A Win–Win Mechanism for Electricity Procurement by a Local Distribution Company

A time-of-use rate option design allowing an LDC's customers to allocate their consumption to be billed at the fixed and daily-varying TOU rates offers a win–win mechanism for electricity procurement in the face of uncertain spot prices and hedging options. Even if all customers have the same risk preferences, the proposed mechanism is Pareto-superior to the tariffs and procurement strategies commonly used in North America.