Peak-Load Pricing in Selected European Electric Utilities

by Bridger M. Mitchell, Jan Paul Acton

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Surveys principles of designing electricity rate structures and analyzes how utilities in England, France, Norway, and Sweden have established tariffs based on these principles. In contrast to U.S. rate setting practice, European rates reflect the marginal cost of supplying electricity. The basic rate structures apply to largest consumers and take into consideration both time pattern and costs of generating and transmitting power at high voltages. Distribution costs are incorporated into these tariffs by using charges for a customer's maximum-demand consumption. The maximum-demand charges vary according to relative importance of distributing costs. For residential and other low-voltage consumers, tariffs are simplified to include a single energy charge plus, in several utilities, a charge based on size of residential fuse or circuit breaker. By using peak-load pricing, European utilities more accurately reflect costs of supplying energy and achieve reductions in peak loads of both high-voltage and residential customers.

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