Subsidy Cut and Its Effect on Tehran Electricity Company: A System Dynamics Approach

摘要

In recent years, subsidy payment has been made a main challenge for governments due to growth of population and energy price in global markets. Targeted subsidy plan has been implemented in Iran since last year, and this article discusses its effects on costs and revenues of Tehran Electricity Company as one of the major subdivisions of Iran's electricity industry. In the new system, structural changes have been made in electricity tariffs, so it is not possible to predict the future trends in electricity consumption only based on the past consumptions. In order to model the decision making structure in the recent conditions, a system dynamics method is applied. In addition to modeling the revenue and cost system of the company, the division of production, i.e. power plant is elaborated by means of state-flow diagram. That is because the company cannot affect consumer's behavior directly and is only able to control the costs for mitigating the problems of instabilities. Based on the obtained results, not only the company faces increased costs in production sector at the beginning of plan implementation, but also the increase will be more significant in the years after the fifth year of plan implementation.