  Price based demand response schemes may significantly improve power system
efficiency. Additionally, it is desired that such schemes yield improved power
operation, by reducing the peak consumption. This paper proposes the Intraday
Block Pricing (IBP) scheme, aiming to promote effective demand response among
consumers by charging their electricity usage based on intraday time-slots. To
design the prices associated with the proposed scheme, we formulate a bilevel
optimization problem that aims to minimize the Peak-to-Average Ratio (PAR) and
simultaneously benefit the consumers and the utility company. The bilevel
problem is converted into a single-level Mathematical Program with Equilibrium
Constraints (MPEC). The resulting MPEC is non-convex and includes nonlinear
constraints. Hence, to obtain a solution, it is relaxed into a Mixed Integer
Linear Program by dealing with all nonlinearities. To evaluate the
conservativeness of the proposed approach, a lower bound to the cost of the
original bilevel problem is obtained. The applicability of the proposed scheme
is demonstrated with simulations on various case studies, which exhibit a
significant reduction in PAR and economic gains for the utility company and
consumers. Moreover, simulation results show that the solutions of the original
and relaxed problems are equivalent, demonstrating the effectiveness of the
proposed solution approach. Further simulation results demonstrate significant
advantages in the performance of the IBP scheme when compared to existing
schemes in the literature.
