If I'm reading correctly, I think what you are referring to is tiered pricing, where the price for consumption is dependent on how much you consume.  However, in tiered pricing there are no consumers who would actually get paid for using less, they would simply have a lower price per kwh.  Hydro One in Ontario uses a two-tier pricing system, where the summer rate is $0.058 for the first 600kwh and $0.067 for usage above the 600kwh.  I agree that using a tiered pricing scheme would definitely reward people for consuming less.  I'd like to see more tiers as well, perhaps at every 200kwh increment, with a price that increases non-linearly with the amount consumed.
Yeah, that's pretty much it, but  (i) the consumers who conserve should benefit, which certainly is not the case now, and (ii) the tiers have to ultimately penalize high usage pretty steeply, if conservation is ultimately the goal.  
Tiered pricing has some problems, though.  Should two people sharing a house be penalized if they use 50% more than their single-person neighbor (energy-per-person is lower, but energy-per-house is higher)?  Should parents get a higher limit even if they purposly created offspring?
By example, another problem with tiered pricing. I heat with electricity but my neighbour heats with gas. I'm using quite a bit more electricity (90% hydro-generated for BC, where I live) but I'm definitely conserving gas. The utility company can't recognise conservation in this circumstance.