UC Santa Barbara

Consider a public utility that offers its service at two different times. We study the effects of a change from uniform pricing through the day to peak-load pricing. We show that a regulated utility constrained to a fixed rate of return on capital can plausibly reduce its prices in both peak and off-peak times. Peak-load pricing can lead to either increased or decreased amount of capital for a regulated firm. We find a simple criterion for whether an individual gains or loses form pesk-load pricing.