ABSTRACT
The underlying theoretical rationale for peak load pricing of electricity based on marginal cost principles has been part of the economics literature since the early 1950s. Regulatory commissions searching for regulatory reforms and a consortium of economists and environmentalists with a reform proposal dealing with at least some of the concerns of the regulators have not guaranteed any rapid movement toward the implementation of the reform proposals. The receptive hearing that the proponents of rate structure reform have received has not been because commissions suddenly embraced the principles of microeconomic theory. The final event that helped move the system toward rate structure as well as more general reform was the Arab oil embargo and the rapid rise in oil prices that followed it. Associated energy crises led to a reexamination of a wide range of structural and behavioral issues in all energy industries.
