Electricity restructuring and the relationship between fuel costs and electricity prices for industrial and residential customers

Ohler, Adrienne; Mohammadi, Hassan; Loomis, David G.

doi:10.1016/j.enpol.2020.111559

Cited by 16 publications

(14 citation statements)

References 25 publications

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“…Knittel et al (2019) find that electric power producers were more responsive to fuel prices in vertically integrated markets than in restructured markets but does not conduct similar tests for prices paid by customers. Results from Ohler et al (2020), on the other hand, do not support the view that restructuring increased the integration between input costs and electricity prices. Hartley, Medlock & Jankovska (2019) utilize bill data from Texas finding that residential customers benefited from retail choice and note that these benefits were likely facilitated by the fall in natural gas prices that occurred post restructuring in Texas.…”

Section: Cross-subsidization Across Customer Classesmentioning

confidence: 72%

Section: Introductionmentioning

confidence: 72%

“…Thus, the extent to which market restructuring has increased the response of electricity prices to fuel costs is another empirical question. A number of studies have investigated fuel costs pass through to retail rates (Whitworth and Zarnikau, 2006; Knittel et al 2019; Ohler et al 2020). Also pertinent to our empirical analysis, while theory suggests that the marginal cost will converge to average cost in the long-run with COS regulation, during periods in which these two costs diverge, political sentiment might tilt towards whichever regime (COS or restructuring) might offer the lowest price at that time (Borenstein & Bushnell, 2015).…”

Section: Table A1mentioning

confidence: 99%

“…The extent to which retail market restructuring has increased the response of electricity prices to fuel costs is the third empirical question addressed in this research. A number of studies have investigated fuel costs pass through to retail rates, finding mixed results (Whitworth and Zarnikau, 2006; Knittel et al 2019; Ohler et al 2020). 13…”

Section: Introductionmentioning

confidence: 99%

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Retail Electricity Market Restructuring and Retail Rates

Rose¹,

Tarufelli²,

Upton³

2024

The Energy Journal

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Prior to the 1990s, all U.S. states used a "cost of service (COS)" regulation regime in which investor-owned utilities were allowed to recover prudently incurred costs plus a rate of return on capital expenditures, and retail customers were unable to choose their electricity supplier. From 1996-2000, multiple states passed retail electricity market "restructuring." This empirical research examines the effect of retail restructuring on electricity prices to final consumers. We find that rates increased in restructured states relative to plausible counterfactuals in the years post-restructuring. But by twelve years after retail restructuring, we no longer observe any difference. We investigate plausible mechanisms, finding evidence that retail prices became more responsive to natural gas prices due to retail restructuring, the timing of which coincided with increases in natural gas prices nationally. We also test for whether restructuring had distributional effects across customer classes and find that in the short run residential customers benefited relative to industrial customers during transition periods, but that this difference does not persist into full implementation.

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Section: Cross-subsidization Across Customer Classesmentioning

confidence: 72%

Section: Introductionmentioning

confidence: 72%

Section: Table A1mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Retail Electricity Market Restructuring and Retail Rates

Rose¹,

Tarufelli²,

Upton³

2024

The Energy Journal

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“…Settlement period (day, month, season); Holiday ; Seasonal variations (Lee et al 2020;Aslam et al 2022) Fuel cost is one of the main aspects of electricity generation, and fuel price changes thus have significant effects on spot electricity prices (Ohler et al 2020). At the same time, power demand is closely related to weather factors.…”

Section: Time Effectmentioning

confidence: 99%

Carbon tax vs. carbon market: Which one could better help China’s coal-based electricity industry achieve carbon neutrality?

Song

et al. 2023

Preprint

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This paper aims to investigate which carbon pricing mechanism, carbon tax or carbon market, could better promote the carbon neutrality of China’s coal-based electricity industry that indeed exerts significant impacts on climate change and industrial prosperity. By building a stochastic electricity price model, we reveal the price shock of both carbon tax and carbon market under different carbon pricing goals. Our key empirical results are as follows. First, both carbon tax and carbon market could significantly trigger the price volatility of coal-based electricity industry, while the shock impact of carbon market on such industry’s carbon emission is more significant than that of carbon tax. Second, by both carbon pricing mechanisms, carbon emission could be reduced up to 20%, and a key premise of achieving this goal is keeping carbon price at the level of 100 yuan/ton. Third, the volatility range of electricity price, which is policy-led, could not manifest the incentive impact of economic instruments on carbon emission reduction of coal-based electricity industry. Further, policy allows the upper limit of floating electricity price up to 15%. In general, we straighten out the linkage of carbon pricing tools and coal-based electricity costs, thereby constructing a carbon pricing mechanism for coal-based electricity industry to step into China’s carbon neutrality as soon as possible.

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