Peak-load Pricing and Energy Conservation

Abstract

Over recent years the idea of an energy shortage has become a reality. The indications are that governments are likely to consider various policy alternatives increasingly in terms of their effects on energy usage. In view of such considerations it is clear that peak-load pricing will be regarded by government and regulators in terms of its contribution to energy conservation. Indeed President Carter’s energy policy (1977–8) proposes time-of-day pricing and various rate reforms as devices for energy conservation. The energy shortage, and the desire for conservation, thus seems to have provided a catalyst for the reform of rate structures and the adoption of peak-load rates. A key question in this regard is therefore whether peak-load pricing contributes to energy conservation or not.