in EconPapers)
Date: 2000
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