Self-Designed Electric Products
The task of setting prices for electric service providers has evolved through at least three paradigms. These pricing modi operandi include: 1) cost-of-service class allocation, 2) marginal cost-based service options, and 3) product design packages based upon customer preferences. We suggest that a fourth approach, Self-Designed Products, resides within the realm of current capabilities.
The notion of a Self-Designed Product is the facility of offering customers the option of developing customized price and service arrangements, within profitability constraints. We envision the facility to be provided via a web site. Upon accessing the site, a customer would be presented with a menu of retail product attributes. The customer selects the level for each attribute. Given the set of selected attribute levels, an evaluation engine calculates prices by solving a constrained optimization problem, using historical loads and prices. The analysis incorporates the customer’s expected load response behavior and prospective economic costs-to-serve with uncertainty.
KeywordsCovariance Mold Marketing Volatility Glean
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