MARGINAL COST PRICING FOR UTILITIES: A DIGEST OF THE CALIFORNIA EXPERIENCE

"The California Public Utilities Commission (CPUC) has adopted the policy of using marginal costs as the basis for the pricing of regulated electric services (the "Marginal Cost Pricing Doctrine"). The record of actions taken by the CPUC to translate the doctrine into pragmatic pricing techniques spans 21 years from 1976, when the policy was adopted, to March 1997. Its pricing edicts for regulated electric rates of the three large California utilities-Pacific Gas and Electric Company (PG &E), Southern California Edison Company (SCE or Edison), and San Diego Gas & Electric Company (SDG &E)-are significant incursions into microeconomic price theory. (JEL" D6, B4, N7) Copyright 1999 Western Economic Association International.