LIMITED ATTENTION IN RESIDENTIAL ENERGY MARKETS:

A REGRESSION DISCONTINUITY APPROACH

Quinn Keefer1 and Galib Rustamov2

Abstract

It is well known that limited attention affects consumption decisions, in particular, when
the decision environment is complex. The objective of this study is to determine whether
or not, and to what extent, limited attention is prevalent in residential energy markets.
We analyze how the tendency to focus on the left-most digit of a number affects how
residential energy consumers incorporate their monthly bills into their energy usage
decisions. We use data on more than 10 thousand randomly selected customers of a
California based utility company and examine consumption responses as measured by
changes in kilowatt hours after a bill has crossed a salient threshold. The results of a
sharp regression discontinuity indicate that consumers use significantly less electricity in
a month following their receipt of bill that crossed a given threshold, such as $50 for
lower-income households, who then show as 5.3% reduction in the consumption. This is
a much more substantial shift than that reported, for instance, by Allcott (2011), who
investigated social comparison field experiments find average reductions in energy
consumption of 2 %, but much less (0.3%) for households in the lowest decile. We find
that even at the threshold, the degree of inattention is roughly 0.7, they still tend to ignore
the actual (i.e., full) cost of energy use. As previous studies have found inattention to be
related to income, we focus primarily on lower-income households. However, there is
some evidence that higher income households have a similar response at higher
thresholds. Considering the urgent need to reduce greenhouse emissions and increase the
energy savings, our results may contribute to the design of more effective billing and
feedback mechanisms for energy-end-users.

JEL Codes: Q41, D03, D12

Keywords: Inattention; residential energy consumption; regression discontinuity;
information salience

We would like to thank Thomas Kniesner, Hal Nelson, Monica Capra, Joshua Tasoff, and
Shahana Samiullah for their helpful comments. We are also grateful to seminar audiences at the
SEA 85th Annual Meetings, Los Angeles Policy Symposium (RAND Corporation), and Bay Area
Behavioral and Experimental Economics Workshop (Stanford University) for constructive
feedback. All errors are ours alone.
1
Department of Economics. California State University San Marcos.
Email: qkeefer@csusm.edu
2
Division of Politics and Economics. Claremont Graduate University.
Email: galib.rustamov@cgu.edu

1
 1. Introduction

Climate change and increases in greenhouse gas emissions have become critical

policy issues and are likely to grow even more important. In recent years, this concern

has led scientists and policymakers to pay particular attention to energy conservation, and

there has been greater investment in studies of energy usage and the design of effective

environmental policy instruments to lower such consumption (Abrahamse et al., 2005;

Gardner and Stern, 2002; Gsottbauer, 2013). Since human behavior, including energy

consumption, is one of the threats to biodiversity and a major cause of the deterioration of

ecosystems, economists and policy makers have focused also on how they might

influence consumer behavior in order both to conserve resources and to increase energy

efficiency. In general, these policy discussions and analyses of consumer energy

conservation can be grouped into three broad categories (Allcott and Mullainathan,

2010): price-based approaches to energy conservation, stimulation of technological

developments in energy-conserving durable goods, and non-price (behavioral)

interventions to increase customer energy conservation. This last approach has not

attracted the attention of many scholars, although it has recently begun to so (Dietz,

2010).

Following this line of investigation, we examine how customers’ attention to costs

(as shown on their monthly bills) affects the demand for residential energy consumption.

Chetty (2015) argues that understanding consumer decision biases will allow us to

develop new policy tools, different from those suggested by the neoclassical model, to

affect behavior.

2
 We look specifically at limited attention—one form of decision bias—to

understand how using monthly billing statement to provide consumers with price—cost

information about their use of electricity affects their energy consumption during the

subsequent period.

The focus of this paper is the residential electricity sector, which produces

significant greenhouse gas emissions. More specifically, it looks at residential electricity

markets. In 2013, the production of electricity generated 31%, the largest component, of

greenhouse-gas emissions (Environmental Protection Agency (EPA), 2015). In 2013,

residential and commercial buildings accounted for 34% of emissions produced by

generating electricity (EPA, 2015). In 2013, residential and commercial buildings

accounted for 40% of total US energy consumption (Energy Information Administration

(EIA), 2014). Total US energy-related emissions of carbon dioxide (CO2) by the electric-

power sector in 2013 amounted to 2,053 million metric tons, or about 38% of total U.S.

energy-related CO2, a 0.7% increase over the previous year (EIA, 2015). U.S.

households’ use of electricity increased substantially, about 17%, from 1980 to 2009, as

compared to their use of other sources of energy (EIA, 2015). The increase in electricity

consumption can be explained in part by an increase in the use of household and other

electrical appliances. The Abrahamse et al. (2005) meta-analysis of increased

consumption attributes it also to other factors, both macro-level (economic growth,

demographic and institutional changes, and so forth) and individual-level (including

preferences, attitudes, and abilities).

The production of electricity often requires the use of fossil fuels. In other words,

increases in the consumption of electricity have a secondary impact on overall energy

3
consumption and greenhouse gas emissions. In 2013, the average monthly household

spending in the US was roughly $141 billion (EIA, 2015). In California, households

consumed about 40% less electricity than the national average (Residential Energy

Consumption Survey (RECS), 2009). Even so, higher prices in California meant that

spending on electricity was close to the national average for that year. This large an

expenditure carries significant economic effects, and even small, individual-level

decision biases that affect consumption can lead in the aggregate to consequential

externalities.

