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June 28, 2011
Brattle Economists Publish Article on Baltimore Gas and Electric Dynamic Pricing Experiment in Journal of Regulatory Economics

An article authored by Brattle principal Ahmad Faruqui and senior associate Sanem Sergici on a dynamic pricing experiment carried out by Baltimore Gas and Electric Company (BGE) has been published in the August 2011 issue of the Journal of Regulatory Economics.

The article, “Dynamic pricing of electricity in the mid-Atlantic region: econometric results from the Baltimore gas and electric company experiment,” analyzes findings from a pilot experiment conducted by BGE during the summers of 2008 and 2009 to test customer price responsiveness to different dynamic pricing options. Referred to as the Smart Energy Pricing Pilot (SEP), the experiment placed approximately 1,000 customers on two types of dynamic pricing tariffs: critical peak pricing (CPP) and peak time rebate (PTR) tariffs.

Based on their analysis, Drs. Faruqui and Sergici found that incentive programs have the capability to reduce customers’ peak period loads using price signals. Additionally, reductions remained consistent over the two-year period when price reduction plans were utilized. The authors also noted in their article an 18 to 33 percent reduction in customers’ usage during 2008, which remained consistent the following summer.