Multiproduct Pricing Revisited: Aligning Time Varying Tariffs to Procurement Costs or Load Profiles

Lilia Filipova-Neumann


Energy Pricing, Retail Power Markets, Time varying Tariffs, Tariff Design


Time varying tariffs have become more popular with the spread of smart metering devices at the household level. Time varying prices should increase with procurement costs and consumer load in order to reflect the market supply conditions and provide the right price signals for load shifts to consumers. In general, peaks and off-peaks of procurement costs and load profiles will not coincide and might even evolve with time in “opposite directions”. This raises the question of how to assign peak and off-peak prices in time. This paper establishes a relationship between procurement costs, load profiles and equilibrium prices and quantifies the impact for linear demand. Furthermore it develops a framework for tariff design to determine peak and base periods and sets of periods based on procurement cost and load data.

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