 Revenue Decoupling for Electric Utilities: Impacts on Prices and WelfareArlan Brucal () and Nori Tarui No 201814, Working Papers from University of Hawaii at Manoa, Department of Economics Abstract: Under traditional (cost-of-service) electric utility regulation, regulated utilities may not recover their fixed costs when their sales are lower than expected. Revenue decoupling (RD) is a mechanism that allows price adjustments so that the regulated utility recovers its required revenue. This paper investigates the welfare and distributional impacts of RD. Theoretically, we find that the excess burden of subsidies for distributed generation is larger with RD than without. Contrary to how RD is specified on dockets in many states, electricity prices appear to demonstrate downward rigidity, while statistically significant upward adjustments on average are observed across utilities that experienced decoupling. We also find empirically that RD has generated negative welfare effects in most states even if we consider the social marginal costs of electricity generation given different energy mix across regional markets. Keywords: utility regulation; decoupling; electricity sector (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hai:wpaper:201814 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Working Papers from University of Hawaii at Manoa, Department of Economics Contact information at EDIRC. |
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