IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v52y2015ipap39-48.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988315002649
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2015.09.011?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Denis Conniffe, 2006. "Indirect addilog translation of indirect utility functions," Canadian Journal of Economics, Canadian Economics Association, vol. 39(4), pages 1388-1397, November.
    2. Douglas W. Caves and Laurits R. Christensen, 1980. "Residential Substitution of Off-peak for Peak Electricity Usage under Time-of-Use Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Caves, Douglas W. & Christensen, Laurits R. & Herriges, Joseph A., 1984. "Consistency of residential customer response in time-of-use electricity pricing experiments," Journal of Econometrics, Elsevier, vol. 26(1-2), pages 179-203.
    4. Ahmad Faruqui & Sanem Sergici, 2011. "Dynamic pricing of electricity in the mid-Atlantic region: econometric results from the Baltimore gas and electric company experiment," Journal of Regulatory Economics, Springer, vol. 40(1), pages 82-109, August.
    5. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
    6. Paul L. Joskow & Catherine D. Wolfram, 2012. "Dynamic Pricing of Electricity," American Economic Review, American Economic Association, vol. 102(3), pages 381-385, May.
    7. Faruqui, Ahmad & George, Stephen, 2005. "Quantifying Customer Response to Dynamic Pricing," The Electricity Journal, Elsevier, vol. 18(4), pages 53-63, May.
    8. Caves, Douglas W & Christensen, Laurits R, 1980. "Global Properties of Flexible Functional Forms," American Economic Review, American Economic Association, vol. 70(3), pages 422-432, June.
    9. Frank A. Wolak, 2011. "Do Residential Customers Respond to Hourly Prices? Evidence from a Dynamic Pricing Experiment," American Economic Review, American Economic Association, vol. 101(3), pages 83-87, May.
    10. Guilkey, David K & Lovell, C A Knox & Sickles, Robin C, 1983. "A Comparison of the Performance of Three Flexible Functional Forms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 591-616, October.
    11. Ahmad Faruqui, Sanem Sergici, and Lamine Akaba, 2014. "The Impact of Dynamic Pricing on Residential and Small Commercial and Industrial Usage: New Experimental Evidence from Connecticut," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    12. Ahmad Faruqui & Sanem Sergici, 2010. "Household response to dynamic pricing of electricity: a survey of 15 experiments," Journal of Regulatory Economics, Springer, vol. 38(2), pages 193-225, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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. 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.
    6. 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.
    7. Blonz, Joshua & Palmer, Karen & Wichman, Casey & Wietelman, Derek C., 2021. "Smart Thermostats, Automation, and Time-Varying Prices," RFF Working Paper Series 21-20, Resources for the Future.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fumitoshi Mizutani & Takuro Tanaka & Eri Nakamura, 2015. "The Effect of Demand Response on Electricity Consumption in Japan," Discussion Papers 2015-02, Kobe University, Graduate School of Business Administration.
    2. Woo, C.K. & Liu, Y. & Zarnikau, J. & Shiu, A. & Luo, X. & Kahrl, F., 2018. "Price elasticities of retail energy demands in the United States: New evidence from a panel of monthly data for 2001–2016," Applied Energy, Elsevier, vol. 222(C), pages 460-474.
    3. Simona Bigerna and Carlo Andrea Bollino, 2015. "A System Of Hourly Demand in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    4. Burns, Kelly & Mountain, Bruce, 2021. "Do households respond to Time-Of-Use tariffs? Evidence from Australia," Energy Economics, Elsevier, vol. 95(C).
    5. Qiu, Yueming & Colson, Gregory & Wetzstein, Michael E., 2017. "Risk preference and adverse selection for participation in time-of-use electricity pricing programs," Resource and Energy Economics, Elsevier, vol. 47(C), pages 126-142.
    6. Michael K. Price, 2014. "Using field experiments to address environmental externalities and resource scarcity: major lessons learned and new directions for future research," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(4), pages 621-638.
    7. Douglas Fisher & Adrian R. Fleissig & Apostolos Serletis, 2006. "An Empirical Comparison of Flexible Demand System Functional Forms," World Scientific Book Chapters, in: Money And The Economy, chapter 13, pages 247-277, World Scientific Publishing Co. Pte. Ltd..
    8. William Barnett & Ousmane Seck, 2006. "Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200605, University of Kansas, Department of Economics.
    9. Chalfant, James & Wallace, Nancy, 1991. "Testing the Translog Specification with the Fourier Cost Function," CUDARE Working Papers 198581, University of California, Berkeley, Department of Agricultural and Resource Economics.
    10. Robert W. Hahn & Robert D. Metcalfe, 2021. "Efficiency and Equity Impacts of Energy Subsidies," American Economic Review, American Economic Association, vol. 111(5), pages 1658-1688, May.
    11. Daniel Adelman & Canan Uçkun, 2019. "Dynamic Electricity Pricing to Smart Homes," Operations Research, INFORMS, vol. 67(6), pages 1520-1542, November.
    12. Ivanov, Chris & Getachew, Lullit & Fenrick, Steve A. & Vittetoe, Bethany, 2013. "Enabling technologies and energy savings: The case of EnergyWise Smart Meter Pilot of Connexus Energy," Utilities Policy, Elsevier, vol. 26(C), pages 76-84.
    13. Takanori Ida & Wenjie Wang, 2014. "A Field Experiment on Dynamic Electricity Pricing in Los Alamos:Opt-in Versus Opt-out," Discussion papers e-14-010, Graduate School of Economics Project Center, Kyoto University.
    14. Goutam Dutta & Krishnendranath Mitra, 2017. "A literature review on dynamic pricing of electricity," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(10), pages 1131-1145, October.
    15. Daruwala, Farhad & Denton, Frank T. & Mountain, Dean C., 2020. "One size may not fit all: Welfare benefits and cost reductions with optional differentiated household electricity rates," Resource and Energy Economics, Elsevier, vol. 61(C).
    16. William A. Barnett & Ikuyasu Usui, 2007. "The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model," International Symposia in Economic Theory and Econometrics, in: Functional Structure Inference, pages 107-127, Emerald Group Publishing Limited.
    17. Adrian R. Fleissig, 2016. "Changing Trends in U.S. Alcohol Demand," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 263-276, September.
    18. Boßmann, Tobias & Eser, Eike Johannes, 2016. "Model-based assessment of demand-response measures—A comprehensive literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 1637-1656.
    19. Fumitoshi Mizutani & Eri Nakamura, 2015. "An Analysis of Household Electricity Saving Behavior Using the Stochastic Frontier Function," Discussion Papers 2015-10, Kobe University, Graduate School of Business Administration.
    20. William A. Barnett & Ousmane Seck, 2008. "Rotterdam model versus almost ideal demand system: will the best specification please stand up?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 795-824.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:52:y:2015:i:pa:p:39-48. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.