Time-of-use rates vs. Hopkinson tariffs redux: An analysis of the choice of rate structures in a regulated electricity distribution company

Recent proposals to restructure the electricity industry in North America may effect the disintegration of a vertically integrated company into several smaller entities, including distribution companies (DISCOs). We explore whether time-of-use (TOU) pricing or a Hopkinson tariff would be more suitable for a regulated DISCO. Focusing on the economic efficiency of these alternative rate structures, we argue that a Hopkinson tariff with demand subscription is superior to TOU rates, as it can better handle the limited load diversity of local transmission and distribution (TD) demands made on the contemporary DISCO, while finessing the problem of endogenous marginal costs of local TD capacity. Copyright © 1997 Published by Elsevier Ltd.