Dynamic Pricing in a Moderate Climate: The Evidence from Connecticut

Abstract

While many dynamic pricing experiments have been carried out in warm climates, few have been carried out in moderate climates. We analyze data from a pilot in New England which featured a time-of-use rate, two dynamic pricing rates and four enabling technologies. Unlike most other pilots, it included small commercial and industrial (C&I) customers in addition to including residential customers, for a total of around 2,200 customers. Using a constant elasticity of substitution model of consumer behavior, we find that customers do respond to dynamic pricing even in a moderate climate, that response to critical-peak pricing rates is higher than response to peak-time rebates, that there is virtually no response to TOU rates with an eight hour peak period and that small C&I customers are less price responsive than residential customers. We also find that some enabling technologies boost price responsiveness.