Review of Industrial Organization

, Volume 5, Issue 2, pp 13–27 | Cite as

Efficiency in nuclear power pricing

  • Herbert G. ThompsonJr.
  • David R. Kamerschen
  • Albert L. Danielsen
Empirical Studies In Industrial Organization, Southern Economic Association Conference

Abstract

This study investigates whether the rate structure for electric utilities with nuclear and fossil fuel generation is efficient and perhaps equitable. Data were collected on fossil and nuclear steam generation and transmission to estimate costs. Tests were performed to determine if efficient pricing practices were being followed. The results indicate that the marginal cost of nuclear generated power is less than that of power generated from fossil fuel sources. Also, the rate structure for the nuclear utilities is inefficient, with industrial rates significantly higher than first-best or second-best pricing criteria would indicate.

Keywords

Fossil Fuel Marginal Cost Industrial Organization Steam Generation Rate Structure 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Atkinson, S.E., and R. Halvorsen. "Parametric Efficiency Tests, Economies of Scale, and Input Demand in U.S. Electric Power Generation,"International Economic Review, 25 (1984): 647–62.Google Scholar
  2. Bonbright, J.C., A.L. Danielsen, and D.R. Kamerschen.Principles of Public Utility Rates. (Norfolk, VA: Public Utility Reports, 1988).Google Scholar
  3. Christensen, L.R., D. W. Jorgenson, and L.J. Lau. "Conjugate Duality and the Transcendental Logarithmic Production Function (abstract),"Economietrica, 39 (1971): 255–256.Google Scholar
  4. ——, and W. H. Greene. "Economies of Scale in U.S. Electric Power Generation,"Journal of Political Economy, 84 (April 1976): 655–676.CrossRefGoogle Scholar
  5. Cowing, T.G. and V. K. Smith. "The Estimation of a Production Technology: A Survey of Econometric Analysis of Steam Electric Generation,"Land Economics, 54 (February 1978): 156–186.Google Scholar
  6. Diewert, W.E. "Applications of Duality Theory," In M.D. Intriligator & D. A. Kendrick (Eds.).Frontiers of Quantitative Economics. (Amsterdam: North-Holland, 1974).Google Scholar
  7. Energy Information Administration.Monthly Power Plant Report (DOE/EIA - 759). (Washington, D.C.: Department of Energy, 1986).Google Scholar
  8. ——.Historical Plant Cost and Annual Production Expenses for Selected Electric Plants 1985 (DOE/EIA - 0455(85)). (Washington, D.C.: Department of Energy, 1987).Google Scholar
  9. ——.An Analysis of Nuclear Power Plant Operation Costs (DOE/EIA - 0511). (Washington, D.C.: Department of Energy, 1988).Google Scholar
  10. Hayashi, P.M., M. Sevier and J.M. Trapani. "Pricing Efficiency under Rate-of-Return Regulation: Some Empirical Evidence for the Electric Utility Industry,"Southern Economic Journal, 51 (1985): 776–792.Google Scholar
  11. Karlson, S.H. "Multiple-Output Production and Pricing in Electric Utilities,"Southern Economic Journal, 53 (1986): 73–86.Google Scholar
  12. Mount, T.D., D. Chapman and T. J. Tyrell.Electricity Demand in the United States: An Econometric Analysis. (ORNL - NSF - 49). (Oak Ridge, Tennessee: Oak Ridge National Laboratory, 1973).Google Scholar
  13. Naughton, M.C. "The Efficiency and Equity Consequences of Two-Part Tariffs in Electricity Pricing,"The Review of Economics and Statistics, 68 (March 1986): 406–414.Google Scholar
  14. Nelson, R.A. "An Empirical Test of the Ramsey Theory and Stigler-Peltzman Theory of Public Utility Prices,"Economic Inquiry, 20 (1982): 277–290.Google Scholar
  15. Nerlove, M. "Returns to Scale in Electricity Supply," in C. Christ (Ed.),Measurements in Economics. (Stanford, CA: Stanford University Press, 1963), 167–198.Google Scholar
  16. Primeaux, W. J. and R. A. Nelson. "An Examination of Price Discrimination and Internal Subsidization in Electric Utilities,"Southern Economic Journal, 47 (1980): 84–99.Google Scholar
  17. Ramsey, F. R. "A Contribution to the Theory of Taxation,"Economic Journal, 37 (1927): 47–61.Google Scholar
  18. Thompson, H.G., Jr. "An Analysis of Efficiency, Costs, and Pricing in the Nuclear Power Industry." (Unpublished doctoral dissertation, Department of Economics, University of Georgia, 1989).Google Scholar

Copyright information

© Industrial Organization Society 1990

Authors and Affiliations

  • Herbert G. ThompsonJr.
    • 1
  • David R. Kamerschen
    • 1
  • Albert L. Danielsen
    • 1
  1. 1.The University of GeorgiaUSA

Personalised recommendations