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The Long-Run Effects of a Time-of-Use Demand Charge

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  • Thomas N. Taylor
  • Peter M. Schwarz

Abstract

Modifications in demand due to time-of-use (TOU) pricing have potential to improve the efficiency of electric power supply. With long lead times for plant construction, utility planners need long-run estimates of response to TOU rates. Existing evidence is primarily drawn from short-run TOU experiments. We provide estimates of long-run response to a nonexperimental residential TOU rate offered by Duke Power. The rate contains a demand charge applied to the maximum rate of energy consumption during the peak period. We find that customer response increases over time in a manner that enhances the ability of TOU rates to reduce system peak.

Suggested Citation

  • Thomas N. Taylor & Peter M. Schwarz, 1990. "The Long-Run Effects of a Time-of-Use Demand Charge," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 431-445, Autumn.
    • Handle: RePEc:rje:randje:v:21:y:1990:i:autumn:p:431-445
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    Citations

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    Cited by:

    1. Bernard, Jean-Thomas & Roland, Michel, 2000. "Load management programs, cross-subsidies and transaction costs: the case of self-rationing," Resource and Energy Economics, Elsevier, vol. 22(2), pages 161-188, May.
    2. 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.
    3. Öhrlund, Isak & Schultzberg, Mårten & Bartusch, Cajsa, 2019. "Identifying and estimating the effects of a mandatory billing demand charge," Applied Energy, Elsevier, vol. 237(C), pages 885-895.
    4. Pearce, Joshua M. & Harris, Paul J., 2007. "Reducing greenhouse gas emissions by inducing energy conservation and distributed generation from elimination of electric utility customer charges," Energy Policy, Elsevier, vol. 35(12), pages 6514-6525, December.
    5. Lanot, Gauthier & Vesterberg, Mattias, 2021. "The price elasticity of electricity demand when marginal incentives are very large," Energy Economics, Elsevier, vol. 104(C).
    6. Juan Pablo Montero & Hugh Rudnick, 2001. "Precios Eléctricos Flexibles," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(113), pages 91-109.
    7. Brown, David P. & Sappington, David E.M., 2018. "On the role of maximum demand charges in the presence of distributed generation resources," Energy Economics, Elsevier, vol. 69(C), pages 237-249.
    8. Filippini, Massimo, 1995. "Electricity demand by time of use An application of the household AIDS model," Energy Economics, Elsevier, vol. 17(3), pages 197-204, July.
    9. Woo, Soomin & Bae, Sangjae & Moura, Scott J., 2021. "Pareto optimality in cost and service quality for an Electric Vehicle charging facility," Applied Energy, Elsevier, vol. 290(C).

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