Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost

Vijayamohanan Pillai N.

doi:doi:10.11648/j.sjee.20140201.11

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Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost

Vijayamohanan Pillai N.

Published in Science Journal of Energy Engineering (Volume 2, Issue 1)

Received: 6 November 2013 Published: 20 March 2014

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Abstract

The present paper attempts at a contribution to peak load pricing theory. The general result from the traditional theory that charges the off peak consumers marginal operating costs only and the peak users marginal operating plus marginal capacity costs has already been called into question in the literature. This paper shows that if the off-peak period output is explicitly expressed in terms of capacity utilisation of that period, the result will be an off-peak price including a fraction of the capacity cost in proportion to its significance relative to total utilisation.

Published in	Science Journal of Energy Engineering (Volume 2, Issue 1)
DOI	10.11648/j.sjee.20140201.11
Page(s)	1-7
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2014. Published by Science Publishing Group

Keywords

Peak, Off-Peak, Pricing, Capacity Utilisation

References

[1]	Boiteux, Marcel, (1949) ‘Peak Load Pricing’, translated in Journal of Business, April 1960, 33: 157-79; reprinted in Nelson, James R. (ed.) Marginal Cost Pricing in Practice, Prentice-Hall Inc., Englewood Cliffs, N. J. 1964.
[2]	Boiteux, Marcel, and Stasi, P. (1964) ‘The Determination of Costs of Expansion of an Interconnected System of Production and distribution of Electricity’, in Nelson, J. R. (ed.) Marginal Cost Pricing in Theory and Practice, Prentice-Hall Inc., Englewood Cliffs, N. J.
[3]	Chicchetti, C. W., Gillen, W. and Smolensky, P. (1977) The Marginal Cost and Pricing of Electricity, Ballinger Publishing Co., Cambridge.
[4]	Crew, M. A. and Kleindorfer, P. R. (1971) ‘Marshall and Turvey on Peak Load or Joint Product Pricing’, Journal of Political Economy, 79 (6), Noveember – December: 1369-77.
[5]	Crew, M. A. and Kleindorfer, P. R. (1975) ‘Optimal Plant Mix in Peak Load Pricing’, Scottish Journal of Political Economy, 22 (3), November: 277-91.
[6]	Crew, M. A. and Kleindorfer, P. R. (1976) ‘Peak Load Pricing with a Diverse Technology’, The Bell Journal of Economics, 7 (1), Spring: 207-31.
[7]	Crew, M. A. and Kleindorfer, P. R. (1979) Public Utility Economics, Macmillan, London.
[8]	Davidson, Ralph K. (1955) Price Discrimination in Selling Gas and Electricity, Johns Hopkins Press, Baltimore.
[9]	DeSalvia, D. N. (1969) ‘An Application of Peak Load pricing’, Journal of Business, October: 458-76.
[10]	Doran, John J., et al., (1973) Electric Utility Cost Allocation Manual, National Association of Regulatory Utility Commissioners, Washington D.C.
[11]	Hirshleifer, Jack (1958) ‘Peak Loads and Efficient Pricing: Comment’, Quarterly Journal Of Economics, 72: 451- 62.
[12]	Joskow, Paul L. (1976) ‘Contributions to the Theory of Marginal Cost Pricing’, The Bell Journal of Economics, 7 (1), Spring: 197-206.
[13]	Panzar, John C. (1976) ‘A Neo-Classical Approach to Peak Load Pricing’, The Bell Journal of Economics, 7 (1), Spring: 521-530.
[14]	Pillai, N. Vijayamohanan (2001) Electricity Demand Analysis and Forecasting – the Tradition is Questioned! Working Paper No. 312, February, Centre for Development Studies, Thiruvananthapuram.
[15]	Pillai, N. Vijayamohanan (2002) ‘Power Sector Reforms in Kerala’, invited paper presented in a special session of the Indian Economic Association 85th Annual Conference in Thiruvananthapuram on 28th December, 2002.
[16]	Pressman, I. (1970) ‘A Mathematical Formulation of the Peak-Load Pricing Problem’, Bell Journal of Economics and Management Science, 1 (2), Autumn: 304-26.
[17]	Steiner, P. O., (1957) ‘Peak Loads and Efficient Pricing’, Quarterly Journal of Economics, 71, November: 585-610.
[18]	Turvey, Ralph (1968) ‘Peak Load Pricing’, Journal of Political Economy, 76, February: 101-13
[19]	Turvey, Ralph (1969) ‘Marginal Cost’, Economic Journal, 79, June: 282-99.
[20]	Weintraub, Sidney (1970) ‘On Off-Peak Pricing: An Alternative Solution’, Kyklos, 23 (3): 501-518.
[21]	Wenders, John T. (1976) ‘Peak Load Pricing in the Electric Utility Industry’, The Bell Journal of Economics, 7 (1), Spring: 232-41.
[22]	Williamson, Oliver E. (1966) ‘Peak Load Pricing and Optimal Capacity under Indivisibility Constraints’, American Economic Review, 56, September: 810-27.
[23]	Williamson, Oliver E. (1974) ‘Peak Load Pricing: Some Further Remarks’, The Bell Journal of Economics and Management Science, 5 (1), Spring: 223-28.

