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Strategic Rate Design: The Role of Industrial Tariffs
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Date
1992-04
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Energy Systems Laboratory (http://esl.eslwin.tamu.edu)
Abstract
Strategic rate design refers to the use of deliberate
pricing strategies that alter customer demand in order to
achieve certain strategic objectives. Often the objective is
to defer or eliminate the need for additional generation
capacity-and, to a lesser extent, transmission and
distribution capacity. In the same way that "a penny saved
is a penny earned," one can say that "demand reduced is
capacity acquired."
In some cases, the strategic objective may be something
other than reduction in peak demand, such as promoting the
economic development of a depressed region. In these
cases some increase in peak demand may be tolernted,
especially if the utility is already in an excess-capacity
situation.
Strategic rate design is also a tool to deal with the self-generating
customer. Over the past 14 years, tremendous
growth has occurred in cogeneration capacity in Texas. The
utilities use their rate tariffs strategically to influence the
growth of self-generation.
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Strategic Rate Design