The study emphasises the need to re-examine the tariff structure, including the use of subsidies and variable peak-load pricing
, and assess whether it is flexible enough for the private sector to sell electricity to the national grid on a commercially viable basis.
Oren (2003) explains that capacity payments derive from the peak-load pricing theory, so that energy is priced at marginal cost and capacity payments recover fixed costs.
Such payments are rooted in the theory of peak-load pricing, so that energy is priced at marginal cost and a capacity payment is used to recover the fixed capacity cost.
Peak-load pricing principles that hold for hotels hold for electricity as well.
However, the economics of peak-load pricing with a bit of real-world noise could produce patterns like those observed in the studies described above, without necessarily any exercise of market power.
Thus, peak-load pricing will create a series of complicated market-place reactions, and indeterminant transfers of wealth.
Downs admits that these remedies, in addition to being political anathema, do not attack the problem of congestion directly, as peak-load pricing does.
He brought Gordes and another local conservation specialist over there to do energy audits of local businesses and to brief local utility officials on peak-load pricing
and similar strategies.
Also, if there are multiplants, the plants with the highest marginal costs are generally used only during the peak; peak-load pricing
will not only decrease the marginal cost but the capacity (peak demand) cost as well.
Most electric utilities are adopting time-of-day and peak-load pricing
as conservation incentives.
Time-of-use pricing is introduced in Chapter 8, where peak-load pricing
is treated extensively.