Association for Public Policy Analysis & Management

Low-income households may face energy poverty, a situation where they are forced to choose between spending money on energy to maintain indoor comfort or spending that same money on other necessities such as food or rent. Demand-side response pricing systems such as time-of-use (TOU) rates have the potential to either assuage or exacerbate energy poverty. However, current literature examining demand-side response only peripherally considers low-income households. Compared to the population at large, low-income households are expected to be significantly more subject to financial pressures, both as motivation to change behavior and as a possible detrimental effect associated with shifting to TOU rates; smart meters have been found to reinforce awareness of energy spending in some households, in turn increasing pressure to curtail use. Low-income households are also more sensitive to electricity prices, with higher demand elasticity when prices change.

We use ordinary least squares multiple regression to examine predictors of intent to remain on TOU, reported by several thousand low-income households that participated in a pilot TOU program. Our data set includes both household responses to a mid-pilot survey, and household monthly billing and hourly usage during the pilot and for two years prior. It is hypothesized that compared to higher-income households, lower-income households will (H1) have greater percentage-wise on-peak reductions, and (H2) report stronger intentions to remain on TOU after the pilot ends if they receive lower bills during the TOU pilot; that is, we expect that income will moderate the effect of actual savings on TOU acceptance. We additionally examine the relationship between low-income status and frequency of reported discomfort when trying to save money on TOU rates. It is hypothesized (H3) that low-income households will more frequently experience discomfort due to decisions to curtail usage during on-peak times. Finally, we examine whether low-income households that experience discomfort due to curtailment report stronger intentions to remain on TOU after the pilot – the direction for this could be positive if the households associate discomfort with monetary savings and so consider TOU overall as a way to manage spending, or negative if the discomfort associated with curtailment during on-peak times is considered to be a disadvantage of TOU rates. Low-income households making such curtailment decisions may be at risk of exacerbating health issues associated with indoor comfort, and TOU programs that promote this behavior may risk exacerbating existing inequities in quality of life associated with limited income and energy poverty.