The impacts of optional time-of-use prices: a case study

We examine customersʹ time-of-use (TOU) demand for electricity and their choice between standard and TOU rate schedules. We specify an econometric model in which the customerʹs demand curves determine the customerʹs choice of rate schedule. We estimate the model on data from Pacific Gas and Electric Companyʹs experiment with optional TOU prices in the residential sector. With the model, we compare the TOU consumption and price elasticities of customers who chose TOU rates with those who chose standard rates. We also estimate the impact of the TOU rates on the utilityʹs revenues and costs. The analysis suggests that all but one of the TOU rates offered under PG and Eʹs experiment decreased PG and Eʹs profits and hence contributed to higher general rate levels. The model can be used, however, to design optional TOU rates that increase profits and lower general rate levels.