Major Reforms in Electricity Pricing: Evidence from a Quasi-Experiment

Xavier Labandeira, Jose Labeaga and Jordi Teixido

The Economic Journal, 2022, vol. 132, issue 644, 1517-1541

Abstract: The global energy mix and cost structure of the power industry are experiencing a redefinition. Many countries are revamping electricity-pricing systems to guarantee fixed-cost recovery, often by raising the fixed charge of two-part tariff schemes. However, a key assumption of two-part tariff schemes and associated fixed-cost recoveries is that consumers discriminate fixed from marginal costs. We conduct a quasi-experiment with data from a major electricity price reform recently implemented in Spain and find robust evidence indicating that consumers fail to distinguish between fixed and marginal costs. As a result, policymakers are not achieving the goal of cost recovery.

Date: 2022
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Working Paper: Major Reforms in Electricity Pricing: Evidence from a Quasi-Experiment (2018)
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