Industry Benchmark Division
Bureau of Economic Analysis
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Institutional Affiliation: Bureau of Economic Analysis
NBER Working Papers and Publications
|February 2008||Electricity Pricing to U.S. Manufacturing Plants, 1963-2000|
with Steven J. Davis, Cheryl Grim, John Haltiwanger: w13778
We develop a large customer-level database to study electricity pricing to U.S. manufacturing plants from 1963 to 2000. We document tremendous dispersion in price per kWh, trace that dispersion to quantity discounts and spatial differentials, estimate the role of cost factors in quantity discounts, and test whether marginal price schedules conform to marginal cost and Ramsey pricing conditions. Our cost analysis and pricing tests rely on a novel empirical approach that exploits utility-level differences in the customer size distribution to estimate how supply costs vary with purchase quantity.
The results reveal that annual supply costs per kWh fall by more than half in moving from smaller to bigger purchasers, providing a clear cost-based rationale for quantity discounts. Befor...