Jt. Bernard et M. Roland, Load management programs, cross-subsidies and transaction costs: the case of self-rationing, RES ENER EC, 22(2), 2000, pp. 161-188
Load management programs are used by electric utilities to decrease peak co
nsumption. Although they are generally offered simultaneously with regular
service, economic models of their allocative efficiency are based on the im
plicit assumption that they are the only service available. We present a mo
del in which participation to a particular load management program, called
self-rationing, is optional. We show that, under a break-even constraint, w
elfare-maximizing prices involve a subsidy from the self-rationing program
to regular service whenever peak demand is less elastic than base demand. I
f cross-subsidization is precluded, regular service is viable only if there
exist transaction costs to participate in the self-rationing program. (C)
2000 Elsevier Science B.V. All rights reserved. JEL classification: D45; L5
1.