During the last decade, discussions of environmental concerns and research on

possible solutions have become ubiquitous. Researchers examine energy-efficient

technologies, price factors, and, more recently, behavioral and non-price interventions to

understand the behavior of energy end-users and extract both financial and energy

savings. Most environmental policy discussions and regulations have been based on the

assumption that consumers are rational agents, while ignoring their decision biases and

heuristics (Gsottbauer, 2013). There are, however, a growing number of studies in

behavioral economics and psychology that attempt to understand decision factors in

energy consumption as something other than a purely rational choice (Allcott, 2011;

Allcott and Rogers, 2014; Ferraro et al., 2011, 2013; Goldstein et al., 2008; Harding and

Hsiaw, 2014; Mani et al., 2013; Nolan et al., 2008; Schultz et al., 2007). Although recent

analyses of energy consumption using behavioral insights provide new perspectives on

how individuals respond to incentives, make decisions, and change their behavior, these

studies have not significantly focused on decision-making biases.

4
 Extensive literatures in psychology and behavioral economics suggest that

individuals have limited attention (DellaVigna, 2009; Gabaix and Laibson, 2004, 2006;

Hossein and Morgan, 2006; Kahneman, 1973). In addition, research has shown that

inattention can affect market outcomes (DellaVigna and Pollet, 2009; Englmaier et al.,

2013; Hirshleifer and Teoh, 2003; Lacetera et al., 2012). In the residential electricity

market, a study by Accenture in 2012 showed that utility consumers in the U.S. only

spend about nine minutes a year thinking about their electricity consumption, but that

their attention increases when they receive a high bill.

Along with the infrequency of considering electricity consumption, there is

substantial evidence of limited attention in the processing of numerical information by

consumers. The inattention towards numerical information often leads to left-digit bias.

(Anderson and Simester, 2003.) Marketing research has shown that “consumers tend to

focus systematically on the left most digit when comparing prices, since it contains the

highest informative value for assessing magnitude” (Korvost and Damian, 2008). This

phenomenon has been shown to exist in the used-car market, for example (Lacetera et al.,

2012) and in retail purchasing (Ashton, 2014).3 It is likely that “some mental units are

easily “available” or “accessible” to the mind and that this phenomenon can become even

more salient in the case of round numbers. (Basu, 2006; Fazio et al., 1982; Kahneman

and Tversky, 1979; Thaler, 1985). However, in residential electricity markets, Sallee

(2014) suggests prices are not as salient as gasoline prices and this makes consumer’s

inattention more rational. The rationally inattentive consumer is nonetheless acting upon

3Lacetera et al. (2012) investigates the role of limited attention in the durable-goods market,
which is more costly, and require consumers to spend a lot of time gathering information and
making decisions. Ashton (2014) investigates this phenomenon in retail purchasing, which
requires less time since most such purchases occur more frequently and carry lower prices.
However, left-digit bias exists in both cases.
5
incomplete information, especially when securing such information and revising behavior

in accordance with it are costly and require effort (Sallee, 2014).

The feasibility and high cost of implementing experiments in the field have been

two critical obstacles for researchers attempting to study decision-making biases such as

limited attention in energy markets. Hence, it becomes necessary to exploit natural and

quasi experiments. “The current literature has explored the effect of consumer inattention

in ‘opaque’ or ‘hard to find’ components of the final price of a good (e.g. shipping

charges, alternative fix prices and non-salient taxes), and while some have tried to

estimate the effects of inattention when the information is relevant and clearly visible,

this has only been accomplished using quality metrics that we expect consumers to

incorporate into their decision making process, as in odometer mileage on used cars

(Ashton, 2014).” Here, we analyze one effect of inattention in residential energy

consumption using observational data and quasi-experimental techniques. We examine

the consumption response to individuals’ monthly bills, especially when the charges cross

a threshold. We find evidence that certain residential energy customers use significantly

less energy when their prior month’s bill surpasses the $50 threshold. Further, their

reduction in energy use is substantial when calculating the total realized savings.

In this paper, section 2 provides monthly household energy consumption data

from an investor-owned utility (IOU) in California. This study uses data on the electricity

consumption both of randomly selected utility customers and of participants in a

residential energy conservation survey.4 Section 3 presents the empirical approach and

estimation technique. It begins with a discussion of the benefits and importance of

4
The empirical analyses were made using randomly selected IOU customer data. Survey data
were mainly for the purposes of comparison. See Appendix A for both figures and estimation
tables.
6
employing regression discontinuity (RD) in a quasi-experimental setting. The results are

presented and discussed in section 4. Although we analyze the effect of inattention on

different income groups’ consumption behavior, we are primarily interested in the

behavior of low-income households. The results suggest that consumers are inattentive to

their energy consumption unless their bill crosses a salient threshold. The last section

discusses some economic, policy, and marketing implications of limited attention—more

specifically, how this study might be used to incentivize and change consumption

behavior by both governmental and non-governmental agencies.

2. Data

The data for this study come from the residential billing records of an IOU in

California, which provided them on a confidential basis. The data are for 20,000

randomly selected customers and cover the years 2009 to 2011. We eliminated any

households with missing data during the period, leaving roughly 10,000 households.

This drop is the result of missing identification numbers, especially during the data

merging process, not inadequate numbers of observation per customer.5 The billing data

includes monthly energy consumption in kilowatt hours (kWh), monthly bill totals,

billing periods, tariff plans, and account types. We merged billing data with demographic

and weather data based on the customer identification numbers and zip codes.

