Offering Time-of-Use Electricity Rates to Households in a Formerly Centrally Planned Economy: Insights from Consumer Tests in Poland

Electricity companies have become interested in demand-side resources for reasons of conservation and efficiency. Previous empirical evidence demonstrated that more advanced (nonlinear) price schemes may be successfully used effectively to manage consumers’ electricity demand in highly developed market economies. This article shows that it is as possible in moderately developed countries with less experience with a market economy. Data were taken from a unique field study conducted in a midsize city in central Poland (Kalisz), in which approximately 750 households voluntarily agreed to use time-varying rates, instead of the flat rate previously used. The study is based on a detailed analysis of changes in average usage patterns in 15-minute intervals. On average, consumers reacted to price signals as predicted by the traditional economic model of a rational consumer, the change in usage depended on the rate design. It can be argued that at the initial stage, when nonlinear pricing schemes are introduced, simpler rates are preferred, as consumers may have difficulty understanding new rates. Simplicity seems to be the key factor that helps to overcome possible cognitive problems and behavioral anomalies when consumers are exposed to new pricing practices.