Abstract
This report provides a detailed analysis of methods to quantify the marginal costs of electricity supply. The nine-point criteria used include measurement of marginal costs that are consistent with economic theory, and determination of the applicability of the method and results in regulatory proceedings. The report examines methods which cover a wide range of potential cost-measurement techniques, including linear-programming models of utility systems, production functions, and simple models based on identification of marginal units. These methods were generally found to be unacceptable because they do not calculate marginal costs of a specified demand increment, and do not adequately reflect the utility's planning process. Furthur research is described that will attempt to develop more-acceptable marginal-cost estimates in rate proceedings. 29 references, 21 figures, 28 tables.
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