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Customer Responsiveness to Real-Time Pricing of Electricity

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  • Jay Zarnikau

Abstract

The success of real-time pricing efforts will depend in large part upon the extent to which electricity consumers are able to alter their consumption patterns in response to the prices quoted by the utility. This article provides some original estimates of hourly price elasticity responses to real-time prices by large industrial energy consumers. An econometric translog cost function methodology was adopted for this purpose. Using data for large industrial users in 1986, the estimated own-price elasticity response averaged -0.09, implying a small but significant reaction to the changing hourly prices. Design deficiencies in the particular rate program studied may have limited customer reaction.

Suggested Citation

  • Jay Zarnikau, 1990. "Customer Responsiveness to Real-Time Pricing of Electricity," The Energy Journal, , vol. 11(4), pages 99-116, October.
    • Handle: RePEc:sae:enejou:v:11:y:1990:i:4:p:99-116
    DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No4-6
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    References listed on IDEAS

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    1. Joseph G. Hirschberg & Dennis J. Aigner, 1983. "An Analysis of Commercial and Industrial Customer Response to Time-of-Use Rates," The Energy Journal, , vol. 4(1_suppl), pages 103-126, June.
    2. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-957, Sept.-Nov.
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    Cited by:

    1. Robert H. Patrick & Frank A. Wolak, 2001. "Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices," NBER Working Papers 8213, National Bureau of Economic Research, Inc.
    2. 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.

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    More about this item

    Keywords

    Real-time pricing; Electricity; Pricing strategies; Translog cost function;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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