Optional Time-of-Use Prices for Electricity: Econometric Analysis of Surplus and Pareto Impacts

We estimate a model of time-of-use (TOU) consumption and choice among optional TOU tariffs in which the customer's choice among tariffs is based on its demand parameters, which vary in the population. We simulate the impact on consumption, consumer surplus, and profit of several optional TOU rates that were offered experimentally in northern California. The analysis suggests that, with one possible exception, the offering of these optional rates did not constitute a Pareto improvement. However, total surplus, excluding measurement costs, is estimated to have risen by $1.41 to $2.55 per month per customer who chose the TOU rates.