Due to the confidentiality of the data, demographic variables are limited. 6

Estimated demographic variables include household size, number of adults, household

5 For instance, there is consumption date for some customers for fewer than 12 months. In addition, those in
this sample are not known to have participated in any known energy-efficiency surveys or programs for the
duration of the period under investigation.
6
Due to privacy concerns the data includes 450 five-digit ZIP codes from eight climate zones, instead of
nine-digit ZIP code, which did not allow for the clear neighborhood matching with census data. Borenstein
(2010) used approximation when records did not provide a nine-digit ZIP code but did give a five-digit one.

7
annual income, marital status of account holder, and home ownership. We also gathered

and included in the analysis weather information by zip code, because “one way to

measure the influence of temperature change on energy demand is using heating and

cooling degree days, which measure the difference between outdoor temperatures and a

temperature that people generally find comfortable indoors” (EPA, 2014). The study used

monthly Cooling Degree Days (CDD) data from 2009 to 2011, which was merged with

the main data set. Due to the warmer weather in California compared to national average,

a 72-degree Fahrenheit (F) indoor baseline temperature was used instead of the nationally

defined baseline of 65 degrees F.

Although the analysis focuses on the randomly selected customers’ consumption

behavior, the paper also analyzes the consumption data of respondents to a home energy-

efficiency survey. The objective is to investigate whether the same behavioral patterns

hold. Data on consumption by these customers covers the years 2008 to 2010, and the

survey was conducted in 2010. The empirical investigation therefore treats both pre- and

post-survey time frames. There are roughly 76,000 survey participants in the data set.

Table A displays details, descriptions, and variable ranges of both the randomly selected

accounts and the accounts of those included in the survey dataset.

Annual household income is a critical variable because, “according to the 2009

California Residential Appliance Saturation Study, there is a positive correlation between

electricity use and income” (Atamturk et al., 2012). Income is consistently found to be a

significant determinant of baseline energy use (Abrahamse et al., 2005; Borenstein, 2010;

Brandon and Lewis, 1999; Heslop et al., 1981; Long, 1993; Matsukawa, 2004; Sardianou,

Here, however, all the data provided was five-digit ZIP codes, so we relied on the information about
demographics from the utility.

8
2007), yet there are few studies that consider the effect of inattention on consumption

across income groups (Banerjee and Mullainathan, 2008; Gaston – Breton, 2011;

Mullainathan and Shafir, 2013). Banerjee and Mullainathan (2008) and Mullainathan and

Shafir (2013) suggest that suggest that higher-income individuals are more attentive and

productive when undertaking tasks that require high levels of responsibility and effort.

Gaston-Breton (2011) shows that level of income is one of the significant predictors of

price consciousness. Specifically, low-income shoppers are more prone to choose

options ending in 99. It seems, as discussed in Allcott (2014), that attention levels are

heterogeneous and vary among consumers based on the attribute that is more likely to

matter in their consumption decision. However, inattention and income in residential

energy consumption have not, to my knowledge, been explored empirically.

The annual incomes of each household were estimated by the IOU as a

categorical variable with thirteen brackets. The estimated total annual income for a living

unit incorporates several individual, household, and geographic variables, including

Summarized Credit Statistics. Multiple methods were used to predict which of the

categories fit the household. In the case of insufficient customer-level data, the estimated

income is the median income, based on Experian’s modeled incomes assigned to other

dwellings in the same nine-digit ZIP. If the nine-digit ZIP is not available, the five-digit

ZIP is used. Since, extensive customer-specific information was not available, We used

estimated income. These values are also used as benchmarks by the utility company, for

its program evaluations, and in pilot studies, which generally have to be approved by the

California Public Utility Commission (CPUC). Following the earlier researches, we

focus primarily on households with an estimated income of less than $35,000 (Banerjee

9
and Mullainathan, 2008; Gaston-Breton, 2011; Mullainathan and Shafir, 2013). We also

analyze households with incomes of $35,000–$49,999, and $50,000–$74,999.

The data also specifies whether the customer is on the California Alternate Rates

for Energy (CARE) program or the Domestic service plan (standard tariff). CARE offers

lower rates to qualifying customers based on income and household size (Borenstein,

2010). Utilities generally have only a small pool of customers whose electricity is priced

according to time-of-use (Borenstein, 2010), which promotes the reduction of demand

during peak hours.

3. Method

We analyze the affect of inattention on residential energy use by employing sharp

regression discontinuity. The benefit of RD is its ability to quasi-experimentally estimate

the relationship. Sharp RD requires a cutoff in the data, at which point observations move

discretely from untreated to treated. Specifically, T = 0 when x < c and T = 1 when x ≥ c;

where T is a binary variable for treatment, x is the assignment variable, and c is the cutoff

value. The inability of individuals to precisely manipulate treatment results in the

treatment being randomized in the neighborhood of the cutoff point (Lee, 2008; Lee and

Lemiuex, 2010). In such a case “local linear regressions provide a non-parametric way of

consistently estimating the treatment effect in an RD design” (Lee and Lemiuex, 2010).

The local average treatment effect (LATE) is the difference in the observed outcome as

the assignment variable approaches the cutoff from the left and from the right (Imbens

and Lemieux, 2008; Lee and Lemieux, 2010)

𝐿𝐴𝑇𝐸 = lim+ 𝐸[𝑦|𝑥] − lim− 𝐸[𝑦|𝑥] (1)

𝑥→𝑐 𝑥→𝑐

10
where y is the outcome variable. For our purposes, y is energy usage, x is the previous

month bill, and c is the salient threshold expenditure.

The LATE is estimated using local linear regression on a specified bandwidth, h.

