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Industrial and Commercial Demand for Electricity by Time of Day

The initial stimulus for this note came from Chung and Aigner (1981), which examined the impact of a major change in electricity tariff structure on industrial and commercial electricity demands. Using a translog cost function the authors investigate the effects on consumption of a change in the pricing practices of the Pacific Gas and Electricity Corporation (PGEC). Instead of charging a uniform price for electricity throughout the 24-hour period, PGEC switched to a "time of use" (TOU) pricing regime. The model performed well for 10 of the 13 industry groups over the 41-month period, and indicated a considerable variation across industries in the impact of TOU pricing. The authors find a general pattern of moderate response to TOU pricing in the peak period and some substitution among electricity demands over other times of the day. The industries that showed the most elastic demands were logging camps, paper mills, industrial gases, and cement manufacturers (as well as shopping centers and educational institutions in the nonmanufacturing sector). The limited available evidence suggests that a similar diversity of responses exists across industries in other countries (Mitchell, Manning, and Acton 1978, pp. 89-120).

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Energy Specializations: Energy Modeling – Sectoral Energy Demand & Technology; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
Q55 - Environmental Economics: Technological Innovation
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Industrial and commercial electricity demand, TOU pricing, PGE, elastic demand

DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No3-8

Published in Volume 6, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.