Efficient Self-Rationing of Electricity Revisited.

In a recent issue of this journal, Woo (1990) suggests a mechanism to improve on a pricing scheme initially proposed by Panzar and Sibley (1978). In this paper, we analyze Woo's mechanism. Woo claims that by activating rationing fuses only when total demand reaches system capacity, the problem of untimely curtailments is avoided. We show that this is true only if all consumers reach their subscribed capacity at the same temperature, which will not occur in general, and clarify the implications of this assumption on Woo's improvement of the Panzar-Sibley scheme. A slightly more complex self-rationing mechanism, which addresses the problems that we point out, is suggested. Copyright 1993 by Kluwer Academic Publishers