𝑦𝑖𝑡 = 𝛽0 + 𝛽1 𝑇𝑖𝑡 + 𝛽2 𝑥̃𝑖𝑡−1 + 𝛽3 𝑇𝑖𝑡 𝑥̃𝑖𝑡−1 + 𝜖𝑖𝑡 (2)

where 𝑥̃ = 𝑥 − 𝑐 and 𝑥̃ ∈ [−ℎ, ℎ] and T is the treatment for having a bill above the

salient expenditure. In practice, the choice of bandwidth can have an impact on results;

higher bandwidth can lead to higher variances and lower bias, whereas lower bandwidth

can lower variance and raise bias. The key is to find the optimal bandwidth. We use the

Imbens and Kalyanaraman (2012) method of calculating the optimal bandwidth (100%),

which uses a data-dependent algorithm for choosing that bandwidth that minimizes the

mean squared error7. “The essential idea is to increase the size of h as the variance in

outcomes at the cutoff increases, as the density of the forcing variable at the cutoff

diminishes, and as the shape of the curves on opposite sides of the cutoff becomes

increasingly symmetrical” (Green et al., 2009). We also report results for half (50%) and

double (200%) the estimated optimal bandwidth (Nichols, 2007).

Another issue with RD is the choice of weighting observations in local linear

regression; this is a decision regarding kernel choice. The use of the rectangular kernel is

the same as estimating OLS on the specified bandwidth. The choice of kernel does not

make significant differences in practice (Lee and Lemieux, 2010). However, we follow

Cheng, Fan and Marron (1997), who show the optimal weighting for boundary cases,

such as RD, is the triangular kernel. The triangular kernel assigns more weight to

observations closer to the cutoff amount (Lee and Lemieux, 2010).

7The experimental, observational, and simulation studies suggest that this method performs well
(Dinas, Riera and Roussias, 2015).
11
 We estimate the effect of crossing the threshold on kWh energy usage, but we

also use two transformed independent variables for comparison. First, we use the change

in energy consumption between months, ∆𝑘𝑊ℎ = 𝑘𝑊ℎ𝑡 − 𝑘𝑊ℎ𝑡−1 . We also use the

natural logarithmic transformation, Ln(𝑘𝑊ℎ), where the interpretation of the effect is in

terms of percentage changes.

Estimating potential discontinuities in other variables can empirically test the

validity of the RD method, the exchangeability of observations on either side of the

cutoff

𝑧𝑖𝑡 = 𝛼0 + 𝛼1 𝑇𝑖𝑡 + 𝛼2 𝑥̃𝑖𝑡−1 + 𝛼3 𝑇𝑖𝑡 𝑥̃𝑖𝑡−1 + 𝜇𝑖𝑡 (3)

where z denotes a demographic variable, such as household size. In this case a

discontinuity in baseline independent variables would suggest a violation of the design.

Therefore, if the RD design is valid, we would expect no significant discontinuities at the

cutoff points for baseline covariates (Lee and Lemieux, 2010).

We also estimated the degree of inattention at the threshold for low-income

households. Since our research is related to the body of literature that studies how

inattention affects market outcomes, we can compare our estimates of the inattention

parameter to the estimates presented in earlier studies. DellaVigna (2009) and Chetty et

al. (2009) hold that the value of a good has two components, a visible component 𝜗 and

an opaque component 𝜊: 𝑉 = 𝜗 + 𝜊. Owing to inattention, the consumer perceives the

value to be 𝑉̂ = 𝜗 + ( 1 − 𝜃)𝜊, where 𝜃 denotes the degree of inattention, with 𝜃 = 0 as

the standard case of full attention. The interpretation of 𝜃 is that each individual sees the

opaque information 𝜊 but then processes it only partially, to the degree 𝜃. Chetty et al.

(2009) assume that the inattention parameter 𝜃 is itself a negative function of the

12
salience. They show that tax-inclusive prices reduce demand compared to pricing that

does not include taxes. This suggests that information salience is an important influence

of purchasing behavior. Hence, we calculate the point estimate of 𝜃 , the method

suggested by Chetty et al. (2009), using our discontinuity values.

∆ Ln(𝑘𝑊ℎ=𝑦) 1
𝜃=− (4)
𝑏 𝜀𝑦,𝑝

where 𝜀𝑦,𝑝 denotes price elasticity of demand and 𝑏 is the optimal bandwidth in

terms of percentage.

In order to further verify the discontinuities and standard errors, we also

performed bootstrap replications, “a way to perform statistical inference by resampling

from the sample (Cameron and Trivedi, 2010).” We performed 50–200 bootstrap

replications for estimates of standard error, which is adequate for normal-approximation

confidence intervals (Cameron and Trivedi, 2010; Mooney and Duval, 1993; Poi, 2004).

4. Results

The analysis focuses primarily on low-income households (of randomly selected

consumers) earning less than $35,000 but also discusses other income groups toward the

end of the section. Examining monthly billing data for the low-income households

reveals that 50% were billed between $24.05 and $77.55. Hence, we hypothesize that a

natural threshold, or critical value, is $50. We focus the analysis on this critical value.

Other natural values, such as $100, were also tested, but no significant discontinuity was

found at those cutoffs. Similarly, possible discontinuities at every $10 threshold were

13
also tested, and again, no significant discontinuities were found at any points other than

the natural threshold of $50. Results are reported in Table 3.8

Although, we focus on the low-income households among the randomly selected

utility customers, we also consider the billing data of a group of energy survey

participants for the purpose of comparison and to observe whether their behavior show

discontinuities at the thresholds similar to that of the randomly selected customers. We

investigate both pre- and post-survey behavior for this group. A similar discontinuity

pattern appears for the low-income group, those survey participants earning less than

$35,000 during the pre-survey period, but only if their tariff plan is under the CARE

program. There is no valid discontinuity after the survey for these participants or for the

higher-income groups (in the CARE program) among the survey participants. The means

of all income groups for both electricity consumptions and cost are much higher for

survey participants (825 kWh vs. 588 kWh, and $138 vs. $93) than for those who did not

take part in the survey. This difference in consumption levels could explain why

consumers opted to take energy-efficiency surveys in the first place. The estimation

results of the survey data are presented in Appendix A.

