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Industrial Electricity Demand and the Hopkinson Rate: An Application of the Extreme Value Distribution

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  • Michael R. Veall

Abstract

The Hopkinson rate is the most common method of pricing electricity for industrial use. It consists of an "energy charge" for total kilowatt hour consumption plus an additional "demand charge" based on the maximum usage by the plan during any quarter-hour period during the month. Despite this tariff's apparent drawbacks, it can have useful properties in the pricing of demand variance so that a combination of the Hopkinson rate and time-of-use pricing may be desirable. The extreme value distribution is used to simplify this analysis and also as part of an econometric analysis of the effect of the Hopkinson rate on the peak demands of a sample of eight Ontario pulp and paper mills between 1970 and 1977.

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  • Michael R. Veall, 1983. "Industrial Electricity Demand and the Hopkinson Rate: An Application of the Extreme Value Distribution," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 427-440, Autumn.
    • Handle: RePEc:rje:bellje:v:14:y:1983:i:autumn:p:427-440
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    Cited by:

    1. 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.
    2. Kim, Jihyo & Lee, Soomin & Jang, Heesun, 2022. "Lessons from residential electricity demand analysis on the time of use pricing experiment in South Korea," Energy Economics, Elsevier, vol. 113(C).
    3. Chi-Keung Woo & Philip Hanser & Nate Toyama, 1986. "Estimating Hourly Electric Load with Generalized Least Square Procedures," The Energy Journal, , vol. 7(2), pages 153-170, April.
    4. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Regulating the Natural Gas Transportation Industry: Optimal Pricing Policy of a Monopolist with Advance-Purchase and Spot Markets," IDEI Working Papers 488, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Public Utility Pricing and Capacity Choice with Stochastic Demand," IDEI Working Papers 489, Institut d'Économie Industrielle (IDEI), Toulouse.

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