Tiered tariff rates

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Tiered tariff rates

grampajohn
Administrator
Tariffs with tiered rate structures are common. For example, my rate for off-peak usage is about a 10% discount from the flat rate for usage up to 400 kWh/mo, and drops to about a 50% discount for monthly usage after that. So last month, when I used about 800 kWh for my heat pump and water heater, the aggregate rate for the off-peak meter was about 70% of the flat rate. Other tiered rates have higher rates once a usage threshold is reached, presumably to encourage energy conservation. You can see these in the Boulder "smart grid city" tariffs, and in many of the British tariffs we have been looking at.

Representing tiered-rate tariffs is not hard, but there are two problems with computing customer bills using them. The first is not too hard but requires some bookkeeping, the second has the potential to distort the effect of tiered rates.

1. We want to track the broker's cash position frequently, preferably once/timeslot. But the usage threshold for a tiered rate is presumably measured over many timeslots, such as weekly or monthly. This could be solved by billing at the first rate until the threshold is reached during the measurement interval, then switching to the second rate until the end of the measurement interval. This would require that the customer subscription keep track of the overall usage per customer since the beginning of the current measurement interval.

2. In a population model, it is not possible to separate out individual customers, and so a tiered rate can only apply to the population. This will, of course, hide individual variations among customers, but probably the aggregate result would be similar unless there is wide usage variation among members of a population. This is because low-usage customers would offset high-usage customers, thereby delaying or eliminating the applicability of the second-tier rate for the higher-usage customers, and changing the resulting broker revenues. In addition, the measurement period would have to be fixed for all customers, and so there would be some distortion due to customers opting in and out of the tariff during a measurement period. Presumably these effects would cancel each other out over the life of a tariff.
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RE: Tiered tariff rates

Wolf
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I would prefer the first model. The only problem I guess is if the customer population becomes really large, therefore we initially decided to the aggregate model.

 

From: grampajohn [via Power TAC Developers] [mailto:[hidden email]]
Sent: Saturday, January 08, 2011 06:51 PM
To: Wolf Ketter
Subject: Tiered tariff rates

 

Tariffs with tiered rate structures are common. For example, my rate for off-peak usage is about a 10% discount from the flat rate for usage up to 400 kWh/mo, and drops to about a 50% discount for monthly usage after that. So last month, when I used about 800 kWh for my heat pump and water heater, the aggregate rate for the off-peak meter was about 70% of the flat rate. Other tiered rates have higher rates once a usage threshold is reached, presumably to encourage energy conservation. You can see these in the Boulder "smart grid city" tariffs, and in many of the British tariffs we have been looking at.

Representing tiered-rate tariffs is not hard, but there are two problems with computing customer bills using them. The first is not too hard but requires some bookkeeping, the second has the potential to distort the effect of tiered rates.

1. We want to track the broker's cash position frequently, preferably once/timeslot. But the usage threshold for a tiered rate is presumably measured over many timeslots, such as weekly or monthly. This could be solved by billing at the first rate until the threshold is reached during the measurement interval, then switching to the second rate until the end of the measurement interval. This would require that the customer subscription keep track of the overall usage per customer since the beginning of the current measurement interval.

2. In a population model, it is not possible to separate out individual customers, and so a tiered rate can only apply to the population. This will, of course, hide individual variations among customers, but probably the aggregate result would be similar unless there is wide usage variation among members of a population. This is because low-usage customers would offset high-usage customers, thereby delaying or eliminating the applicability of the second-tier rate for the higher-usage customers, and changing the resulting broker revenues. In addition, the measurement period would have to be fixed for all customers, and so there would be some distortion due to customers opting in and out of the tariff during a measurement period. Presumably these effects would cancel each other out over the life of a tariff.


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Re: Tiered tariff rates

Carsten Block
Administrator
Hi!

A agree with you in both points, John.

The bookkeeping is not too hard to realize: (i) customer x reports his true demand for a timeslot, (ii) accounting service gets this information and then looks up customer x's current tariff, (iii) if a tiered rate is agreed and the demand is exceeding the threshold level, two CashUpdate instances are generated: The first is the booking for the "normal" consumption, the second for the "peak consumption". Same would apply for the generation side.  

Concerning the population issue: I would also strongly prefer to keep populations homogenous, even though this might mean that a whole population enters "peak demand" at once. We just have to keep populations reasonably small. Everything else seems to become very soon very complex again.

Best,
Carsten 


Am 09.01.2011 um 20:58 schrieb Wolf [via Power TAC Developers]:

I would prefer the first model. The only problem I guess is if the customer population becomes really large, therefore we initially decided to the aggregate model.

 

From: grampajohn [via Power TAC Developers] [mailto:<a href="x-msg://3/user/SendEmail.jtp?type=node&amp;node=2222916&amp;i=0" target="_top" rel="nofollow">[hidden email]]
Sent: Saturday, January 08, 2011 06:51 PM
To: Wolf Ketter
Subject: Tiered tariff rates

 

Tariffs with tiered rate structures are common. For example, my rate for off-peak usage is about a 10% discount from the flat rate for usage up to 400 kWh/mo, and drops to about a 50% discount for monthly usage after that. So last month, when I used about 800 kWh for my heat pump and water heater, the aggregate rate for the off-peak meter was about 70% of the flat rate. Other tiered rates have higher rates once a usage threshold is reached, presumably to encourage energy conservation. You can see these in the Boulder "smart grid city" tariffs, and in many of the British tariffs we have been looking at.

Representing tiered-rate tariffs is not hard, but there are two problems with computing customer bills using them. The first is not too hard but requires some bookkeeping, the second has the potential to distort the effect of tiered rates.

1. We want to track the broker's cash position frequently, preferably once/timeslot. But the usage threshold for a tiered rate is presumably measured over many timeslots, such as weekly or monthly. This could be solved by billing at the first rate until the threshold is reached during the measurement interval, then switching to the second rate until the end of the measurement interval. This would require that the customer subscription keep track of the overall usage per customer since the beginning of the current measurement interval.

2. In a population model, it is not possible to separate out individual customers, and so a tiered rate can only apply to the population. This will, of course, hide individual variations among customers, but probably the aggregate result would be similar unless there is wide usage variation among members of a population. This is because low-usage customers would offset high-usage customers, thereby delaying or eliminating the applicability of the second-tier rate for the higher-usage customers, and changing the resulting broker revenues. In addition, the measurement period would have to be fixed for all customers, and so there would be some distortion due to customers opting in and out of the tariff during a measurement period. Presumably these effects would cancel each other out over the life of a tariff.


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