Association for Public Policy Analysis & Management

Increasing penetration of energy efficiency and distributed renewable energy generation has imposed significant challenges for the utilities to recoup their large upfront cost. There is a heated debate on what tariffs should be implemented to help utilities recover their fixed cost; however, very few studies focus on consumers’ attitudes regarding this topic. Appropriate energy prices should ensure that the utilities collect sufficient revenues as well as consider consumers’ attitudes and acceptance of new surcharges. This study surveys about 190 residential consumers throughout the United States nationwide in November 2015, investigating their preferences and attitudes towards extra demand charges and volumetric energy price increases.

The online survey was created using Qualtrics and distributed through Amazon Mechanical Turk (Mturk). In this study, the survey participants were at least 21 years old, and had to be internet or smart phone users for Amazon Mturk. The participants were asked to answer questions on their preferences and attitudes towards two types of surcharges. Certain demographic and behavioral factors of the consumers were also collected in the study. The demographic variables include gender, the state, age, income, education, number of children, and living situation. Behavioral variables include typical summer bill amount, knowledge on energy bills, whether there is attempt to save energy, energy efficient appliance/PV ownership, plan to invest in next 5 years, whether or not enrolled in any utility sponsored energy efficiency programs/ solar programs, etc.

The survey responses show that most consumers (85% of the survey participants for energy efficiency and 87% for solar energy) agree that energy efficiency programs and solar panel installation save them money on their energy bills. More consumers agree that solar panels (74%) reduce the revenues for utilities when compared to energy efficiency (41%).  Most consumers disagree that it is fair for utilities to cover revenue losses from energy efficiency or solar panels by increasing volumetric electricity prices. Overall, the consumers prefer a demand charge (74% for energy efficiency and 75% for solar panels) to an increase in volumetric energy price.

We apply probit models and regress consumers’ attitudes on selected demographic and behavioral variables. The results indicate homeowners are more likely to prefer demand charges when compared to renters. The demographic and behavioral variables impact consumers’ attitudes on bill savings from energy efficiency programs or solar panels installation. The demographic and behavioral variables also influence how consumers perceive the fairness of utilities recovering revenue losses incurred by energy efficiency program or solar energy by increasing the volumetric energy price. In this paper, we demonstrate there is preference heterogeneity among consumers and that policy makers should be aware of such preference heterogeneity and apply policy targeting based on the demographic and behavioral factors identified impacting consumer preferences. Utilities should explore the demographic and behavioral factors of the consumers in their service territory and provide energy efficiency program and solar consumers with most suitable energy price options.