Redesigning standard retail tariffs for competition: New tools and strategies

Technical Report · Fri Mar 01 04:00:00 EST 1996

OSTI ID:254457

Braithwait, S ^[1]

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1. Christensen Associates, Madison, WI (United States)

Utilities looking to thrive in increasingly competitive markets are reexamining their approach to pricing. To compete effectively, utilities will need to both control costs and offer customers pricing options that are competitive and reflect the diversity in their customer base. These price structures must reflect two key factors -- marginal costs, which will increasingly reflect market prices, and consumers` responsiveness to those price structures. To accomplish this requires the capability to forecast customers` response to price structures that often provide complex signals to customers about how changes in their energy consumption and maximum power demand affect their bill, and to calculate corresponding changes in utility profits and customer net benefits. Much discussion of competitive pricing focuses on innovative new rate structures. However, significant opportunities are present to improve matters by simply redesigning current traditional rate forms. This paper reports on research recently undertaken in conjunction with EPRI and a major utility in which the authors developed customer response and price optimization models designed to: (1) simulate customer response to changes in demand and energy prices for existing tariffs, (2) calculate the corresponding changes in customer net benefits and utility contribution to margin, and (3) search for prices that generate the greatest gain in economic benefits. Analysis using the models indicated that significant economic gains could be obtained by changing the current tariff structure.

• Research Organization: Electric Power Research Inst., Palo Alto, CA (United States)
• OSTI ID: 254457
• Report Number(s): EPRI-TR--106232; CONF-960330--
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
COMPETITION
DEREGULATION
ECONOMIC ANALYSIS
ELECTRIC UTILITIES
ENERGY DEMAND
OPTIMIZATION
RATE STRUCTURE