Regressivity of electricity pricing based on marginal cost

The impact that long-term marginal cost pricing of electricity would have on Quebec residential customers was investigated. The main conclusion was that such a practice would result in price increases ranging from 18% to 28%, regardless of any adjustment of consumption to price. Hydro-Quebec's current pricing policy was considered by some as regressive with respect to income, and that it would be made even more regressive by the introduction of marginal cost pricing. It was argued that since the fixed monthly charge is regressive by nature, it was within the government's power to correct this negative effect on income distribution associated with marginal cost pricing by lowering the fixed monthly charge. According to these authors, the regressivity argument used to justify the current average cost pricing formula was considered weak. 19 refs., 5 tabs