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The concept of shaping residential loads can be an effective way of controlling the load profile of a distribution company. Flat energy rates do not provide incentives to customers to use power as would be optimal from a utility point of view. With the restructuring of the power industry it is expected that prices will fluctuate in any given day. Actually real-time pricing (RTP) and demand side management have been discussed for quite some time since the 1970s. However, RTP is still a concept, and often misused with time of use. This paper describes how to design an RTP system for residential customers, by looking into some of the current problems in the electricity market, and the potential impact of demand response from residential customers.