Under real time pricing (RTP) tariffs, electricity consumers are charged prices that vary over short time intervals, typically hourly, and are quoted one day or less in advance to reflect contemporaneous marginal supply costs. RTP differs from conventional retail tariffs, which are based on prices that are fixed for months or years at a time to reflect average, embedded supply costs. In recent years, a resurgence of interest in RTP has occurred. Economists recognize that providing electricity consumers with price incentives to reduce their usage when wholesale prices rise would improve the performance of wholesale electricity markets in two important ways: mitigating suppliers' ability to exercise market power and dampening price volatility.
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