Investment decisions under time-of-use rates and their relationship to utility system planning are examined. Optimal investment and price under social welfare maximization are derived and compared with the results of static analyses. For a multiplant case, the optimal pricing and investment policy are characterized by a plant of lower cost in a wide range of cost parameters. It is found that the second-best price, the so-called Ramsey price, is higher than the best price by an amount proportional to the ratio of deficit to revenue of an electric utility.>
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Kaya et al. (1989) studied this question.