Financial comparison of time-of-use pricing with technical DSM programs and generating plants as electric-utility resource options

Technical Report · Fri Apr 01 04:00:00 EST 1994

DOI:https://doi.org/10.2172/10155153· OSTI ID:10155153

Hill, L J

Changing electricity prices to more closely reflect production costs has a significant impact on the consumption of electricity. It is known, for example, that most of the efficiency gains in the electric power sectors of the industrialized world since the first international oil price shock in 1973 are attributable to the rising trend of electricity prices. This was due to the rising average price of electricity. Because of the unique characteristics of producing electricity, its marginal cost is higher than its average cost during many hours of the day. This study shows that, for utilities not reflecting these cost differences in their rates, there is ample room to satisfy a portion of their resource needs by exploiting the load-shaping properties of time-of-use (TOU) rates. Satisfying a portion of resource requirements by implementing a TOU-pricing program, however, is not costless. Metering and administering TOU pricing requires a financial commitment by an electric utility. And the commitment has an opportunity cost. That is, the funds could be used to construct generating plants or run DSM programs (other than a TOU-pricing program) and satisfy the same resource needs that TOU pricing does. The question addressed in this study is whether a utility is better-served financially by (i) implementing TOU pricing or (ii) running technical DSM programs and building power plants. The answer is that TOU pricing compares favorably on a financial basis with other resources under a wide set of conditions that real-world utilities confront.

• Research Organization: Oak Ridge National Lab., TN (United States)
• Sponsoring Organization: USDOE, Washington, DC (United States)
• DOE Contract Number: AC05-84OR21400
• OSTI ID: 10155153
• Report Number(s): ORNL/CON--352; ON: DE94012722
• Country of Publication: United States
• Language: English

Related Subjects

32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION
320601
320603
CONSERVATION SERVICES
ECONOMIC ANALYSIS
ELECTRIC UTILITIES
ENERGY CONSERVATION
LOAD MANAGEMENT
OFF-PEAK POWER
POWER DEMAND
PUBLIC UTILITIES
RATE STRUCTURE
TIME-OF-USE PRICING