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Impact measurement of tariff changes when experimentation is not an option—A case study of Ontario, Canada

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  • Faruqui, Ahmad
  • Sergici, Sanem
  • Lessem, Neil
  • Mountain, Dean

Abstract

This paper presents the first year results of a three-year study that was designed to measure the impact of time-of-use rates in the Canadian province of Ontario. Unlike prior studies, which have analyzed such impacts in an experimental setting featuring the randomized allocation of customers to treatment and control groups, this study deals with a situation where the deployment of time-of-use rates was not experimental in nature. It was part of a full-scale program. By carefully drawing samples across four local distribution companies, we were able to interpret the study as a natural experiment and construct control groups and treatment groups. We used the Addilog model of consumer demand to estimate elasticities of substitution between peak, mid-peak and off-peak periods. The Addilog model includes as a special case the constant elasticity of substitution model that has been widely used in the literature on customer response to time-of-use rates. The estimated elasticities are well behaved and consistent with those found in the literature.

Suggested Citation

  • Faruqui, Ahmad & Sergici, Sanem & Lessem, Neil & Mountain, Dean, 2015. "Impact measurement of tariff changes when experimentation is not an option—A case study of Ontario, Canada," Energy Economics, Elsevier, vol. 52(PA), pages 39-48.
    • Handle: RePEc:eee:eneeco:v:52:y:2015:i:pa:p:39-48
    DOI: 10.1016/j.eneco.2015.09.011
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    References listed on IDEAS

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    1. Sulaima, Mohamad Fani & Dahlan, Nofri Yenita & Yasin, Zuhaila Mat & Rosli, Marlinda Mohd & Omar, Zulkiflee & Hassan, Mohammad Yusri, 2019. "A review of electricity pricing in peninsular Malaysia: Empirical investigation about the appropriateness of Enhanced Time of Use (ETOU) electricity tariff," Renewable and Sustainable Energy Reviews, Elsevier, vol. 110(C), pages 348-367.
    2. Y, Kiguchi & Y, Heo & M, Weeks & R, Choudhary, 2019. "Predicting intra-day load profiles under time-of-use tariffs using smart meter data," Energy, Elsevier, vol. 173(C), pages 959-970.
    3. Vaughan, Jim & Doumen, Sjoerd C. & Kok, Koen, 2023. "Empowering tomorrow, controlling today: A multi-criteria assessment of distribution grid tariff designs," Applied Energy, Elsevier, vol. 341(C).
    4. Yueming Qiu & Loren Kirkeide & Yi David Wang, 2018. "Effects of Voluntary Time-of-Use Pricing on Summer Electricity Usage of Business Customers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 417-440, February.
    5. Jang, Heesun & Moon, Seongman & Kim, Jihyo, 2024. "Effects of time-of-use pricing for residential customers and wholesale market consequences in South Korea," Energy Economics, Elsevier, vol. 134(C).
    6. Joshua Blonz & Karen Palmer & Casey J. Wichman & Derek C. Wietelman, 2025. "Smart Thermostats, Automation, and Time-Varying Prices," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 90-125, January.
    7. Nijhuis, M. & Gibescu, M. & Cobben, J.F.G., 2017. "Analysis of reflectivity & predictability of electricity network tariff structures for household consumers," Energy Policy, Elsevier, vol. 109(C), pages 631-641.
    8. Walsh, Darragh & Malaguzzi Valeri, Laura & Di Cosmo, Valeria, 2016. "Strategic bidding, wind ownership and regulation in a decentralised electricity market," MPRA Paper 71502, University Library of Munich, Germany.

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    More about this item

    Keywords

    Time-of-use rates; Ontario; Canada; Electricity pricing; Impact evaluation; Energy policy; Customer response;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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