Applied Microeconomics Seminar: Meredith Fowlie
Meredith Fowlie
Berkeley
“Designing Electricity Rates for An Equitable Energy Transition”
with Severin Borenstein and James Sallee
Abstract: We examine the causes and distributional consequences of California’s high residential electricity prices. We first estimate the social marginal cost (SMC) of electricity consumption in California and show how regulated retail prices charged by electric utilities exceed this SMC by two to three times. We find that California’s electricity prices are high because nearly all fixed costs are recovered through volumetric prices, because of subsidies for low-income households and customers with rooftop solar, and because rates are used to fund objectives not directly related to the provision of electricity. These high and rising prices can undermine efforts to decarbonize transportation and buildings through electrification, an emerging national priority. Moreover, we show that California’s rate structure is highly regressive. We discuss the viability of alternative ways of recovering the costs of the electricity system that are more efficient and more equitable, with a focus on the creation of income-based monthly fixed charges on electricity bills.
*The seminar will be held online via Zoom. The zoom links for all seminars will be sent out to those on the GCER mailing list weekly. If you wish to be added to the list or attend this particular seminar, please contact the organizer, Prof. Mary Ann Bronson, mb1828@georgetown.edu .