An Analysis of the Wisconsin Time-Of-Day Electricity Pricing Experiment.

Abstract

The purpose of this thesis is to examine the short-run effect of time-of-day electricity prices on time-of-day residential electricity consumption. Specifically, the impact of time-of-day rates on total weekday consumption, the hour of maximum consumption, and the amount consumed at maximum are examined. We also estimate time-of-day price elasticities using dem and equations. The final objective of this thesis is to make an assessment of the effects of time-of-day pricing on household welfare. The data used are from the Wisconsin Time-of-Day Electricity Pricing Experiment. The Wisconsin Public Service Commission, in conjunction with researchers at the University of Wisconsin-Madison, collected observations on hourly electricity consumption from a stratified r and om sample of 644 households in the Madison area. Hourly observations were collected over a period of four years, from 1976 to 1980. During the first year, all households were on st and ard declining block rates. During the following three years, households were assigned to a time-of-day rate schedule. In this dissertation, only data from the Summer of the first two years are used. Spectral analysis is employed to examine differences in the shape of the daily load curve between households on TOD rates and households on flat or st and ard declining block rates. Five different dem and systems are specified to estimate TOD price elasticities. The measure of equivalent variation is used to assess the effect of TOD rates on household welfare. The results of the spectral analysis show that TOD rates decrease total consumption over the period of a day, shift the time of maximum consumption to later in the day, decrease household electricity consumption when the entire system is at peak dem and (noon), and increases the difference between mean consumption and maximum consumption. The results of the dem and analysis show that base period and peak period consumption are Hicksian substitutes, but Marshallian complements. Estimates of the own-peak Marshallian elasticity range from -.46 to -.25, depending on the TOD rate schedule. Estimates of the base period's own-price elasticity range from -.11 to -.25.