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April 03, 2014
Article on Time-Varying Rates by Ahmad Faruqui Featured in Intelligent Utility

An article by Brattle principal Ahmad Faruqui, “Study Ontario for TOU Lessons,” was recently published in Intelligent Utility. Dr. Faruqui’s article raises the question of whether time-varying rates, such as time-of-use (TOU) rates, critical peak pricing (CPP), and other pricing rates should be used as the default tariff for residential and small business customers.

Traditionally, economists argue that because these rates best reflect the cost of providing electricity, they should be the default tariff given their economic efficiency. However, as of April 2014, the vast majority of residential and small business customers in the U.S. are not on time-varying rates, though commissions in California and Massachusetts are considering adopting these rates as the default tariff.

As a solution to the debate over setting a default tariff, Dr. Faruqui’s article suggests American regulators and utilities study Ontario’s successful example of TOU rates, which began in 2009. Dr. Faruqui’s article finds that moving to time-varying rates would likely face little to no resistance from customers and that economic efficiency will likely improve as customers respond by lowering peak usage.

To read the full article, click here.