Evaluating the influence of increasing block tariffs in residential gas sector using agent-based computational economics

Abstract

Designing a desirable increasing block tariff for the residential gas retail market has been a challenging task for regulated utilities, especially in China. To deal with such problems, in this paper, we establish an agent-based, computational economics system to provide a formal evaluation of the direct and indirect influences of several issued increasing block tariffs in the residential gas market. Moreover, a comprehensive demand response behaviour model has been improved in term of price elasticity, while still coping with income levels and complex social environment. We also compute and compare the outcomes of several increasing block tariffs with the initial flat tariff by running the system on a test-case using real-world data from a middle-scale gas retail market in Wuhan. The results indicate that there is an appropriate increasing block gas tariff scheme that has greater ability to improve social equity while still ensuring operator revenue and promoting gas conservation. In order to offset the limitations of the proposed increasing block tariffs, the regulator should adopt some complementary measures, such as applying appropriate policies targeting the intended consumers, and allowing large families to obtain extra allowance of volume.