Part Two deals with various types of peak-load pricing problems faced by public utilities. Such problems arise when a utility’s product is economically non-storable and demand fluctuates over time. Under these circumstances non-uniform utilisation of capacity can result. Thus using a ‘peak-load pricing’ policy to discourage consumption in peak periods and encourage off-peak consumption can improve such utilisation. The evaluation of the trade-off between utilisation gains and consumer welfare is the central issue of peak-load pricing theory.
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