Brattle economists recently authored a report published by The Regulatory Assistance Project (RAP) Global Power Best Practice Series that provides an international discussion on the basics of time-of-use and dynamic pricing.

The report will be distributed at the National Association of Regulatory Utility Commissioners (NARUC) Summer Committee Meetings, taking place July 22-25 in Portland, Oregon. The report highlights critical issues in the design and deployment of time-varying rates as they apply to international regulators and policymakers, and summarizes international experience with time-varying rate offerings. The authors draw upon their first-hand experience in designing and evaluating innovative rate designs, as well as conversations with other experts in the field, in developing the design principles presented in the report. Among its key findings, the report concludes that smart meter technology is rapidly changing, creating the opportunity to provide time-varying rates for the mass market. Time-varying rate options, which include time-of-use (TOU) rates, critical peak pricing (CPP), peak time rebates (PTR), and real time pricing (RTP), each present a different opportunity to reduce consumers’ electricity bills by shifting load from higher-priced hours to lower-priced hours. The report also finds that there are many potential benefits of time-varying rates, such as avoided or deferred resource costs, reduced wholesale market prices, and improved fairness in retail pricing. The authors argue, however, that well-designed pilots are critical to proving the benefits of time-varying rates. The report, “Time-Varying and Dynamic Rate Design,” was authored by Brattle principal Ahmad Faruqui, senior associate Ryan Hledik, and research analyst Jennifer Palmer, and is available at the RAP website. Dr. Faruqui presented the findings of the report today during a panel session of the NARUC meetings. His presentation, “Architecting the Future of Dynamic Pricing,” is available for download here.

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Architecting the Future of Dynamic Pricing