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Commercial/Industrial Customer Response to Time-Of-Use Electricity Prices: Some Experimental Results

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  • Dennis J. Aigner
  • Joseph G. Hirschberg

Abstract

This article analyzes a time-of-use pricing experiment involving over 700 small and medium size commercial/industrial firms. Two basic rate structures were implemented: one with time-varying demand (kW) charges and a flat energy (kWh) charge, and the other with time-varying energy charges and a flat kW charge. A small but statistically significant elasticity of substitution between peak and offpeak (kWh) consumption is estimated for the Summer season in the overall sample for firms facing the time-of-use demand rate. A substantially larger response is estimated in the Summer season for the subgroup of "large" firms in the experiment that faced a time-of-use demand rate, and this response translates into a welfare gain that in just the first year more than offsets the additional metering costs involved under mandatory implementation.

Suggested Citation

  • Dennis J. Aigner & Joseph G. Hirschberg, 1985. "Commercial/Industrial Customer Response to Time-Of-Use Electricity Prices: Some Experimental Results," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 341-355, Autumn.
    • Handle: RePEc:rje:randje:v:16:y:1985:i:autumn:p:341-355
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    Cited by:

    1. Zarnikau, J. & Landreth, G. & Hallett, I. & Kumbhakar, S.C., 2007. "Industrial customer response to wholesale prices in the restructured Texas electricity market," Energy, Elsevier, vol. 32(9), pages 1715-1723.
    2. Katrina Jessoe & David Rapson, 2015. "Commercial and Industrial Demand Response Under Mandatory Time-of-Use Electricity Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 397-421, September.
    3. Papineau, Maya, 2017. "Setting the standard? A framework for evaluating the cost-effectiveness of building energy standards," Energy Economics, Elsevier, vol. 64(C), pages 63-76.
    4. Lucinda, Claudio Ribeiro & Anuatti Neto, Francisco, 2014. "Non-linear Demand and Price: An Empirical Analysis of the Brazilian Industrial Electricity Consumption," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 34(2), November.
    5. Mahyar Amirgholy & Hojjat Rezaeestakhruie & Hossain Poorzahedy, 2015. "Multi-objective cordon price design to control long run adverse traffic effects in large urban areas," Netnomics, Springer, vol. 16(1), pages 1-52, August.
    6. Mostafa Baladi, S. & Herriges, Joseph A. & Sweeney, Thomas J., 1998. "Residential response to voluntary time-of-use electricity rates," Resource and Energy Economics, Elsevier, vol. 20(3), pages 225-244, September.
    7. Zhou, Yang & Ma, Rong & Su, Yun & Wu, Libo, 2019. "Too big to change: How heterogeneous firms respond to time-of-use electricity price," China Economic Review, Elsevier, vol. 58(C).
    8. J. G. Hirschberg, 2000. "Modelling time of day substitution using the second moments of demand," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 979-986.
    9. 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.
    10. Zarnikau, Jay & Hallett, Ian, 2008. "Aggregate industrial energy consumer response to wholesale prices in the restructured Texas electricity market," Energy Economics, Elsevier, vol. 30(4), pages 1798-1808, July.

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