Estimation of Electricity Marginal Costs and Application to Pricing

Los Angeles, California
06 November 2013
Hosted By: NERA Economic Consulting

In today's world, with growing emphasis on energy efficiency, intermittent renewable resources, and fast technological progress in metering and communications, many utilities are taking a closer look at their existing electricity rates and options available for demand response. Time-differentiated marginal costs provide the starting point for such analysis, and are also critical when it comes to developing cost-benefit analysis of smart metering deployment. This NERA course, held in Los Angeles on 6-8 November 2013, provided details on best-practice marginal cost estimation and ratemaking. Taught by NERA Vice President Amparo Nieto and Affiliated Consultant Dr. Hethie Parmesano, the course was structured as two separate workshops. Workshop 1, Marginal Costing (6-7 November), provided in-depth discussions of methods to estimate marginal costs, and group exercises. Workshop 2, Marginal Cost Pricing (8 November), provided an overview of the pricing principles, methods for allocating revenue requirements to customer classes, and the steps required to develop a set of efficient, marginal cost-based rates, including demand-response and dynamic rate options.

To learn more about this NERA course, please view the materials in the right-hand column of this page.

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