A Bilevel Framework for Optimal Price-Setting of Time-and-Level-of-Use Tariffs

Power systems face higher flexibility requirements from generation to consumption due to an increasing injection of non-controllable distributed renewable generation. Time-and- Level-of-Use is a recently proposed energy pricing scheme for Demand Response, designed for residential users and providing suppliers with robust guarantee on the consumption. We for- mulate the supplier decision as a bilevel, bi-objective problem optimizing for both financial loss and guarantee. A decomposition method is proposed, related to the {\epsilon}-constraint and optimal value transformation. It allows for the computation of an exact solution by finding possible Pareto-optimal candidate solutions and then eliminating dominated ones. Numerical results on experimental residential power consumption data show the method effectively finds the optimal candidate solutions while optimizing costs only or incorporating risk-aversion at the lower-level.

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