Novel Electricity Pricing Method Based on the Customers’ Risk Aversion Function

Articles in Press

Document Type : Research paper

Authors

Faculty of Electrical and Computer Engineering, Urmia University, Urmia, Iran.

Abstract

Electricity pricing approaches are generally categorized into flat-rate and dynamic pricing models. Flat-rate pricing charges a fixed rate regardless of market conditions, whereas dynamic pricing adjusts rates based on system and market factors. Traditional pricing methods often lack flexibility, preventing consumers from choosing their preferred pricing plans. This study introduces a Selective Electricity Pricing (SEP) model that allows customers to select a Maximum Tolerable Price (MTP) tailored to their needs and benefit from Real-Time Pricing. The SEP model also includes a retailer-funded mechanism to shield customers from high market prices, acting as a risk hedge. Using a risk aversion function to gauge consumer preferences, the SEP method was implemented on the IEEE-24 test system. Results indicate that low-risk customers are more likely to engage in dynamic pricing. The SEP model significantly outperforms flat-rate pricing, yielding 17.27% higher retailer profits, 11.32% lower demand, and a 2.73% increase in average customer payments, compared to a 2,500MW drop under flat-rate pricing.

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References

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Journal of Operation and Automation in Power Engineering

Articles in Press, Corrected Proof
Available Online from 20 December 2024

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History

  • Receive Date: 08 April 2024
  • Revise Date: 06 August 2024
  • Accept Date: 26 August 2024
  • First Publish Date: 20 December 2024

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