No abstract

We analyse the production of electricity from n power stations in a dynamic model. Each power station's production of electricity is constrained by the quantity of water available to it (supply constraint) as well as limitations on reservoir capacity (storage constraint). We show that hydro power production can lead to two sources of welfare loss: suboptimal management of water resources and the exercise of market power. A monopolist minimizes the first source of inefficiency, whereas decentralized production in a competitive environment minimizes the second. The decision to introduce competition in hydropower production must account for these two opposite effects. JEL Classification: L11, Q48De´centralisation de la production d'hydroe´lectricite´. Nous analysons la production d'hydroe´lectricite´par n centrales dans un mode`le dynamique. La production de chaque centrale est contrainte par la quantite´d'eau disponible (contrainte d'approvisionnement) et la capacite´du re´servoir (contrainte de stockage). Nous de´montrons que la production hydroe´lectrique peut donner lieu a`deux types d'inefficacite´: la gestion sousoptimale des ressources hydrauliques et l'exercice de pouvoir de marche´. L'entreprise monopolistique minimise la premie`re inefficacite´alors que la production de´centralise´e dans un marche´concurrentiel minimise la deuxie`me. La de´cision d'introduire la concurrence dans la production d'hydroe´lectricite´doit tenir compte de ces deux effets oppose´s.

No abstract

We describe a simple insurance scheme for use in an environment in which consumers of electricity are differentiated by their value of uninterrupted service as well as their location. Location plays a determining role in the model, in that reliability of distribution is allowed to vary throughout the network. Consumers choose a level of compensation for service interruption and pay a premium that depends on this compensation, as well as the distribution reliability at their location. In the event of power shortages, the utility will interrupt consumers according to their selected compensation so as to minimize compensation payments. The premium schedule is designed to induce consumer self-selection which resu •ts in e•icien t rati•ning' i•e•' c•nsumers are interrupted in increasing •rder •f their interrupti•n losses. The tariff has the added feature of inducing consumers to purchase full insurance and thus transfers all of the risk to the utility. It is shown that with proper "tuning" the proposed insurance scheme is Pareto superior to a uniform service charge with random rationing.