The Effects of Rivalry with Price Regulation of Electric Power Generation

Ronald Ray Braeutigam*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This article examines how rivalry between an electric utility and nonutility generators (NUGs) affects electricity prices, market structure and welfare. If a utility cannot break even financially when outputs are priced at marginal cost, then the Ramsey optimal price paid by a utility purchasing electricity from a NUG should be below avoided cost, in contrast to the requirements of PURPA. The analysis also compares FDC, Residual and Ramsey prices for a utility's electricity sales. It illustrates how FDC prices may force a utility to exit relatively competitive business markets, eliminating any benefits of economies of scope from serving both business and residential customers.

Original languageEnglish (US)
Pages (from-to)119-137
Number of pages19
JournalJournal of Regulatory Economics
Volume11
Issue number2
DOIs
StatePublished - Jan 1 1997

ASJC Scopus subject areas

  • Economics and Econometrics

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