Tariffs and load management: a post privatisation study of the UK electricity supply industry

An electric utility can influence its customers´ load by providing financial incentives through the prices charged for electricity at different times of use. By designing discriminatory time-of-use tariffs in which the price of electricity corresponds to the marginal cost of supply, a utility provides appropriate signals to the customer to increase consumption of electricity at off-peak periods. The utilization of off-peak electricity results in the improvement of power system load factor which is an indicator for the utilities to decide to defer investment in new generating and transmission capacity. The need to utilize off-peak electricity provides ample justification for the investigation of the determinants of the off-peak demand functions, customers response to discriminatory prices and their implication to system load management. Using the econometric approach, this paper reports a study of the British experience in the field of tariffs and load management in the case of the privatised electricity supply industry. The results of this study may be applicable to the Regional Electricity Companies in the UK. The utilities in several developing countries may find this study relevant, if they decide to restructure their industry for increasing efficiency and tariff for implementing load management instead of arbitrary load shedding