Group for Research in Decision Analysis

Models to Evaluate Alternative Consumer Pricing Schemes in Electricity Markets

David Fuller University of Waterloo, Canada

The speaker will present work in progress to create variants of mathematical programming based models of equilibrium in electricity markets, for the purpose of evaluation and comparison of different schemes for setting consumer prices of electricity, such as time-of-day pricing versus a single price at all times. Suppliers of electricity in competitive markets regularly respond to prices that change hour by hour or even more frequently, i.e. to so called "real time pricing", but most consumers respond to price changes on a very different time scale, i.e. they observe and respond to changes in price as reflected on their monthly bills. The central technical challenge in the ongoing research is to define an equilibrium that realistically represents the two very different time scales of price responsiveness.

Applications of the modelling techniques will include: (a) evaluation of the economic savings due to implementation of time-of-day pricing into markets such as Ontario; and (b) estimation of the degree of market power that can be exercised by large suppliers, within in the more realistic modelling framework.