A pilot program in Chicago could help make variable rate pricing for electricity a reality for consumers. The idea is straightforward: Because the demand for electricity varies from day-to-day, as well as by time of day, electricity prices should reflect this fact. This would encourage consumers to shift some electricity use, such as running the dishwasher, from peak daytime hours into the evening. Some industrial users already purchase electricity this way, but the benefits of implementing such reforms could be signficiant -- and would move retail electricity service in the direction of an actual market in which prices provide information about supply and demand.

The NYT reports:

Most people are not aware that electricity prices fluctuate widely throughout the day, let alone exactly how much they pay at the moment they flip a switch. . . .

Just as cellphone customers delay personal calls until they become free at night and on weekends, and just as millions of people fly at less popular times because air fares are lower, people who know the price of electricity at any given moment can cut back when prices are high and use more when prices are low. Participants in the Community Energy Cooperative program, for example, can check a Web site that tells them, hour by hour, how much their electricity costs; they get e-mail alerts when the price is set to rise above 20 cents a kilowatt-hour.

If just a fraction of all Americans had this information and could adjust their power use accordingly, the savings would be huge. Consumers would save nearly $23 billion a year if they shifted just 7 percent of their usage during peak periods to less costly times, research at Carnegie Mellon University indicates. That is the equivalent of the entire nation getting a free month of power every year.

Meters that can read prices every hour or less are widely used in factories, but are found in only a tiny number of homes, where most meters are read monthly.

The handful of people who do use hourly meters not only cut their own bills, but also help everyone else by reducing the need for expensive generating stations that run just a few days, or hours, each year. Over the long run, such savings could mean less pollution, because the dirtiest plants could be used less or not at all.