Demographic impacts of utility rate designs Page: 1 of 13
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Demographic Impacts of Utility Rate Designs' JAN 2 7 1,35
John Butler and David A. Poyer O S T O
Argonne National Laboratory
9700 South Cass Avenue
A90outh IL 60439 The submitted manuscript has been authored
ArgoneIL 6439by a contractor of the U. S. Government
under contract No. W-31-109-ENG-38.
Accordingly, the U. S. Government retains a
nonexclusive, royalty-free license to publish
or reproduce the published form of this
contribution, or allow others. to do so, for
Introduction U. S. Government purposes.
Historically, utility customers have been differentiated into various customer classes, based on their utility
service demand characteristics. In this paper we argue that greater differentiation, if based on value and cost of
service, can be justified on grounds of economic efficiency, and if done properly can also promote economic
equity. This would require a break with traditional customer classifications. With this break, more detailed
information on how and why certain utility services are consumed would be required.
Traditionally, a great deal of effort has been expended in cost of service studies. One purpose has been the
allocation of cost among various customer classes. Unfortunately, little is known about the structure of demand
among sub-classes of consumers. What is generally known comes from demand or load studies which are
invariably conducted along lines of traditionally established customer classifications. It is typically assumed that
demand within these categories is homogeneous or that electric demand differences are insignificant and can be
ignored.
However, there is no reason to assume electricity demand within a broadly defined customer class is
homogeneous and without differences. Furthermore, with a growing emphasis by public utility commissions on
demand-side management and equity, a fuller characterization of electric demand by population group may be
both useful and practical. Unexploited differences in electricity demand are useful in that they provide an
opportunity to achieve greater efficiency through the implementation of non-uniform pricing strategies (see Brown,
and Sibley pp. 162-167) and are practical in that they will promote fairer and more equitable pricing schemes.
In line with the issue of heterogeneity, within the residential customer class, is the differential impact that
different utility rates might have on different population groups. The purpose of this paper is to show how
differences in the pattern of energy use may give rise to disparate economic impacts depending on the rate structure
and how more equitable and efficient outcomes might be achieved if these differences are taken into account. For
this purpose, an analytical model has been developed under the auspices of the U.S. Department of Energy, Office
of Economic Impact and Diversity.
The Energy Policy Socioeconomic Impact Model (EPSIM), an econometric simulation model, has been
developed to assess the economic impact of utility rate designs and demand-side management programs on various
population groups. The following discussion provides a conceptual description of the theoretical underpinnings
associated with the EPSIM.
1 This work was sponsored by the U.S. Department of Energy, Office of Economic Impact and Diversity, under
contract W-31-109-Eng-38.
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Butler, J. & Poyer, D.A. Demographic impacts of utility rate designs, article, December 31, 1994; Illinois. (https://digital.library.unt.edu/ark:/67531/metadc684908/m1/1/: accessed April 19, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.