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A Residential Demand Charge: Evidence from the Duke Power Time-of-Day Pricing Experiment

Demand charges account for one-third to one-half of industrial and commercial electricity bills, and yet they have been virtually ignored, both theoretically and practically, as a component of residential tariffs. Our objective here is twofold: (1) to model and test the effects of a time-of-use demand charge on residential consumer behavior and (2) to evaluate, theoretically and empirically, its influence on utility system peak. Among the pragmatic issues are the effects of sustained hot weather on household response and the effects of the charge on demand at time of system peak compared to billing demand.

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

JEL Codes:
Q55 - Environmental Economics: Technological Innovation
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: TOU pricing, Residential electricity demand, Consumer bahavior, utility system peak

DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No2-10

Published in Volume 7, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.