Price responsiveness in electricity markets: Implications for demand response in the Midwest

February 2, 2016

This paper provides an empirical analysis of price responsiveness in retail and wholesale markets in the Midcontinent ISO electricity markets. In the retail market, consumers do not often observe real-time price changes and pay a pre-determined flat rate, but are able to respond to price over longer time periods. In the wholesale electricity market, buyers are able to adjust their electricity purchases based on real-time price changes. Our findings show that retail industrial customers respond differently in different across states in the Midwest. The authors also find differences in real-time wholesale price elasticities between sub-regional pricing hubs in the MISO footprint. Results suggest that the observed differences in price responsiveness of demand across market levels and sub-regions are associated with demand response program adoption.

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