Chapter

Time-Varying Retail Electricity Prices: Theory and Practice

Severin Borenstein

in Electricity Deregulation

Published by University of Chicago Press

Published in print August 2005 | ISBN: 9780226308562
Published online February 2013 | e-ISBN: 9780226308586 | DOI: http://dx.doi.org/10.7208/chicago/9780226308586.003.0009
Time-Varying Retail Electricity Prices: Theory and Practice

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This chapter presents the theoretical argument in support of time-varying retail prices and explains the societal loss from using flat rate retail pricing. It discusses the variety of programs that implement time-varying retail prices and discuss their effectiveness in giving customers economically efficient incentives. This chapter explains that while real-time pricing of electricity can reduce the amount of needed generating capacity as well as reduce prices and the overall cost of electricity its full implementation is being hampered by the costs of installing real-time metering equipment and the reluctance of customers to face price risk.

Keywords: time-varying retail prices; flat rate pricing; societal loss; electricity prices; real-time pricing; metering equipment; price risk

Chapter.  16788 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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