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Vijayamohanan Pillai N. (2014). Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost. Science Journal of Energy Engineering, 2(1), 1-7. https://doi.org/10.11648/j.sjee.20140201.11

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ACS Style

Vijayamohanan Pillai N. Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost. Sci. J. Energy Eng. 2014, 2(1), 1-7. doi: 10.11648/j.sjee.20140201.11

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AMA Style

Vijayamohanan Pillai N. Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost. Sci J Energy Eng. 2014;2(1):1-7. doi: 10.11648/j.sjee.20140201.11

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@article{10.11648/j.sjee.20140201.11,
  author = {Vijayamohanan Pillai N.},
  title = {Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost},
  journal = {Science Journal of Energy Engineering},
  volume = {2},
  number = {1},
  pages = {1-7},
  doi = {10.11648/j.sjee.20140201.11},
  url = {https://doi.org/10.11648/j.sjee.20140201.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjee.20140201.11},
  abstract = {The present paper attempts at a contribution to peak load pricing theory. The general result from the traditional theory that charges the off peak consumers marginal operating costs only and the peak users marginal operating plus marginal capacity costs has already been called into question in the literature. This paper shows that if the off-peak period output is explicitly expressed in terms of capacity utilisation of that period, the result will be an off-peak price including a fraction of the capacity cost in proportion to its significance relative to total utilisation.},
 year = {2014}
}

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TY  - JOUR
T1  - Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost
AU  - Vijayamohanan Pillai N.
Y1  - 2014/03/20
PY  - 2014
N1  - https://doi.org/10.11648/j.sjee.20140201.11
DO  - 10.11648/j.sjee.20140201.11
T2  - Science Journal of Energy Engineering
JF  - Science Journal of Energy Engineering
JO  - Science Journal of Energy Engineering
SP  - 1
EP  - 7
PB  - Science Publishing Group
SN  - 2376-8126
UR  - https://doi.org/10.11648/j.sjee.20140201.11
AB  - The present paper attempts at a contribution to peak load pricing theory. The general result from the traditional theory that charges the off peak consumers marginal operating costs only and the peak users marginal operating plus marginal capacity costs has already been called into question in the literature. This paper shows that if the off-peak period output is explicitly expressed in terms of capacity utilisation of that period, the result will be an off-peak price including a fraction of the capacity cost in proportion to its significance relative to total utilisation.
VL  - 2
IS  - 1
ER  -

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Author Information

Vijayamohanan Pillai N.

Centre for Development Studies, Thiruvananthapuram - 695011, Kerala, India

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Vijayamohanan Pillai N. (2014). Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost. Science Journal of Energy Engineering, 2(1), 1-7. https://doi.org/10.11648/j.sjee.20140201.11

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ACS Style

Vijayamohanan Pillai N. Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost. Sci. J. Energy Eng. 2014, 2(1), 1-7. doi: 10.11648/j.sjee.20140201.11

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AMA Style

Vijayamohanan Pillai N. Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost. Sci J Energy Eng. 2014;2(1):1-7. doi: 10.11648/j.sjee.20140201.11

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@article{10.11648/j.sjee.20140201.11,
  author = {Vijayamohanan Pillai N.},
  title = {Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost},
  journal = {Science Journal of Energy Engineering},
  volume = {2},
  number = {1},
  pages = {1-7},
  doi = {10.11648/j.sjee.20140201.11},
  url = {https://doi.org/10.11648/j.sjee.20140201.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjee.20140201.11},
  abstract = {The present paper attempts at a contribution to peak load pricing theory. The general result from the traditional theory that charges the off peak consumers marginal operating costs only and the peak users marginal operating plus marginal capacity costs has already been called into question in the literature. This paper shows that if the off-peak period output is explicitly expressed in terms of capacity utilisation of that period, the result will be an off-peak price including a fraction of the capacity cost in proportion to its significance relative to total utilisation.},
 year = {2014}
}

Copy | Download

TY  - JOUR
T1  - Peak Load Pricing with Heterogeneous Technology: The Off-Peakers Too Bear the Capacity Cost
AU  - Vijayamohanan Pillai N.
Y1  - 2014/03/20
PY  - 2014
N1  - https://doi.org/10.11648/j.sjee.20140201.11
DO  - 10.11648/j.sjee.20140201.11
T2  - Science Journal of Energy Engineering
JF  - Science Journal of Energy Engineering
JO  - Science Journal of Energy Engineering
SP  - 1
EP  - 7
PB  - Science Publishing Group
SN  - 2376-8126
UR  - https://doi.org/10.11648/j.sjee.20140201.11
AB  - The present paper attempts at a contribution to peak load pricing theory. The general result from the traditional theory that charges the off peak consumers marginal operating costs only and the peak users marginal operating plus marginal capacity costs has already been called into question in the literature. This paper shows that if the off-peak period output is explicitly expressed in terms of capacity utilisation of that period, the result will be an off-peak price including a fraction of the capacity cost in proportion to its significance relative to total utilisation.
VL  - 2
IS  - 1
ER  -

Copy | Download