The Long-Run Effects of a Time-of-Use Demand Charge

Thomas N. Taylor and Peter M. Schwarz

RAND Journal of Economics, 1990, vol. 21, issue 3, 431-445

Abstract: Modifications in demand due to time-of-use (TOU) pricing have potential to improve the efficiency of electric power supply. With long lead times for plant construction, utility planners need long-run estimates of response to TOU rates. Existing evidence is primarily drawn from short-run TOU experiments. We provide estimates of long-run response to a nonexperimental residential TOU rate offered by Duke Power. The rate contains a demand charge applied to the maximum rate of energy consumption during the peak period. We find that customer response increases over time in a manner that enhances the ability of TOU rates to reduce system peak.

Date: 1990
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