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Do distribution companies loose money with an electricity flexible tariff?: A review of the Chilean case

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  • Vera, Sonia
  • Bernal, Felipe
  • Sauma, Enzo

Abstract

We can get an (energy efficiency) EE improvement if we produce a flatter daily load curve, leading to a higher efficiency of the power system, making better use of the generation and transport electricity chain, thus avoiding over-investment in equipment used just few hours a year. Tariff flexibility of the (Time of Use) TOU type is one of these measures. Generally, TOU systems are designed to minimize total system cost, which may cause losses in distribution companies (DISCOs), generating opposition. On the contrary, the present paper proposes a TOU system for electricity consumption in Chile where optimal prices are obtained in order to maximize total income of DISCOs. In this manner, the proposed TOU system is, by definition, beneficial for DISCOs and it may lead to a win–win situation among DISCOs and consumers. In particular, we show that such a system, implemented in a country like Chile, would allow for DISCOs a total potential benefit of 811.7 millions of dollars for the 3-year study period (2005–2007), considering initiatives that promote a 5% savings in real consumption during on-peak hours, obtained by the spread or difference between the proposed and the current systems.

Suggested Citation

  • Vera, Sonia & Bernal, Felipe & Sauma, Enzo, 2013. "Do distribution companies loose money with an electricity flexible tariff?: A review of the Chilean case," Energy, Elsevier, vol. 55(C), pages 295-303.
    • Handle: RePEc:eee:energy:v:55:y:2013:i:c:p:295-303
    DOI: 10.1016/j.energy.2013.03.024
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    Cited by:

    1. Vera, Sonia & Sauma, Enzo, 2015. "Does a carbon tax make sense in countries with still a high potential for energy efficiency? Comparison between the reducing-emissions effects of carbon tax and energy efficiency measures in the Chile," Energy, Elsevier, vol. 88(C), pages 478-488.
    2. Hu, Zhuangli & Zhang, Yongjun & Li, Canbing & Li, Jing & Cao, Yijia & Luo, Diansheng & Cao, Huazhen, 2015. "Utilization efficiency of electrical equipment within life cycle assessment: Indexes, analysis and a case," Energy, Elsevier, vol. 88(C), pages 885-896.
    3. Katz, Jonas & Andersen, Frits Møller & Morthorst, Poul Erik, 2016. "Load-shift incentives for household demand response: Evaluation of hourly dynamic pricing and rebate schemes in a wind-based electricity system," Energy, Elsevier, vol. 115(P3), pages 1602-1616.
    4. Haider, Haider Tarish & See, Ong Hang & Elmenreich, Wilfried, 2016. "Residential demand response scheme based on adaptive consumption level pricing," Energy, Elsevier, vol. 113(C), pages 301-308.
    5. Park, S.C. & Jin, Y.G. & Song, H.Y. & Yoon, Y.T., 2015. "Designing a critical peak pricing scheme for the profit maximization objective considering price responsiveness of customers," Energy, Elsevier, vol. 83(C), pages 521-531.

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    More about this item

    Keywords

    Tariff flexibility; Time of Use; Energy efficiency; Flexible pricing system; Load curve;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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