An integrated costing framework for competitive electricity market

Pricing of electricity in an open competitive market is an integrated issue that deals with balance between economics of return and externality costs, comparison of short-run and long-run incentives of investment, and choice of appropriate economic and energy policy tools for reflecting true costs of supply in competitive electricity markets. A costing framework is proposed in the paper to work out the conceptual issues relating to evaluation of the associated externality costs and environmental impacts. Also, the framework serves to identify appropriate economic and policy tools for internalizing the costs and reflect them through various competitive electricity market pricing tools.