24/7 Hourly Response to Electricity Real-Time Pricing with up to Eight Summers of Experience

This paper provides hourly own and cross price elasticities for industrial customers with up to 8 years of experience on Duke Power optional real-time rates. We include the effects of customer characteristics and temperature conditions. Aggregated results show larger own elasticities than have previous studies, complementarity within the potential peak hours and substitution in the late evening. As customers gain experience with hourly pricing, they show larger load reductions during higher priced hours. As compared to a TOU rate, net benefits are $14,000 per customer per month, approximately 4% of the average customers bill, and much greater than metering costs.JEL classification: L51, L94, D00We wish to acknowledge helpful comments from Herb Thompson and Steve Braithwait. We also wish to thank Colin Loxley and other participants at the Rutgers Advanced Workshop in Regulation and Competition, Lake Tahoe, CA, June 2002, as well as participants at the Second World Congress of Environmental Economics in Monterey, CA, June 2002, for comments on a preliminary version of this paper. Finally, we thank two anonymous referees for helping to improve this paper.