Lessons to be Learned from the Los Angeles Rate Experiment in Electricity

by Jan Paul Acton, Willard G. Manning, Bridger M. Mitchell

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Abstract

Summarizes the objectives and principal features of the Los Angeles Electricity Rate Study designed and analyzed by RAND. The study is designed to measure and evaluate the effects of peak-load pricing of electricity on residential households. About 1800 households are facing time-of-day or seasonal rates for a 30-month period. If electricity customers have any price responsiveness at all, then introducing peak-load pricing will permit an electric utility to reduce both operating and capacity costs in the long run. The major policy question for U.S. electric utilities, and for the public bodies that regulate their rates, is whether the benefits from introducing peak-load pricing outweigh the added metering and administrative costs of a more complicated rate structure. Published also in J.L. O'Donnell (ed.), Adapting Regulation to Shortages, Curtailment and Inflation, Michigan State University Press.

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