Conference Agenda

Time-of-use (ToU) tariffs are an economically appealing mechanism for managing peak electricity demand, but low consumer adoption and suboptimal usage tend to limit their real-world effectiveness. This paper examines four potential economic and behavioural barriers that may underpin the issue: (1) Potential savings from ToU tariffs may be insufficient given the electricity-use changes required to achieve them. (2) Consumers may have imperfect knowledge of how time-of-use tariffs work. (3) Consumers may lack understanding about which electricity-use changes would be financially beneficial under a ToU plan. (4) Consumers may hold incorrect perceptions about how ToU pricing impacts their total electricity costs. We develop an online survey experiment to assess consumer comprehension of ToU tariffs, preferences for adopting the plans, and the role relevant information disclosures can play in encouraging their uptake. Using a multiple price list, we derive novel estimates of consumers’ willingness to accept (WTA) ToU tariffs specifically designed to provide bill discounts conditional on consumers making changes to the timing of their electricity usage. Randomised information treatments are used to experimentally evaluate the impacts of tariff knowledge and price salience on WTA. We find that the compensation consumers require to change behaviour under ToU tariffs can be substantial but varies significantly with the information presented. Our results suggest that the salience of the marginal per-unit electricity prices that ToU tariffs entail are a particular deterrent to adoption. In contrast, our knowledge interventions do not significantly affect willingness-to-accept. Furthermore, we find that baseline tariff understanding is high in our sample and is not improved by our interventions. The findings highlight the importance of understanding the nuances of the trade-offs consumers face when selecting an electricity tariff.