Abstract Demand response aims to change the energy consumption patterns of normal customers in response to changes in price rate or incentive offers. This process reduces peak loads and in turn potentially lowers the energy cost for customers. In this study, we propose a new demand response scheme on the basis of an adaptive consumption level pricing scheme. On the one hand, this strategy encourages customers to manage their energy consumption and consequently lower their energy bill. On the other hand, it allows utilities to manage the aggregate consumption and predict load requirement. Unlike other pricing schemes, such as block tariff and time-of-use, the proposed pricing scheme can lower the energy bill of about 73% of customers, assuming that the total utility revenue is the same for all pricing schemes. On the basis of the currently available schemes in the literature, we find that the proposed method has significant advantages over other schemes in terms of fairness in charging customers.