Jessoe, Katrina and Rapson, David “Commercial and Industrial Demand Response Under Mandatory Time-of-Use Electricity Pricing” (February 2013) (Revised version published in the Journal of Industrial Economics, 63(3): 397-421, 2013) | WP-238R
This paper is the first to evaluate the impact of a large-scale field deployment of mandatory time-of-use (TOU) pricing on the energy use of commercial and industrial firms. The regulation imposes higher user prices during hours when electricity is generally more expensive to produce, and is by far the most common way for time-varying incentives to be transmitted to retail electricity customers. We exploit a natural experiment that arises from the rules governing the program to present evidence that TOU pricing induced no (or very little) change in customer usage or load. As such, economic efficiency was not increased by this regulation. Bill levels and volatility exhibit only minor shifts, suggesting that concerns from advocacy groups about increased expenditure and customer exposure to risk have been overstated.