Using Customer-Level Response to Spot Prices to Design Pricing Options and Demand-Side Bids

Abstract

This chapter presents estimates of customer-level demands for electricity by large and medium-sized industrial and commercial customers purchasing electricity according to half-hourly spot prices and demand charges from the England and Wales electricity market. The resulting models can be used to measure demand-altering effects arising from the imposition of arbitrary time varying and consumption-dependent energy and demand pricing structures, including alternative levels of supply reliability/interruptibility and stability or certainty of prices. Knowledge of customer-level electricity demands is critical to success in the evolving competitive business environment, as well as for the success of restructured electricity markets as a whole. Such knowledge is required to effectively forecast customer price responsiveness and demands, design pricing options to attract and maintain a profitable portfolio of customers, and demand-side bid to build a price response into the market demand used to determine market-clearing electricity and ancillary services prices.