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Response of industrial customers to hourly pricing in Ontario’s deregulated electricity market

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Abstract

This paper uses hourly data from Ontario (Canada) between 2005 and 2008 to estimate the effects of real time wholesale electricity prices on demand by industrial customers. Nonlinear SUR estimates from Generalized Leontief (GL) specifications reveal elasticities of substitution from 0.02 to 0.07, confirming that industrial customers (connected to the transmission grid) shift consumption across peak and off-peak periods in order to reap benefits of lower prices. Estimates from FGLS and IV models suggest that this reduction in demand by industrial customers results in lower wholesale prices, which benefits all consumers. The policy lesson is that market based schemes that encourage Real Time Pricing (RTP) pricing should result in positive spillovers to all consumers.

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Authors and Affiliations

  1. Department of Economics, University of Waterloo, Waterloo, ON, N2L 3G1, Canada

    Wai Hong Choi & Anindya Sen

  2. Association of Major Power Consumers in Ontario (AMPCO), Sterling Tower, 372 Bay Street, Suite 1702, Toronto, ON, M5H 2W9, Canada

    Adam White

Authors
  1. Wai Hong Choi
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  2. Anindya Sen
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  3. Adam White
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Correspondence to Anindya Sen.

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Choi, W.H., Sen, A. & White, A. Response of industrial customers to hourly pricing in Ontario’s deregulated electricity market. J Regul Econ 40, 303–323 (2011). https://doi.org/10.1007/s11149-011-9169-9

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  • DOI: https://doi.org/10.1007/s11149-011-9169-9

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