Public utility pricing under risk: the case of self-rationing

Abstract

A framework of optimal pricing decisions combined with simple load management is designed for a public utility self-rationing strategy that will optimize prices under risk and improve on other schemes in the literature. This approach has the advantages of not resorting to restrictive assumptions, allows the firm to accomplish solvency without relying on additional schemes, avoids the difficulty of excess demand, and requires minimum information about consumer preferences. The authors recommend further research that includes multiple periods, analyzes more flexible and more sophisticated techniques, and that can be extended to cover peak-load pricing. 15 references. (DCK)