Will residential electricity customers defaulted onto a time-of-use (TOU) rate respond to the price signal? Brattle economists examine the first system wide rollout of TOU in Ontario, Canada and find that customers do shift load from more expensive peak period, to the cheaper off-peak period. These results, and more, are discussed in a co-authored article published in the February 2017 issue of Public Utilities Fortnightly.
The study focuses on the first three years of default TOU in Ontario. The roll-out of TOU rates was not an experiment, so the authors employed several quasi-experimental design methods to adequately account for what would have happened in the absence of TOU. To obtain representative results for the province, the authors split the province into four distinct climate zones and estimated separate impacts for each region. These impacts were reweighted using census data to obtain representative impacts for the province.
After analyzing load and price data over a three-year period, the authors conclude that the default deployment of TOU rates to four million customers has yielded tangible reductions in peak demand; however, their analysis did not find any significant evidence of conservation across all regions.
The article, “The Impact of Time-of-Use Rates in Ontario,” was co-authored by Brattle Principals Ahmad Faruqui and Sanem Sergici, Senior Associate Neil Lessem, and Dean Mountain, a Professor of Finance and Business Economics at McMaster University. The article is available for download below.