Data-Driven Clustering and Feature-Based Retail Electricity Pricing with Smart Meters

The adoption of smart meters and dynamic pricing programs is rapidly increasing among electric utility companies. In “Data-Driven Clustering and Feature-Based Retail Electricity Pricing with Smart Meters,” Keskin, Li, and Sunar analyze how utility companies should use smart meter data for better pricing decisions. Utility companies typically have access to consumption patterns and high-dimensional features on customer characteristics and exogenous factors. The authors identify that such feature data can exhibit different forms of heterogeneity—over time and over customers. They show that the different forms of feature heterogeneity significantly worsen the best profit performance that can be achieved by a data-driven dynamic pricing policy. The authors also develop a policy based on joint spectral clustering and contextual dynamic pricing and prove that this policy achieves near-optimal profit performance.