Utility Averaging Policies—Impact on Consumer's Energy Usage

Abstract

Average Monthly Payment (AMP) plan is a utility policy designed to assist consumers in need such as low income and elderly. This study examines whether this utility policy is an advantage to these target customers. Results indicate that, with a muted price signal, the AMP plan produces an effect contrary to the objective of assisting low and fixed income consumers. Further, the study indicates consumers on the AMP plan consume more energy and the AMP plan does not appear to support energy conservation and efficiency.

Automatic Bill Payment and Salience Effects: Evidence from Electricity Consumption

“…The effect is larger among recent accounts except summer-conserving homes. These results are similar to those of Ha et al (1993), who estimated that households enrolled in budget-smoothing programs consumed 10% more electricity than those not enrolled in the programs. They did not, however, control for selection.…”

“…Table 3 also provides new evidence of the impact of budget billing programs on electricity consumption. Though the literature includes previous estimates of the impact of these programs on electricity consumption (McDermott et al, 1980;Williams et al, 1990;Beard et al, 1998;Ha, Williams, & Weber, 1993), none afford the internal validity of the fixed-effects estimation of this paper. On average, budget billing induces a 6.73% increase in consumption across all residential accounts, as shown in column 1 of table 3.…”

Subsidies versus mental accounting nudges: Harnessing mobile payment systems to improve sanitation

“…The monthly-billing treatment was meant to mimic the features of ‘budget billing’ or ‘average monthly payment’ billing offered by many US utilities to allow consumers to smooth utility payments across months. Proponents of bill smoothing systems suggest that they help poorer households pay for their utility bills by providing a savings mechanism to smooth expenses across months and they make electricity bills less variable and more predictable (Beard et al, 1998; Ha et al, 1993).…”

“…Evaluation of bill smoothing programs in the US shows that consumers use more electricity when offered a bill smoothing program (Ha et al, 1993), and that adoption of the program varies substantially with the associated fees (Beard et al, 1998). Because utilities tend to be local monopolies, they can take advantage of a large amount of information on past use of their services.…”

It Is Time to Change How We Think about Electricity: Getting the Consumer Involved

“…Ironically, there was an often‐repeated concern that once customers adopted conservation and demand‐management options, the incentives created by the lower bills would encourage expanded demand or the so‐called snap back effect (Costello and Galen ). Regulators would routinely reject the adoption of time‐of‐use pricing because of the potential bill impacts for customers (Beard, Gropper, and Raymond ; Ha, Williams, and Weber ) . And yet that is exactly what was necessary to induce behavioral changes necessary to achieve conservation and other goals.…”