Do distribution companies loose money with an electricity flexible tariff?: A review of the Chilean case

• We propose a TOU (Time of Use) system for electricity consumption in Chile.
• In this system the optimal prices are obtained in order to maximize total income of (distribution companies) DISCOs.
• The proposed TOU system may lead to a win–win situation among DISCOs and consumers.
• This system, implemented in a country like Chile, would allow for DISCOs a total potential benefit of M$811.7.
• Benefit obtained for 3-year study period with initiatives that promote 5% savings in real consumption during on-peak hours.

We can get an (energy efficiency) EE improvement if we produce a flatter daily load curve, leading to a higher efficiency of the power system, making better use of the generation and transport electricity chain, thus avoiding over-investment in equipment used just few hours a year. Tariff flexibility of the (Time of Use) TOU type is one of these measures. Generally, TOU systems are designed to minimize total system cost, which may cause losses in distribution companies (DISCOs), generating opposition. On the contrary, the present paper proposes a TOU system for electricity consumption in Chile where optimal prices are obtained in order to maximize total income of DISCOs. In this manner, the proposed TOU system is, by definition, beneficial for DISCOs and it may lead to a win–win situation among DISCOs and consumers. In particular, we show that such a system, implemented in a country like Chile, would allow for DISCOs a total potential benefit of 811.7 millions of dollars for the 3-year study period (2005–2007), considering initiatives that promote a 5% savings in real consumption during on-peak hours, obtained by the spread or difference between the proposed and the current systems.