Promoting Electricity Conservation through Consumer Education

Electricity companies around the world use complex pricing schemes to promote affordable basic electricity services while also encouraging conservation for those who use more electricity. Unfortunately, the basic goals of such pricing systems risk being undermined by their sheer complexity: if households do not understand how they are being charged for electricity, they cannot react to the prices in the manner that policymakers or the utility had hoped. A team of Stanford students from the Econ 121 course and researchers from PESD undertook a randomized controlled trial in Mexico to test the theory that providing actionable information in a clear, engaging, and straightforward manner could encourage electricity customers to make smarter decisions, save money, and conserve energy. The students “treated” over 200 Mexican households by explaining how their electric bills are actually calculated, as well as showing them the effective price they pay to use their electric appliances. This is among the first attempts to carry out such energy pricing field experiments in developing country settings and the results are highly encouraging, with an average electricity use reduction of 6% for high consuming households that received this information.

Speaker: Ognen Stojanovski, Stanford