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Time-Varying Retail Electricity Prices: Theory and Practice

Time-Varying Retail Electricity Prices: Theory and Practice

Chapter:
(p.317) 8 Time-Varying Retail Electricity Prices: Theory and Practice
Source:
Electricity Deregulation
Author(s):
Severin Borenstein
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226308586.003.0009

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

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