4.1 Graphical Results

The first graph in Figure 1 displays a polynomial smoothing function of current

electricity usage, in kWh. The graph indicates a discontinuity in current usage at $50 for

households earning less than $35,000. For those who paid slightly more than $50 in the

previous month, the discontinuity shows a decrease in usage. The remaining graphs in

Figure 1 show polynomial smoothing functions for ΔkWh and LN(kWh), respectively,

8 Although, this research focuses on whether a given month’s billing information discontinuously
predicts usage in the following month, we also tested two-month and three-month effects. There
is no evidence of such effects at any cutoff points.
14
and compare the results obtained by using these transformed variables. Both graphs

show similar results to the first graph; there are downward discontinuities in usage at the

$50 cutoff.

We also present similar graphs for the number of adults (as well as household

size), income, and weather. The graphs in Figure 2 present the evidence for each of

these.9 Since the identification strategy considers households on either side of the cutoff

as being exchangeable, it is critical to check for discontinuities in other variables. In

order not to violate the design, there should be no significant discontinuities in the

baseline independent variables, and as the three graphs indicate, there are none. This

validity check confirms the consistency of the results for the $50 cutoff among those

earning less than $35,000. Table 3 shows that among all the estimated cutoff points ($10–

$100), there is strong and consistent evidence of discontinuity only at $50. These

findings suggest, as hypothesized, that $50 is a natural threshold for low-income

electricity consumers, especially for those whose bill ranges from $38.78 to $61.22.

Figure 3 presents graphical results for households with an estimated annual

income between $50,000 and $74,999. In this case, the cutoff point is $200, and it

confirms the role of inattention, since people pay greater attention to higher bills.

Households in this income group who are in the CARE program show a larger

discontinuity at $200 than the entire sample in this income bracket. Appendix Figure A1

presents the graphical results for survey participants with low incomes who are also

CARE plan customers. Although the magnitude is slightly higher (as measured by kWh),

there is a similar pattern of reactions at the cutoff between low-income survey

participants, who is in the CARE plan, and randomly selected low-income customers. It
9
Income is categorical in the data. However, we present results for income for comparison purposes.

15
is also consistent with the baseline covariates. We also estimate and plot similar graphs

for survey participants as random accounts for HEES participants, and there is no

evidence of significant and consistent discontinuities at any other cutoff points for other

income groups. These findings suggest that among the survey participants, only low-

income customers with larger household sizes will respond to billing information if they

have developed a mental threshold and respond when it has been crossed. This could also

explain why households participated the survey. That survey participants had higher rates

of inattention to their billing information.

4.2 Estimation Results

We begin by presenting the local linear estimates for the other factors, testing the

exchangeability of households near the cutoff. Table 2 reports optimal bandwidth

estimations for the number of adults, income, weather, and marital status. There is no

significant discontinuity in any of the variables. The estimation results, taken together

with the graphical results, support the treatment of households near the cutoff as

exchangeable. That the baseline covariates are not significant at the cutoff points suggests

that the RD design is valid.

Table 1 shows the estimation results for the entire sample of low-income (below

$35,000/annum) households in the group of randomly selected IOU customers. The

estimated discontinuity in kWh is significant to the 5% level when using the optimal

bandwidth, 11.22, and also at half the bandwidth. It is not significant when using double

the bandwidth. All three estimations are negative, as hypothesized. Crossing the $50

threshold results in a decrease in usage of 11.57 kWh the following month, using the

optimal bandwidth. For the transformed dependent variables, ΔkWh and LN(kWh), the

16
estimated discontinuity is significant for all bandwidths, at least to the 10% level. The

optimal bandwidth suggests the change in energy consumption from one month to the

next is 9.5 kWh less for individuals who cross the $50 threshold. The optimal bandwidth

also shows households that are above the $50 point use 5.3% less energy the following

month. The results show that people substantially reduce their energy consumption when

their previous bill exceeds $50.

Despite the statistical significance of the discontinuity, it remains necessary to

evaluate whether the magnitude of the effect is economically important. Here, we

present a simple calculation of the realized savings for the sample. The optimal

bandwidth for the kWh estimation is 11.22 (using Imbens and Kalyanaraman’s (2012)

method), which considers households with bills ranging from $38.78 to $61.22.

However, the energy savings only applies to those with bills between $50.00 and $61.22.

In the sample, there are 7,039 observations for those with incomes below $35,000.

Therefore, the energy savings in the sample is -11.57kWh×7,039 = -81,441 kWh. Since

the data cover three years, the generated savings were approximately 27,147 kWh

annually. The number of households that fall into the affected range is 1.96% of the

entire sample. Since the sample is large and randomly selected, it is possible to infer that

the total number of people affected is approximately 1.96% of the IOU’s total customer

base. Using a conservative estimate of two million households as the total of the IOU’s

population, we can estimate the realized savings for the population. A population of two

million accounts generates twenty-four-million monthly bills in a year. Assuming 1.96%

of the monthly bills are for individuals with an income of less than $35,000 and fall

between $50 and $61.22, then there are a total of 470,400 monthly bills. Using our

17
optimal bandwidth estimate of -11.57 kWh, the estimated realized savings in the

population is -11.57kWh×470,400 = -5,442,528 kWh annually. The average monthly

usage for the entire sample is 588.1kWh, or 7,057.2 kWh annually, so the estimated

realized savings in the population is equivalent to the annual energy consumption of

approximately 770 average households. This is also equivalent to an estimated 3753

metric tons of carbon dioxide emissions, or about $79,000 in social costs, assuming $21

per metric ton of carbon dioxide (EPA, 2015; Greenstone, Kopits, and Wolverton, 2013).

