Stay or Switch

Abstract

Energy markets with retail choice enable customers to switch energy plans among competitive retail suppliers. Despite the promising benefits of more affordable prices and better savings to customers, there appears subsided participation in energy retail markets from residential customers. One major reason is the complex online decision-making process for selecting the best energy plan from a multitude of options that hinders average consumers. In this paper, we shed light on the online energy plan selection problem by providing effective competitive online algorithms. We first formulate the online energy plan selection problem as a metrical task system problem with temporally dependent switching costs. For the case of constant cancellation fee, we present a 3-competitive deterministic online algorithm and a 2-competitive randomized online algorithm for solving the energy plan selection problem. We show that the two competitive ratios are the best possible among deterministic and randomized online algorithms, respectively. We further extend our online algorithms to the case where the cancellation fee is linearly proportional to the residual contract duration. Through empirical evaluations using real-world household and energy plan data, we show that our deterministic online algorithm can produce on average 14.6% cost saving, as compared to 16.2% by the offline optimal algorithm, while our randomized online algorithm can further improve cost saving by up to 0.5%.