Benefit-Cost Methodology for Evaluating Peak-Load Pricing System Implementation for Electricity Rates

Many utilities are searching for ways to cut down their costs and to implement innovative rate designs. Economic analysis suggests that marginal cost pricing is necessary for efficient allocation. Specifically, peak-load pricing (PLP) for the use of electricity is widely recommended. However, such shifts are not without costs. In this paper the use of a cost-benefit framework to evaluate change to a rate structure based upon PLP is suggested. The use of the framework with some hypothetical examples is demonstrated.