Design of time-of-use rate periods for a utility

Electric utilities are turning to the time-of-use rate structure as a solution to the pricing dilemma they face by charging relatively higher prices for peak usage and lower prices for offpeak usage. An important aspect of time-of-use rate design is the determination of peak and offpeak hours of the day. This paper uses cluster analysis to delineate the appropriate hours for rate design. The procedure presented groups loads into rating periods such that peak periods contain large loads and offpeak periods contain low loads. The methodology is applied to the determination of time-of-use rating period hours for a large electric utility in the U.S. Since the optimal grouping with four seasons and three time-of-use periods was judged to be not feasible, a ‘practical best’ solution was developed by modifying it appropriately. The time-of-use rate structure has been implemented for commercial and industrial consumers on an experimental basis. A consumer opting for the new structure will be monitored using both structures and billed for the lower amount.