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Rent Dissipation through Electricity Prices of Publicly Owned Utilities

Author

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  • Jean-Thomas Bernard
  • Michel Roland
Abstract
A public-choice model is presented in order to explain the fact that publicly owned electricity utilities rarely price at marginal cost in practice. It is shown that if (1) government revenues are raised through proportional taxes, (2) median income is less than mean income, and (3) the share of a consumer's spending on electricity decreases with income, then the price resulting from a majority rule and universal voting is below marginal cost. The determination of a fixed subscription fee is also considered. Empirical evidence of the authors' results is obtained from pricing and consumption data for Hydro-Quebec.

Suggested Citation

  • Jean-Thomas Bernard & Michel Roland, 1997. "Rent Dissipation through Electricity Prices of Publicly Owned Utilities," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1204-1219, November.
    • Handle: RePEc:cje:issued:v:30:y:1997:i:4:p:1204-19
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    Cited by:

    1. Bernard, Jean-Thomas & Guertin, Chantal, 2000. "Nodal Pricing and Transmissions Losses. An Application to a Hydroelectric Power System," Cahiers de recherche 0007, GREEN.
    2. Bernard, Jean-Thomas, 2014. "La tarification de l'électricité: un sujet négligé lors des débats sur la nationalisation en 1962," Working Papers 169870, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
    3. Mirnezami, Seyed Reza, 2014. "Electricity inequality in Canada: Should pricing reforms eliminate subsidies to encourage efficient usage?," Utilities Policy, Elsevier, vol. 31(C), pages 36-43.
    4. Cetin, Tamer & Oguz, Fuat, 2007. "The politics of regulation in the Turkish electricity market," Energy Policy, Elsevier, vol. 35(3), pages 1761-1770, March.
    5. Bernard, Jean-Thomas, 1999. "Le marché québécois de l’électricité : rétrospective et voies de l’avenir," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(4), pages 673-694, décembre.
    6. C. Robert Clark & Andrew Leach, 2007. "The Potential for Electricity Market Restructuring in Quebec," Canadian Public Policy, University of Toronto Press, vol. 33(1), pages 1-20, March.
    7. Antweiler, Werner, 2016. "Cross-border trade in electricity," Journal of International Economics, Elsevier, vol. 101(C), pages 42-51.
    8. Pierre-Olivier Pineau, 2008. "Electricity Subsidies in Low-Cost Jurisdictions: The Case of British Columbia," Canadian Public Policy, University of Toronto Press, vol. 34(3), pages 379-394, September.

    More about this item

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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