Shock Value: Bill Smoothing and Energy Price Pass-Through
Energy prices are volatile, affect every consumer and industry in the economy, and are impacted by regulations including gas taxes and carbon pricing. Like the pass-through literature in general, the growing energy pass-through literature focuses on marginal prices. However, multi-part pricing is co...
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| Format: | Article |
| Language: | English |
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Blackwell Publishing Ltd
2019
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| Online Access: | View Fulltext in Publisher |
| Summary: | Energy prices are volatile, affect every consumer and industry in the economy, and are impacted by regulations including gas taxes and carbon pricing. Like the pass-through literature in general, the growing energy pass-through literature focuses on marginal prices. However, multi-part pricing is common in energy retail pricing. I examine the retail natural gas market, showing that while marginal prices exhibit full or nearly full pass-through, fixed fees exhibit negative pass-through. This is consistent with the stated desire by utilities and regulators to prevent ‘bill shock.’ I discuss implications for pass-through estimation and for proposed alternative pricing structures for regulated utilities. © 2019 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd |
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| ISBN: | 00221821 (ISSN) |
| DOI: | 10.1111/joie.12200 |