A. Tishler et Y. Ye, MINIMAL ADJUSTMENT COSTS, FACTOR DEMANDS, AND SEASONAL TIME-OF-USE ELECTRICITY RATES, Resource and energy economics, 15(3), 1993, pp. 313-335
In time-of-use (TOU) pricing schemes, utilities charge rates that depe
nd on the time of day and the season of the year at which electricity
is used. Estimates of the effects of TOU rates on business customers i
n the US and Israel have differed widely; however, the actual response
by business customers in the aggregate is very small. Most firms do n
ot appear to respond at all, but those that do respond make substantia
l adjustments to newly introduced TOU rates. In this paper we show tha
t adjustment costs associated with changing the level of employment ca
n explain the observed pattern of behavior in the US and Israel. We de
velop a model that predicts whether a firm will respond to the introdu
ction of TOU rates, and show that the 'average' firm in the US and Isr
ael is unlikely to respond to the current TOU rate schedules. Moreover
, the more often the price structure changes during the year, the less
likely are firms employing only one labor shift to respond. We apply
our model to TOU rates in the US and Israel and show that it predicts
the actual response to these rates quite well.