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October 24, 2011
Article Authored by Brattle Economists Refuting Article Authored by Brattle Economists Refuting Dynamic Pricing Myths Published in Regulation Magazine

An article authored by Brattle principal Ahmad Faruqui and research analyst Jennifer Palmer assessing seven pervasive myths about residential dynamic pricing has been published in the Fall 2011 issue of Regulation magazine.

In their article, “Dynamic Pricing and its Discontents,” Dr. Faruqui and Ms. Palmer explain that while there is widespread support of dynamic pricing for residential consumers among academics and consultants, many utilities and state regulators doubt their efficiency, which has led to a delay in growth among residential consumers. In a 2009 Federal Energy Regulatory Commission survey of utilities, only four of over 1,700 respondents indicated they had non-experimental dynamic pricing programs in place for residential consumers.

Using empirical data on customer responses from numerous dynamic rate experiments, Dr. Faruqui and Ms. Palmer address and refute seven popular beliefs regarding residential dynamic pricing programs. Among the myths the authors address is that dynamic pricing will hurt low-income customers. Using a sample of residential and residential low-income consumers from a large urban utility, the authors illustrate that without any change in electricity usage, more than half of low-income customers are better off on a dynamic rate.

To read the article in its entirety, please visit the Regulation website.