It is worth looking more closely at that part of the low-income group with

incomes between $25,000 and $34,999. Tables 4 and 5 show the discontinuity at the $50

threshold, a decrease of 17.80 kWh, significant at the 5% level. For this income group,

the household change in electricity consumption from one month to the next is 18.28

kWh less, which suggests that households that were above the $50 point used 7.27% less

energy the following month. The other income groups, $35,000 to $49,999, $50,000 to

$74,999, and $75,000 to $99,999 were tested using the same method. Table 6 reports the

results for those earing $35,000 to $49,999 per year. There is no clear evidence of

inattention by this income group at any cutoff points. Also, the effect is limited to

households on the CARE program. Tables 7 and 8 provide evidence of discontinuity for

those earning $50,000 to $74,999 a year. The salient cutoffs for this group (and for higher

income groups more generally) are higher than for low-income households; this is

consistent with inattention. For households with an estimated annual income between

$50,000 and $74,999, $200 is an important cutoff. The estimated effect, using the

optimal bandwidth, is -118.1 kWh for CARE plan customers and -54.35 kWh for the

entire sample. The results vary greatly for the other estimated bandwidths, however,

18
ranging from -62.9 to -199.6. Table 9 contains the estimation results for the group with

annual incomes from $75,000 to $99,999. There is no discontinuity at any threshold other

than $200, where there is an upward jump. However, this result does not remain

consistent when considering the other baseline covariates.

We also test for incomes greater than $99,999, and there are no discontinuities

there, either. These findings are aligned with the literature, which shows that price and

income elasticity of demand for electricity is generally small, and significantly different

from zero. The Reiss and White (2005) study of household electricity demand shows that

price elasticities vary with income and decrease as income increases (i.e., 0.49 to 0.29).

According to Costa and Kahn (2010) in the California residential electricity demand

study, income elasticity varies between 0.05 and 0.173, which also suggests income

elasticity is very low. Borenstein (2010) discusses positive and low-income elasticity of

demand for electricity. Such low elasticity is consonant with customers at higher income-

levels being less likely than those with lower incomes to pay attention to their bills and

provides more reason to focus mainly on low-income households, who are more likely to

be sensitive to costs and responsive to price hikes than those in any other income group.

These finding are consistent with the DellaVigna (2009) inattention model and

Gaston-Breton’s (2011) demonstration that income is a negative predictor of price

consciousness. This study makes two critical additions to this literation. First, as income

increases, the thresholds are also rise. Second, the discontinuities start to disappear

beyond the low-income level, at which point it is not necessary to check for robustness

with baseline covariates. Researchers might profitably address greater inattention and

biases at higher income levels. Additionally, we will likely get more solid results if we

19
could use an income variable that is not estimated but is the actual household-level

annual income.

We estimate the inattention parameter (𝜃) using equation (4) in section 3. To our

knowledge, this is the first attempt to calculate the inattention parameter for residential

energy consumption. We show that (for low-income households), crossing the $50

threshold results in a decrease in usage by 5.3% the following month. The optimal

bandwidth is 11.22 (or 22.4% above the threshold) and energy savings occur only for

those households with bills between $50 and $61.22. In addition, we use price elasticity

at the household income levels calculated by Reiss and White (2005). We rely on Reiss

and White’s (2005) results for two reasons. First, California has a non-linear tariff

structure, and our data does not include tier identification for individual households.

Second, their categorization of income groups is very similar to ours. We use elasticity

values for income between $18,000 and $37,000, which is – 0.34. Plugging these values
5.3
into equation (4) yields an estimate of 𝜃 = 22.4∗0.34 ≅ 0.7. 10 This implies that even when

households increase their attention at the cutoff point, they tend to ignore the actual (i.e.,

full) cost of energy use.11

Finally, Table 10 contains the estimates of the triangular kernel local linear

regression as computed using bootstrapping. Bootstrapped standard errors were estimated

using the same regressions to check the robustness and replicability of the results. As

shown in the table, bootstrapping gives almost identical results.

10
Studies have shown that the degree of inattention is context specific. For instance, Chetty et al.
(2009) report 0.75 for non-transparent taxes, and the study done by Lacetera et al. (2012) yields
0.31 for odometer values in car sales.
11
Using regression estimations, we also find that households ignore the digits beyond the leftmost
digit of the billing numbers. In addition, since we do not observe discontinuities in other possible
cutoff points, we do not calculate the average of the degree of inattention.
20
 5. Concluding Remarks and Policy Implication

Inattention to the costs of electric bills exists, but only up to a certain threshold, at

which point consumers become responsive to their past expenditures. In other words, as

the left-most digit in the electricity bill becomes more attributable and hits a threshold,

such as $50, consumers’ attention increases. The studies suggest “an unwarranted

significance is placed on certain numbers” by households, numbers that consumers think

make the information attributable, identifiable, round, and symbolic (Mitchell, 2011). In

the aforementioned case, that number is 50 for low-income households. In short,

customers have mental thresholds; they are responsive and pay greater attention when

their expenditures pass this value. We also show that even at the threshold, consumers

still tend not to perceive the full price, whether they passed the mental threshold or not.

