Does dynamic pricing work in a winter-peaking climate? A case study of Hydro Quebec

Abstract

Ever since California experienced its energy crisis two decades ago, dynamic pricing of electricity has been the topic of discussion in numerous conferences and papers. Scores of pilots involving some 400 treatments of time-varying rates have been done to assess customer response to dynamic pricing around the globe, beginning with California’s Statewide Pricing Pilot that ran from 2003 to 04. In the past few years, we are witnessing large scale deployment of static time-varying rates in states such as California and Michigan. Colorado is about to embark on that journey. However, other than OG&E’s deployment of dynamic pricing, we have not seen much deployment of dynamic pricing in North America. California’s power outages in August 2002 have rekindled interest in the topic. But almost all of the discussion about dynamic pricing has focused on summer peaking utilities. In this paper, we discuss the experience of Hydro Quebec, a winter peaking utility in Canada. Hydro Quebec has tested both critical-peak pricing and peak-time rebates. The results are very encouraging and quite consistent with results from summer peaking utilities.The article is based on a question and answer format with Frederic Pelletier, who advises Hydro Quebec on tariff strategy. He had posted some results from their dynamic pricing deployment on LinkedIn in response to some results I had posted from three-pilots with TOU rates that had been carried out in Maryland. I put a few questions to Frederic and this article evolved out of that conversation. In the article that follows, the questions are mine and the answers are exclusively his.