Costs and Benefits of Residential Time-of-Use Metering

Huettner, David A.; Kasulis, Jack J.; Dikeman, Neil

doi:10.5547/issn0195-6574-ej-vol3-no3-6

The Energy Journal

1982

DOI: 10.5547/issn0195-6574-ej-vol3-no3-6

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Costs and Benefits of Residential Time-of-Use Metering

David A. Huettner¹,

Jack J. Kasulis²,

Neil Dikeman³

Abstract: During the past few years interest in time-of-day (TOD) pricing has grown in the electric utility industry. Federal regulations, par- ticularly the Public Utility Regulatory Policy Act (PURPA), plant licensing problems, and the extremely high cost of new utility plants along with regulatory commission unwillingness to pass on higher costs to consumers have all played a part in this process. As the results of various TOD experiments have become available, interest has naturally turned to assessing costs and ben… Show more

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Cited by 8 publications

References 6 publications

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Peak-load pricing with continuous and interdependent demand

Burness

Patrick

1991

J Regul Econ

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Issues concerning time-of-use (TOU) pricing with continuous and interdependent demand are examined in a context where increasing marginal costs of production, as opposed to capacity constraints, provide the major incentive for flattening the load curve. The analysis develops the underlying consumer preferences sufficient to insure a continuously varying load curve and generalizes previous considerations of the peak load pricing problem by simultaneously considering continuous and interdependent demand in determining optimal prices and pridng period lengths. A profit incentive for TOU pricing as a form of price discrimination is revealed, which is tempered as substitution across pricing periods allows limited intertemporal arbitrage. The profit incentive leads a price-regulated firm, ceteris paribus, to choose a peak pricing period longer than the social optimum.The theory of peak-load pricing, as developed by Marcel Boiteux (1949;), Peter Steiner (1957), Oliver WiUiamson (1966, and others, has focused on normative rules for pricing a public utility's nonstorable service subject to periodic demand. The pricing decision is relatively straightforward in these models as a result of the following assumptions: (a) demand is constant within pricing periods; (b) demand in one period is independent of demand in another; (c) production takes place under constant marginal costs; 1 and (d) the length and number of pricing periods are exogenously given.Collectively these assumptions imply that "optimal" peak price is set equal to the sum of marginal operating and capacity costs, and off-peak price is set equal to marginal operating cost. While the contributions to the peak-load pricing literature have been significant, questions arise concerning the manner in which extant pricing rules might be altered when one allows for (a') continuously varying demand (load) over time;Co') the possibility of interdel~endeneies between demand at different times; 2 (c') increasing marginal operating costs; and (d') the length and number of pricing periods to be determined

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Peak-load pricing with continuous and interdependent demand

Burness

Patrick

1991

J Regul Econ

View full text Add to dashboard Cite

show abstract

The significance of insignificant results from the Oklahoma time-of-day rate experiment

Huettner

Kasulis

Dikeman

1983

Resources and Energy

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Rate structure effects and regression parameter instability across time-of-use electricity pricing experiments

Patrick

1990

Resources and Energy

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Costs and Benefits of Residential Time-of-Use Metering

Cited by 8 publications

References 6 publications

Peak-load pricing with continuous and interdependent demand

Peak-load pricing with continuous and interdependent demand

The significance of insignificant results from the Oklahoma time-of-day rate experiment

Rate structure effects and regression parameter instability across time-of-use electricity pricing experiments

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