An Equilibrium Analysis of Time-Varying and Flat Electricity Rates

Many electricity providers are offering their customers an array of tariff options intended to discourage electricity consumption at specific times of the day. The problem facing a customer is whether to switch from their existing tariff to a new tariff. The aim of this paper is twofold: first, to develop two analytical methods that help residential customers evaluate when switching from a flat-rate tariff to time-varying pricing options, specifically the Time-of-Use (TOU) tariff and an event-based tariff, becomes economically beneficial, and second, to review customers’ experiences with the tariffs. The methods identify the specific consumption distributions at which the TOU or event-based tariffs are in energy- and cost-equilibrium with the domestic service tariff for residential customers. For the TOU structure, the analysis shows that customers must maintain a non-winter-to-winter-peak consumption ratio exceeding 3.0756 for cost neutrality, a condition rarely met by households with winter-dominant loads. In contrast, event-based structures require only minimal behavioral adjustments to achieve savings, with as little as 1.75% of annual consumption needing to be avoided during event periods to match domestic-service costs. Additional savings are observed with partial or full load shifting away from peak events. The findings highlight that while TOU may benefit households with high summer usage, event-based tariffs present a more practical and economically favorable option for residential customers living in the Canadian province of Nova Scotia. The paper concludes with implications for tariff selection and consumer behavior. This research will be of value to anyone considering designing a time-varying rate or having to choose between an existing flat-rate tariff and a time-varying tariff.