Peak load pricing with heterogeneous technology: The off-peakers too bear the capacity cost

摘要

The present paper attempts at a contribution to peak load pricing theory. The general result from the traditional theory that charges the off peak consumers marginal operating costs only and the peak users marginal operating plus marginal capacity costs has already been called into question in the literature. This paper shows that if the off-peak period output is explicitly expressed in terms of capacity utilisation of that period, the result will be an off-peak price including a fraction of the capacity cost in proportion to its significance relative to total utilisation.