Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305597 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11355
Publisher: 
CESifo GmbH, Munich
Abstract: 
The marginal cost of electricity fluctuates hour-by-hour, yet retail customers typically face flat prices. Using data from all seven US wholesale markets and a new method to evaluate alternative rates set in advance that accounts for equilibrium price effects, we estimate efficiency gains from time-varying price schedules that better align price with cost. We have three main results. First, time-of-use rates and critical-peak pricing, the two most common time-varying rate plans, each correct about 10% of mispricing. Second, complex rate structures based on historical prices often backfire. Third, real-time pricing with price ceilings can capture most potential efficiency gains.
Subjects: 
electricity
time-of-use pricing
critical- peak pricing
real-time pricing
efficiency
JEL: 
L94
L97
Q41
Q48
Document Type: 
Working Paper
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