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

Xavier Labandeira (), Jose Labeaga and Jordi Teixido
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Xavier Labandeira: Rede, Universidade de Vigo and Economics for Energy

No 201828, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: The global energy mix is being redefined, and with it the power industry’s cost structure. In many countries, electricity-pricing systems are being revamped so as to guarantee fixed-cost recovery, often by raising the fixed charge of two-part tariff (TPT) schemes. However, consumer misperception of TPTs threatens to undermine the policy’s outcome and puts the sector’s much-needed transformation in jeopardy. We conduct a quasi-experiment with data from a major electricity price reform recently implemented in Spain and find robust evidence that consumers are failing to distinguish between fixed and marginal costs. As a result, the policy goal of cost recovery is not being achieved.

Keywords: Fixed-cost recovery; Residential electricity demand; Renewables; quasi-experiment; two-part tariff. JEL classification:C99; D12; L11; L94; L98; Q41; Q48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-reg
Date: 2018-12, Revised 2018-12
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