  The death spiral hypothesis in electric utility represents a positive
feedback phenomenon in which a regulated utility is driven to financial
instability by rising prices and declining demand. We establish conditions for
the existence of death spiral and conditions of stable adoption of distributed
energy resources. We show in particular that linear tariffs always induce death
spiral when the fixed operating cost of the utility rises beyond a certain
threshold. For two-part tariffs with connection and volumetric charges, the
Ramsey pricing that optimizes myopically social welfare subject to the revenue
adequacy constraint induces a stable equilibrium. The Ramsey pricing, however,
inhibits renewable adoption with a high connection charge. In contrast, a
two-part tariff with a small connection charge results in a stable adoption
process with a higher level of renewable adoption and greater long-term total
consumer surplus. Market data are used to illustrate various solar adoption
scenarios.
