Shock Value: Bill Smoothing and Energy Price Pass-Through

Energy prices are volatile, affect every consumer and industry in the economy, and are impacted by regulations including gas taxes and carbon pricing. Like the pass-through literature in general, the growing energy pass-through literature focuses on marginal prices. However, multi-part pricing is common in energy retail pricing. I examine the retail natural gas market, showing that while marginal prices exhibit full or nearly full pass-through, fixed fees exhibit negative pass-through. This is consistent with the stated desire by utilities and regulators to prevent "bill shock." I discuss implications for pass-through estimation and for proposed alternative pricing structures for regulated utilities.