8. Conclusion

8.1 Review of electricity pricing from a monopoly perspective

Utility rates have several functions:

• generate revenue to at least cover current expenses and finance future activities, i.e. secure the company's future;

• steer demand in a direction that benefits the community.

From a theoretical point of view, the probability is low that the second function, provided by selling at long-run marginal cost, is compatible with the first, provided by the accounting level. However, it is possible to ensure their coincidence by working on the pricing structure to maintain the effectiveness of the price signal. In practice, this is achieved by homothetic recalibration.

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