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The article examines the two factors affecting electrical rates. The present paper deals mainly with two fundamental questions: (1) the bearing of the time of consumption upon the rate, and (2) the proper influence of quantity taken upon the rate. While the importance of the load factor constitutes the great peculiarity of the electrical rate situation, quantity discounts constitute the most troublesome practical problem. Quantity taken is perhaps more important than load characteristics as the reason for class rates, even where the latter are ostensibly based on load-factor grounds.

The article presents a comment on a previous article New England Power Economics, by Roy G. Poulsen that appeared in the August 1965 issue of the journal Land Economics. According to the author, this article describes prospective improvements in electricity supply and costs in New England and looks forward to the time, not too far in the future, when atomic energy for utility generating plants will be widely used in the Northeast, and New England at long last will have a power source no more costly to the region than to any other part of the nation and its competitive power cost disadvantage will come to an end. The Poulsen paper learns heavily, as of course it must, on statements by utilities and their executives about future plans for larger, more efficient conventional and nuclear regeneration. According to the author, the reason for the present high level of electric rates in New England lies not solely in fuel cost. The fixed costs of operation and maintenance, depreciation, taxes and rate of return as well as the magnitude of the unit investment per customer and per kilowatt must be examined in depth before one can be sure of the reasons for the present situation.

The purpose of the "Investment 85" model is to shed light on the evolution, up to 1985, of the optimal structure of electricity production equipment in France and to outline its geographical distribution by main regions. The model fits into the general pattern of theoretical studies which contribute to the preparation of investment decisions by Electricité de France. It was solved in 1965 and represents the status then current in the application of mathematical programming methods to investment decision problems faced by Electricité de France. A detailed description of the model including the production and consumption features is provided. The various components of the total cost and the constraints are discussed. A treatment of the problem under uncertainty is given and the main results of the model are summarized. In addition the paper contains a historical review of the main stages in the development of the model and its solution. [ABSTRACT FROM AUTHOR]

More than a decade ago Leland Olds pinpointed the problem of private power companies in the cleverly phrased statement, "Rates are high because costs are high because consumption is low because rates are high." Presumably he meant that rates and costs of private power are high relative to those for public power, leading to lower consumption per potential consuming unit in areas serviced by private power. It is the purpose of this paper to elaborate on those aspects of cost and demand which support and enlarge the argument while leading to the same general conclusion. Private power companies have also been disadvantaged relative to public power in obtaining investment funds. First, they have needed to raise equity capital, which requires a greater return than does debt. Public power had no such problem. Government-financed river basin projects had many objectives only one of which was generation of electric power, and general taxpayers bore a large share of construction costs on that account.

The purpose of this article is to demonstrate the applicability of peak load pricing to a typical U.S. electric utility. The article also isolate problems, which will require further investigation if the theory is to be made generally applicable. In addition, it will be argued that existing rate structures do not adequately reflect resource costs and thus result in poor utilization of resources. The firm studied is considered to be typical of privately owned electric utilities in the United States. All cost data are for the year 1963, which was the latest year for which complete information was available when the project was undertaken. Peak-load pricing based on economic principles offers a practical solution to the problem of supplying peak loads. As opposed to uniform rates, it would act to depress peak demands and thereby reduce the total amount of resources, which need be devoted to the industry. In addition, it would stimulate off-peak consumption, thereby allowing more efficient utilization of existing resources. Finally, the rate structure would be more in line with the costs of providing service. Despite initial resistances, which might be encountered, the adoption of peak-load pricing principles would be an important step toward improving the organization of the industry.

The article presents a comment on a previous article by Edwin Fleischmann in response to author's article New England Power Economics that appeared in the August 1965 issue of the journal Land Economics. According to the author, Fleischmann expresses concern about the use of Federal Power Commission (FPC) data to substantiate the argument that New England power costs are higher than in other parts of the country. He quotes the FPC qualification that this presentation of typical electric bills does not include a critical evaluation of many factors, which operate to produce differences in the level of bills. According to the author, it was atomic electric plants as expressed in the Land Economics article that New England electric rates would most significantly bring down his belief. The six new atomic plants under construction or planned for New England by 1972 show utility acceptance of the atomic promise. Furthermore, the growth of the nuclear capacity will have important indirect effects.

The main conclusion from the analysis is that relative price changes are not unambiguously an important determinant of growth in industrial electricity consumption. The chief determinants are growth in output and changes in technology. Taken at face value, the results for the relative price variables suggest that in at least nine out of the sixteen industry groups price elasticity of demand is zero; in a further two it is relatively inelastic; and in only five does there appear to be a marked responsiveness of demand to relative price changes. This, if valid, would seem to have relevance for current developments in the energy economy. It suggests, for example, that quite considerable changes in relative fuel prices would be necessary to offset even partially the effects of growth in industrial output, so that natural-gas discoveries need not, in a time of economic growth, have a significant effect on electricity's share of the industrial energy market. The main conclusion, then, is that electricity demand is highly responsive to changes in output and fuel technology but relatively unresponsive to price. This latter result, however, is a first approximation only, and further research in this area should concentrate on measuring responsiveness to prices actually paid, and also on the derivation of a satisfactory relative cost index for different types of fuel-using equipment. [ABSTRACT FROM AUTHOR]

Scientific electricity rates must cover the minimum necessary supply price of the service as a whole, on the average of fluctuations if not over every single month or year, the service being of the quantity and quality which is worth paying that price for. This is not an eternal necessity, since it is possible to subsidize the service to cheapen it to consumers, and a publicly operated system is in a position to do this quite freely. But the general framework of people's existing scheme of prevailingly private operation requires this, and any immediate program must recognize the fact. This Limit is admittedly elastic. If less is allowed, supply will not at once fall short of demand, but the service may be starved in the long run, and intangible elements of quality sacrificed. Charges for particular services and units of service should be so constructed as to stimulate the maximum economical use of the service, securing to the consumers all uses of service which are worth the additional cost they occasion.