Still, the threshold response among the low-income group generates energy savings

equivalent to the annual energy consumption of approximately 770 average households.

In other words, 770 households are taken off the grid. Low-income customers who

participated in the energy survey and in the CARE plan exhibit similar behavior during

the pre-survey period.12 There were also similar, but not as consistent, savings among the

randomly selected higher-income customers in the CARE program. The results suggest

there is plenty of room for further research on consumer biases about electricity

consumption.

In this paper, we focus on primarily one aspect of imperfect optimization–limited

attention. As previous studies suggest, the one area in which the effect of limited

attention is prevalent and important is the residential-energy market. The electricity

12
The discontinuities observed during the pre-survey period dissipate in the post-survey period. See
Appendix A (Tables A1 – A3) for estimation results.

21
market is one in which small inefficiencies by households can add up to very substantial

financial losses for the customer and to a great waste of a environmental resource in the

absence of appropriate policies (Allcott and Taubinsky, 2015). Earlier works suggest that

households’ decision biases and cognitive limitations also contribute to externalities

(Congdon, Kling, and Mullainathan, 2011). In California, CPUC has mandated all

statewide IOUs implement behavior-based programs.13 This suggests policymakers are

starting to realize the power of decision heuristics, in contrast to the classical approach,

when it comes to affecting energy consumption.

The many studies in behavioral economics and marketing provide evidence that

price is not the only mechanism for changing the demand for a good—altering decision

biases and heuristics can also play a role (Allcott, and Mullainathan, 2010). Although

acknowledging behavioral failures have proven effective for outside the energy arena,

adoption of these concepts and interventions by energy providers has been slow. Yet as

Thaler and Sunstein (2009) argue, paternalistic liberalism could help policymakers

achieve more efficient results by taking advantage of momentary changes in attention.

This is especially true in energy markets, where pricing is complex and not often salient

for consumers and so provides weak incentives to change behavior.

Considering that biases such as inattention are generally heterogeneous, nudges

can help draw the attention of those with biases to prices but would not affect those

13
In Decision (D.).12-11-015, the CPUC encouraged utilities to “initiate a process for expansion
of the definition of behavioral programs as well as initiating additional program activities in this
cycle. Nothing prohibits the utilities from going beyond this minimum level and definition. If
there is consensus on additional types of activities in the behavioral area that would be beneficial,
the utilities may initiate them as soon as possible utilizing the program and administrative
flexibility they have already been granted and/or they may seek specific authority from the
Commission, if necessary.”

22
without biases (Allcott, 2014). Thus, our results suggest that for policymakers to change

consumer behavior and conserve energy and resources they must make cost information

more salient, to close the gap between actual and perceived prices. For the consumers

studied here, the goal would be to get households that receive bills of slightly less than

$50 to act as if those costs were $50 or slightly more. Since the theoretical, empirical,

and anecdotal evidence all suggest that people perceives 49 as 40, it should be possible to

design an electricity bill that induces cognitive limitations and increases the salience of

the information. One potential change would be to use only rounded figures when

billing. If a customer’s bill is for $49.50, the customer would still be responsible for

paying $49.50, but as part of the bill, utilities could provide a salient, attention-grabbing

rounded total.

The empirical investigation here already provides evidence that even without any

behavioral intervention, a bill that captures the consumers’ attention would lead to at least

a 5% reduction in consumption in the following months. In addition, a recent study by

Sexton (2015) investigates automatic bill payment (ABP) programs, which reduce price

salience, and their effect on electricity consumption. The results suggest that a decline in

price salience leads to a 4%–6% increase in electricity consumption among residential

customers. This suggests that such programs may counteract energy conservation

objectives. Therefore, the creation of more price-salient billing information becomes even

more important for achieving greater energy efficiency. The implications of our findings

are not limited to residential electricity markets but might also apply to the provision of

water, gas and other services.

23
 The earlier literature in this field argues that people are rationally inattentive to

the cost of electricity (Costa and Kahn, 2010; Sallee, 2014). The results of this study,

however, show that the rational-inattention argument is true only to that a point at which

electricity bills hit mental thresholds and become attributable and salient. This is

particularly true for low-income households. In order to highlight the importance of our

findings, we compare it to Allcott’s (2011) social-comparison field study. The findings of

the field experiment show an average reduction in energy consumption by 2% and an

even smaller drop of 0.3% for households in the lowest decile. The contribution of this

study to the literature is its investigation and identification of psychological cost

thresholds, which it also shows vary for different level of income groups.

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29
 Figures and Tables

Figure 1: Polynomial Smoothing Function of kWh, ΔkWh, and LN(kWh) at $50 Cutoff:
Income < $35,000

Note: Income < $35,000. Bandwidth (kWh) = 11.22, Bandwidth (ΔkWh) = 11.29 and
Bandwidth (Ln(kWh)) = 1.89. Triangle Kernel

30
Figure 2: Polynomial Smoothing Function of # of Adults, Income, and Weather (CDD)
at $50 Cutoff: Income < $35,000

Note: Income < $35,000. Bandwidth (kWh) = 11.22, Bandwidth (ΔkWh) = 11.29 and
Bandwidth (Ln(kWh)) = 1.89. Triangle Kernel. There are no significant discontinuities at
the cutoff points for baseline covariates.

31
Figure 3: Polynomial Smoothing Function at $200 Cutoff: $50k ≤ Income < $75k.
The top figure is for customers in the CARE program, and the next figure is for the entire
sample.

