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American Economic Review: Vol. 103 No. 3 (May 2013)

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Efficient Retail Pricing in Electricity and Natural Gas Markets

Article Citation

Puller, Steven L., and Jeremy West. 2013. "Efficient Retail Pricing in Electricity and Natural Gas Markets." American Economic Review, 103(3): 350-55.

DOI: 10.1257/aer.103.3.350

Abstract

A long line of research investigates whether the retail prices of electricity and natural gas send proper signals about scarcity in order to induce efficient consumption. Historically, regulated utilities have not designed tariffs that set marginal prices equal to marginal costs. Currently, some jurisdictions are opening the retail sectors to competition via "retail choice." These new regimes replace imperfect regulation with imperfect competition as the process by which retail tariffs are formed. We discuss the challenges in evaluating the efficiency of tariffs and present evidence of how pricing has changed in markets with retail choice.

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Authors

Puller, Steven L. (TX A&M U)
West, Jeremy (TX A&M U)

JEL Classifications

L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L94: Electric Utilities
L95: Gas Utilities; Pipelines; Water Utilities
L98: Industry Studies: Utilities and Transportation: Government Policy
Q41: Energy: Demand and Supply


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