How dynamic pricing options can help
Utilities maximize revenues
When it comes to paying for use of electricity, water or gas utilities, different rates charged at different time of the year by a Utility company comprises what is called as dynamic pricing. This change in the pricing is done to reflect the cost of electricity which differs with time. As it is a known fact that electricity cannot be accumulated and can be consumed immediately when the demand is high, it is important to keep some spare peak generation capacity to meet the fluctuating demand of electricity.
Dynamic pricing options can help the consumers to utilize maximum value out of resources as such solutions lure consumers to decrease their usage at peak times. Dynamic pricing can be defined in a variety of forms, however the most sophisticated form, known as real time pricing (RTP) and time-of-use (TOU), is believed to be the simplest form. In between these two extreme forms lies critical peak pricing (CPP).
The RTP is calculated instantaneously while the prices for TOU are usually fixed in advance. The pricing for CPP are calculated approximately 100 hours in advance. A popular variant of CPP is known as peak time rebates (PTR). In this, the consumers are priced at standard rates, however they can earn a rebate by decreasing their usage in the peak hours.
Each dynamic pricing option symbolizes a different combination of rewards and risks for the consumers. RTP offers the highest reward to the customers as compared to the traditional flat rate dynamic pricing but it comes along with highest risks also. In contrast, TOU offers its clients least potential rewards along with lowest risks. Depending on an individual’s risk preferences, he could choose a pricing regime. The selected pricing regimen would have the appropriate rate design thereby maximizing benefits for consumers and revenues for Utility companies.
People in large number support dynamic pricing; however some kind of doubt still remains regarding its efficacy. With SURE! Solution consumers can opt for automated utility billing services so that all their bills are not only paid on time but can also be paid via multiple payment channels which includes both offline and online channels.
There are several myths which have been perceived such as dynamic pricing options don’t really help utilities to maximize revenues, however the opposite is true.
Less number of populace respond to dynamic pricing
It is believed that consumers do not change their activities or behavior when they are faced with dynamic rates. But in a large number of cases, it has been seen that customers do respond well to dynamic pricing rates. They respond by lowering their peak usage. The myth that customers do not respond well to dynamic pricing is not supported by the facts.
Response of consumers does not fluctuate with dynamic pricing
It is generally seen that higher the incentive the greater would be the demand response. Customer’s response as well as its magnitude varies with the dynamic pricing. When a survey was conducted, it was seen that for a given elasticity of substitution, customer’s demand response tends to increase.
New technologies do not increase demand response
In the last few years, a large number of new technologies have been introduced for the benefit of customers in order to help them to understand the usage patterns. Consumers can automatically control various functions of cooling and heating systems that has been installed in their homes. Many critics have challenged this system as they believe that it is not cost effective and is unnecessary, however the facts say the other way around.
Customer response do not remain constant over a set period of time
It has been argued that customer response does not last for multiple days at a stretch and it may change with time. However, dynamic pricing can help in continuing the demand response over a large time period. According to a survey, not only the participants maintain their responsiveness to price but they also increase it. This suggests that consumers may have actually learnt to decrease their load on a dynamic rate.
Low income customers would be affected by dynamic pricing
When people agreed that they can reap benefits from dynamic pricing there was a disagreement about its impact on low-income customers. Some people believe that because people who have low-income use less power they would be unable to shift the load. As a result, dynamic pricing would not be beneficial for them. However, from an evaluation it has been noted that such customers would be able to save their money immediately.
Utility companies that lie across the globe face competition and pricing pressure. The utility billing system of SURE! has been designed in such a manner that it can help you make good relations with your customers.