Real Time Pricing as a Default or Optional Service for Commercial and Industrial Customers: A Comparative Analysis of Eight Case Studies

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Demand response (DR) is broadly recognized to be an integral component of well-functioning electricity markets, but currently underdeveloped in most regions. In recent years, there has been renewed interest among a number of public utility commissions (PUC) and utilities in implementing real-time pricing (RTP), typically for large commercial and industrial (C&I) customers, as a strategy for developing greater levels of DR. Such efforts typically face a set of key policy and program design issues, including:

  • How to organize the process for developing and implementing RTP in a manner that facilitates productive participation by the relevant stakeholder groups;
  • Whether to designate RTP as an optional or default service, and for which customer classes;
  • What type of tariff design to adopt given prevailing policy objectives, wholesale market structure, ratemaking practices and standards, and customer preferences; and
  • What types of supplemental activities (e.g., customer education, deployment of enabling technologies) are appropriate to facilitate customer participation and price response.

Given resolution of these design and implementation issues, a key question for policymakers is how much DR can ultimately be expected from RTP, which requires analyzing customers' willingness to be exposed to dynamic hourly prices over a sustained time period and their actual price responsiveness.

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