The theory and practice of electricity pricing policy : alternatives for the State Electricity Commission of Victoria

Abstract

This study endeavours to show how the social and political influences of the environment within which an electricity undertaking operates can be incorporated into an economically efficient pricing policy. We have taken one undertaking, the State Electricity Commission of Victoria (SECV), and closely examined the outside influences on its pricing policy. We then show how these influences can be included in a pricing system which reflects costs more accurately than does the existing system. The study is in three parts. In Part A we discuss the theory of Peak Load Pricing and reconcile this theory with the work done on optimizing welfare under a budget constraint. Part B is devoted to an examination of the social and political factors which influence the SECV's pricing policy. In Part C, the final two chapters, we explain the SECV's present pricing policy and present an alternative which retains all of the existing outside influences explained in Part B while reflecting the economic costs of supply.