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Discussion

Real-time pricing exposes the consumer to

  • A.a single rate averaged over the whole year
  • B.a penalty for exceeding a contracted demand
  • C.the wholesale price as it varies hour by hour
  • D.a fixed schedule of rates known a year in advance

Answer: C

Correct answer: the wholesale price as it varies hour by hour

Real-time pricing passes the market price straight through, so the signal is exact and the consumer sees the true cost of consuming at that moment. The difficulty is exposure: prices can rise by an order of magnitude in an hour, so the arrangement suits consumers who can respond and can bear the risk.

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