The Equity and Efficiency Effects of Electricity Network Tariff Reform: Evidence From Ireland

Niall Farrell and Tensay Hadush Meles

The Energy Journal, 2025, vol. 46, issue 5, 1-23

Abstract: We estimate the welfare implications of reforming residential electricity network tariffs to incorporate cost-reflective “Coasian†principles. For an Irish case study, we find that current Distribution Use of System (DUoS) tariffs deviate considerably from those that incorporate cost-reflective principles. In aggregate, positive welfare effects are largely canceled out by negative welfare effects. This results in a relatively small net welfare impact of up to around €33 million. However, there is a regressive distribution of incidence at the household level. Households in the lowest income decile incur losses of up to around €40 per annum, on average, while households in the highest income decile benefit by up to €63 per annum, on average. We show that inefficient DUoS tariffs represent a costly redistribution policy. We demonstrate that it is more efficient to counter the regressive effects through the tax-benefit system. JEL Classification: L94, L98, Q42, Q48, Q51, Q53, Q54, Q55

Keywords: electricity tariffs; distortion; welfare loss; distributional impacts (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:46:y:2025:i:5:p:1-23

DOI: 10.1177/01956574251334363

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