Consumer Acceptance of Time-of-Use Tariffs: The Role of Information and Price Salience

Time-of-use (ToU) tariffs are an efficient mechanism for managing peak electricity demand, but consumer adoption remains low and usage suboptimal. This paper examines three possible economic and behavioral barriers: (1) The monetary compensation available under ToU tariffs may be insufficient relative to the effort required to make savings. (2) Consumers’ perceptions of how ToU pricing affects their total bill may influence adoption. (3) Consumers may have imperfect knowledge of how time-of-use tariffs operate. We develop an online survey experiment with a representative sample (N = 1,000) to assess preferences for adopting ToU tariffs and test whether targeted information disclosures affect willingness to accept (WTA) such plans. Using a multiple price list, we derive novel estimates of consumers’ WTA for ToU tariffs that provide bill discounts conditional on shifting electricity use. Randomized information treatments are used to experimentally evaluate the impacts of price salience and tariff knowledge on WTA. We find that the compensation required to change consumption under ToU tariffs can be substantial but is sensitive to how price information is presented. Making marginal per-unit prices salient significantly increases WTA estimates compared to when per-unit prices are merely implied. Fully-informed consumers demand compensation that exceeds what tends to be available in retail markets. In contrast, our knowledge interventions do not significantly affect WTA. Comprehension tests suggest a high baseline level of tariff understanding that is not improved by simple interventions.