The Response of Industrial Customers to Electric Rates Based upon Dynamic Marginal Costs

Joseph Herriges

The Review of Economics and Statistics, 1993, vol. 75, issue 3, 446-54

Abstract: Recent advances in technology and in the theory of electric utility operations and planning have led to an increased interest in rate and service options that are differentiated over short time intervals. The purpose of this paper is to describe the results from an analysis of a real-time pricing experiment recently conducted at Niagara Mohawk Power Corporation. The objective of the experiment is to measure the response of large industrial customers to dynamic, fully time-differentiated, marginal cost-based electricity rates over a broad range of industries. Because of its design features, including the establishment of an experimental control group, the Niagara Mohawk study provides a rare opportunity to study large user response to real-time pricing, including inter-hour price elasticities. Coauthors are S. Mostafa Baladi, Douglas W. Caves, and Bernard F. Neenan. Copyright 1993 by MIT Press.

Date: 1993
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