This thesis studies priority pricing in the electricity industry considering consumers' investments which increase the value of electricity consumption. In practice, a monopolistic supplier provides price-reliability menu by observing the consumer's preference effected by consumer investment.
In the first place, supplier is assumed to maximize profit. Then, in most cases, the incentive of consumer investment is removed under priority pricing. But, the regulation on profit of supplier induces pricing not to damage the incentive of consumer investment. Consumer investment. Consumer investment increases the difference of surplus between consumer groups under priority pricing.
However, if supplier maximizes social welfare and does not consider consumer investment, departures from optimal capacity investment occur.