The Effects of Time-of-Use Electricity Rates on New York Dairy Farms
Schenkel, Mark; Boisvert, Richard N.
Recent concern among New York dairy farmers has grown regarding potential increases in energy costs as upstate utilities, under mandate from the New York Public Service Commission, move to time-of-use electricity rates. Furthermore, since it is often desirable to maintain relatively fixed intervals between daily milkings, farmers have expressed further concern about their ability to shift electricity consumption from expensive peak period hours to relatively inexpensive off-peak hours. To determine the effects of time-of-use electricity rates on New York dairy farms and to gain a better understanding of methods farmers can adopt to save energy, an empirical model estimating the time-of-day demand for electricity is developed. The parameters from this model are used to simulate load curves for a sample of farms. The time-of-use rates for four upstate utilities are used in conjunction with these load curves to estimate electricity costs under time-of-use and flat rates. Farm characteristics are regressed on the percentage change in the electricity bills for this sample of farms to derive relationships to explain how to reschedule dairy operations to reduce electricity costs under time-of-use rates. The empirical results indicate that electricity bills will fall for the majority of farms in the move to time-ofuse electricity rates. Savings are an increasing function of farm size since larger farms can more easily spread the higher customer charge that accompanies time-of-use rates. There appear to be few incentives for farmers to reschedule dairy operations to realize additional savings under time-of-use pricing.
Charles H. Dyson School of Applied Economics and Management, Cornell University