CUSTOMER-CLASS PRICE-DISCRIMINATION BY ELECTRIC UTILITIES
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Despite the concentration on peak-load pricing in public utility pricing theory, electric utilities in the United States have divided consumers by customer type (residential, industrial, commercial) rather than time of use (peak, off-peak) in determining prices. In this paper a theory of customer-class pricing is developed which emphasizes the impact of demand characteristics on optimal prices and the utility's pricing incentives under regulation. It is shown that customer-class demand patterns matter in determining socially optimal prices, and that the rate-of-return regulated utility has an incentive to distort prices to manipulate demand in predictable ways. 1987.