Through the application of flexible Time-of-Use (ToU) tariffs, demand side management (DSM) can be facilitated in order to alleviate grid congestion problems and potential network reinforcement. In this work, a novel approach to derive ToU tariffs for residential prosumers is described and the potential impact is verified in a pilot network within the distribution grid of Cyprus comprised of three hundred prosumers. This pilot network acts as a test-bed for defining the baseline scenario and subsequently verifying the developed ToU tariffs. The ToU block periods were determined by combining statistical analysis and a hybrid optimization function that utilizes annealing driven pattern search algorithms. The ToU rates were calculated by exploiting an optimization function that maintained a neutral electricity bill in the case where the load profile remained unchanged. The impact of the derived ToU tariffs was first analysed through a sensitivity analysis performed on the seasonal load profiles of the participants. The obtained sensitivity analysis results showed that for the summer and winter season, the maximum Load Factor (LF) was 42.83% and 33.33% respectively and occurred when load was shifted mainly to the off-peak period. Finally, with the ToU tariffs applied to the pilot network of prosumers, the effectiveness and potential response of the prosumers to the imposed tariffs, was verified. The results indicated that the LF was increased while the percentage of total consumption measured during peak hours was reduced by 3.19%, 1.03% and 1.40% for the summer, middle and winter season respectively. This led to the conclusion that the derived ToU tariffs are effective in persuading the prosumers to change their energy behaviour. (C) 2017 Elsevier Ltd. All rights reserved.