Mass. Governor Urges Time-of-Use Rates

Michael Giberson

No shameless self-promotion involved in this posting, but in otherwise related electric rate news the Boston Globe reports that Massachusetts Governor Mitt Romney is favoring a proposal to implement time-of-use rates for residential customers in the state. According to the article, the plan would have a higher afternoon rate between 2 PM and 5 PM.

Particularly during the summer, demand for electricity normally peaks during those hours. Because of the wholesale electric market’s unusual economics, prices can soar to 15 times normal levels during those hours. But except for some large business and industrial customers, utility rates remain constant every hour, so few customers have an economic incentive to conserve during the hours it would help most.

My initial sense was that afternoon peaks were often as late as 6 to 7 PM, but a brief examination of Massachusetts load data (available from the ISO New England here) confirms that summer peaks tend to occur from about 3 PM to 5 PM. Winter peaks come later in the day in Massachusetts, but summer peak demands are higher than winter peaks, even in New England.

3 thoughts on “Mass. Governor Urges Time-of-Use Rates

  1. How hard would it be to implement a rate scale based directly on minute-by-minute demand? It would save the trouble of trying to predict peaks.

  2. Lynne’s post about Illinois says the state will consider “real time pricing” — sometimes these proposals have hour-by-hour rates and not minute-by-minute. It does save the regulator (or rate designer) the trouble of predicting peaks, but may increase the cognitive burden on the consumer. While these programs have been around in small pieces, they are rarely in broad usage.

    There has been some research comparing flat rates, real time rates, and time-of-use rates, but it remains an active area of study.

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