Class prices for gas and electricity

Classification of gas and electric customers and application of different rate schedules to these customer classes have been frequent sources of controversy between public-utility producer and consumer interests. Application of monopoly-pricing analysis, where these are probable differences of demand elasticity among such consumer groups, reveals a basis for discriminatory pricing to maximize profits when regulation is assumed to be non-existent or when regulation is ineffective. Though a similar variation in costs of service sometimes provides a defense for such pricing, precise determination of these costs in a joint-cost situation is impossible; and sometimes it seems that other factors than costs of service explain the differences in these class prices. Even though utility regulation were more effective than it now is, elimination of all returns in excess of the allowable "fair" return may be a questionable regulatory policy. Excercise of regulator's judgement seems necessary in division among customer classes of an ordered reduction of a company's revenue.