Turns Out Behavioral Nudges Work

Photo credit: Robert Couse-Baker, CC BY 2.0.

Today in “remember how Richard Thaler won the Nobel Prize in Economics?” we go to Bloomberg Businessweek and Sacramento’s recent decision to automatically enroll people in variable-pricing electricity plans (essentially, they’d get charged more for electricity during peak usage hours):

The customers who had been automatically enrolled in variable-pricing plans ended up embracing them, albeit slowly. Those enrolled in the “critical peak pricing” plan cut their electricity consumption during high-cost peak periods by 7 percent. By shifting their consumption to cheaper, off-peak periods, they reduced their monthly bills on average. The 7 percent decline was meaningful, although not as big as the 25 percent reduction by people who opted in to the plans and were presumably savvier consumers.

This is a win-win for both consumers and the city of Sacramento. (It costs a lot of money to provide a lot of people with electricity, especially during peak hours.)

But here’s my question: how did they cut their electricity consumption? Did they turn off the lights and bask in the glow of their fully-charged laptops and phones? My guess is that they probably turned their air conditioners up a few degrees—or maybe turned them off completely during peak periods—but I’m still curious about how they started using 25 percent less electricity.

Any Sacramento Billfolders want to weigh in?