Inverted block or lifeline rates and micro-efficiency in the consumption of electricity

Abstract

Recent evidence indicates that the marginal cost of electricity exceeds average electricity rates. A model is presented in this paper to investigate the conditions under which inverted block or 'lifeline' rates could contribute to minimizing the deadweight loss associated with electricity consumption. Although conditions exist where inverted block rates might aggravate deadweight loss, empirical evidence is presented suggesting that inverted block rates would, in fact, improve the efficiency of electricity consumption. © 1981.