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A Note on Measuring Household Welfare Effects of Time-of-Use (TOU) Pricing

Chi-Keung Woo

Year: 1984
Volume: Volume 5
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol5-No3-12
View Abstract

Abstract:
Several recent studies address the issue of household welfare effects caused by the implementation of time-of-use (TOU) pricing of electricity (for example, see Aigner and Lillard, 1982; Aigner and Learner, 1982; Parks, 1983; and Caves et al., 1983). In these studies, the historical average price is used to assess the household welfare change. Implicit in their approach is the assumption that the original electricity rate structure is a flat one. In fact, however, the common rate structure is multitier, frequently an inverted block. While the literature on demand for electricity includes extensive discussions of whether the average price or the marginal price is the correct price signal to a residential customer (e.g., Taylor, 1975; Nordin, 1976; Terza and Welch, 1982; and Billings, 1982), little attention has been given to evaluating welfare change resulting from TOU pricing.



An Application of the Expenditure Function in Electricity Pricing: Optimal Residential Time-of-Use Rate Option

Chi-Keung Woo

Year: 1985
Volume: Volume 6
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No2-7
View Abstract

Abstract:
Caves et al. (1983) recently reported that mandatory time-of-use (TOU) pricing for residential customers served by four Illinois electric utilities fails to pass the cost-benefit test. Gains in economic efficiency are outweighed by the relatively high TOU meter costs. An obvious alternative is to offer a TOU rate option for which customer participation is voluntary (see, for example, Woo et al. [1983, Section D] and Malko and Faruqui [1980, pp. 161-62]). The problem of optimal pricing under self-selection has been analyzed by Faulhaber and Panzar (1977), Panzar and Sibley (1978), and Mirman and Sibley (1980). Following these studies, this paper derives the optimal electricity prices when a customer can choose between paying the TOU rates and the full incremental costs of a TOU meter and remaining on a flat rate schedule. My approach departs from the earlier studies in using the expenditure function to characterize the optimization problem as described by Diamond and McFadden (1974).



Demand for Electricity of Small Nonresidential Customers under Time-Of-Use (TOU) Pricing

Chi-Keung Woo

Year: 1985
Volume: Volume 6
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No4-9
View Abstract

Abstract:
After the oil crisis of 1973, the California Public Utilities Commission (CPUC) in 1976 ordered Pacific Gas and Electric Company (PGandE) to charge its large nonresidential customers with monthly billing demand of over 4000 kilowatts (kW) mandatory time-of-use rates. Using a translog (TLOG) specification attributable to Christensen, Jorgenson, and Lau (1973), Chung and Aigner (1981) estimate the electricity demand price elasticities by time-of-use for 64 of these customers in 13 Standard Industrial Classification (SIC) code groups. Own-price elasticity estimates are generally around -0.1 and at times can be as high as -0.5, or they have the wrong sign. Cross-price elasticity estimates indicate that electricity usages by time-of-use are mostly substitutes. However, the estimated price responsiveness typically is larger than observed usages (see below and the section, Experimental Design and Data). Moreover, positive own-price elasticity estimates, though not statistically significant, raise further doubts about the validity of empirical results.



Estimating Hourly Electric Load with Generalized Least Square Procedures

Chi-Keung Woo, Philip Hanser, and Nate Toyama

Year: 1986
Volume: Volume 7
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No2-11
View Abstract

Abstract:
Although electricity demand receives much attention in the empiri-cal literature (see Taylor (1975) and EPRI (1982b) for excellent surveys on the topic), hourly load demand analysis has only recently begun. Notable contributions are a series of studies sponsored by the Electric Power Research Institute (EPRI (1977. 1979a, 1979b, 1981a, 19816. 1982a) and Platt (1983)). These studies estimate load curve models for regions of the United States. Unfortunately, from a utility perspective, the empirical results presented in these studies are not directly applicable. Further, because the data used in these studies are not generally available at the geographic level of a utility service area, applying their methodology is problematic. This paper presents a practical method for an electric utility to produce an hourly load curve model similar in overall framework to these studies. Our procedure is innovative in that it produces statistically efficient estimates, which the above papers do not. We also demonstrate a method that uses supplementary forecasts to enhance the forecasting performance of the hourly load model.



Service Reliability and the Optimal Interruptible Rate Option in Residential Electricity Pricing

Chi-Keung Woo and Nate Toyama

Year: 1986
Volume: Volume 7
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No3-10
View Abstract

Abstract:
Recent research on electricity pricing extends the traditional peak load pricing problem in many directions. Some notable studies include the time-of-use (TOU) papers by Crew and Kleindorfer (1976, 1978); the cycling analysis by Dansby (1977); the Demand Subscription Service (DSS) studies by Tschirhart and Jen (1979), Panzar and Sibley (1978), and Marchand (1974). Central to these papers is the role played by demand uncertainty in determining the optimal electricity rate structure and capacity planning. With the exception of Tschirhart and Jen and Marchand, these papers do not directly address the question of service reliability from the customer's perspective. Moreover, the supply-side uncertainty caused by random plant outages (as indicated by Chao, 1983) is largely ignored. Finally, these studies, though elegant and innovative, do not analyze the problem of residential rate options, which recently have gained considerable popularity in the United States, especially in California.



Estimating Household Value of Electrical Service Reliability with Market Research Data

Andrew A. Goett, Daniel L. McFadden and Chi-Keung Woo

Year: 1988
Volume: Volume 9
Number: Special Issue 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-NoSI2-7
No Abstract



Household Preference for Interruptible Rate Options and the Revealed Value of Service Reliability

Michael J. Doane, Raymand S. Hartman and Chi-Keung Woo

Year: 1988
Volume: Volume 9
Number: Special Issue 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-NoSI2-8
No Abstract



Households' Perceived Value of Service Reliability: An Analysis of Contingent Valuation Data

Michael J. Doane, Raymond S. Hartman, and Chi-Keung Woo

Year: 1988
Volume: Volume 9
Number: Special Issue 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-NoSI2-9
No Abstract



Estimating Residential Partial Outage Cost With Market Research Data

Dennis M. Keane, S. Leslie MacDonald, and Chi-Keung Woo

Year: 1988
Volume: Volume 9
Number: Special Issue 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-NoSI2-10
No Abstract



The Cost of Electric Power Interruptions to Commercial Firms

Chi-Keung Woo and Kenneth Train

Year: 1988
Volume: Volume 9
Number: Special Issue 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-NoSI2-11
No Abstract




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