Note: $50k ≤ Income < $75k. Bandwidth = 20.06. Bandwidth (CARE) = 19.91. Triangle
Kernel

32
 Table A: Description of Variables

Data Variable Name Description / range of values Mean St.D. %

Monthly Electricity consumption in kWh data from 2009 January - 2011
kWh Usage December for roughly 10,000 randomly selected customers from all income 588.1 406.1
groups (358,968 observation).

Bill amount Monthly billing information of the randomly selected customers. 92.92 91.48

Monthly bill amount (< $35k) Monthly billling information for households of income less than $35,000. 64.16 68.63
Monthly billling information for households of income between $35,000
Monthly bill amount ( $35k & $50k) 68.59 67.33
and $50,000.
Monthly billling information for households of income between $50,000
Monthly bill amount ( $50k & $75k) 86.87 78.23
Random Account

and $75,000.
Monthly billling information for households of income greater than
Monthly bill amount ( > $75k) 111.5 103.3
$75,000.
Income as estimated by the IOU. It is a categorical variable with thirteen
different income brackets. Minimum is $1–$15000, maximum is $250,000.
Income In this study, incomes greater than $100,000 merged in single category 4.61 1.75

The California Alternate Rates for Energy (CARE) program, offers lower
CARE Program electricity tier pricing to qualifying customers, based on income and 30
household size.
Domestic Plan Tier plan that offers standard tier prices, higher than for CARE members 60

Household Size (Range 1-8) Number of people in the household. Values range from 1–8 2.98 1.84

Number of Adults Number of adults in the household. Values range from 1–8 2.55 1.5
Home/Condo Owner Percentage of customers who owns house or condo 72
Renter Percentage of customers who rents their house 6

33
Data Variable Name Description / range of values Mean St.D. %
Monthly Electricity consumption in kWh data from 2009 January –2011
kWh Usage December for roughly 76,000 energy efficiency survey participants from 825.38 885.6
all income groups (2,730,619 observations)
kWh Usage: Pre-Survey Period Monthly electricity consumption in kWh for pre-survey period 845.9 912.7
kWh Usage: Post Survey Period Monthly Electricity Consumption in kWh for post-survey period 784.1 826.9
Bill amount Monthly billing information of the survey participants. 138.23 151.23
Bill amount - Pre-Survey Year Monthly billing information for the survey participants before the survey. 140.62 154.93
Energy Efficiency Survey Participants

Monthly bill amount (< $35k) Monthly billling information for households of income less than $35,000. 108.3 105.6
Monthly billling information for households of income between $35,000
Monthly bill amount ( $35k & $50k) 106.2 95.2
and $50,000.
Monthly billling information for households of income between $50,000
Monthly bill amount ( $50k & $75k) 117 98.2
and $75,000.
Monthly billling information for households of income greater than
Monthly bill amount ( > $75k) 149.1 133
$75,000.
Bill Amount - Post-Survey Year Monthly billing information of the survey participants post survey period. 133.4 143.4
Monthly bill amount (< $35k) Monthly billling information for households of income less than $35,000. 98.93 83.6
Monthly billling information for households of income between $35,000
Monthly bill amount ( $35k & $50k) 100.7 87.7
and $50,000.
Monthly billling information for households of income between $50,000
Monthly bill amount ( $50k & $75k) 111.2 91.2
and $75,000.
Monthly billling information for households of income greater than
Monthly bill amount ( > $75k) 139.7 115
$75,000.
Income as estimated by the IOU. It is a categorical variable with thirteen
different income brackets. Minimum is $1-$15000, maximum is
Income 5.6 1.75
$250,000. In this study, incomes greater than $100,000 have been
merged into a single category
The California Alternate Rates for Energy (CARE) program, offers lower
CARE Program electricity tier pricing to qualifying customers, based on income and 12.68
household size.
Domestic Plan Tier plan that offers standard tier prices, higher than for CARE members 44.97

34
Household Size (Range 1-8) Number of people in the household. Values range from 1-8 3.5 1.79
Adult Size Number of adults in the household. Values range from 1-8 3 1.5
Home/Condo Owner Percentage of customer who owns their dwelling 90
Renter Percentage of customers who rent their dwelling 8
Age of the house in which utility customer lives. Categorical variable.
House Age Ranges as follows: New (Built 2006 or after), 2002-2005, 1993 - 2001,
before 1978 and etc.

Number of rooms, categorical variable. Minumum is 1-2 rooms;

Number of Rooms maximum is 13 or more rooms. 7.12 2.25
Marital status is an estimated variable and its based on the composition
of the Living unit or through the application of a predictive model. The
Marital Status categories are extremely likely, likely and unknown. Extremely likely and
likely make up 73.36%, rest is unknown.

35
 Randomly Selected Customers
Table 1: Triangle Kernel Local Linear Results: Income < $35k, $50 Cutoff

Cutoff=$50 (1) (2) (3)

Bandwidth kWh ΔkWh Ln(kWh)

100% -11.57** -9.487** -0.0526*

(5.240) (4.750) (0.0271)
50% -19.62*** -14.86** -0.0786**
(7.227) (6.569) (0.0390)
200% -5.570 -7.542** -0.0451**
(3.852) (3.460) (0.0191)

Optimal Bandwidth 11.22 11.29 1.89

Observations 64,832 64,832 64,496

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

36
Table 2: Triangle Kernel Local Linear Results for Other Factors: Income < $35k, $50

Cutoff=$50 (1) (2) (3)

VARIABLES kWh ΔkWh Ln(kWh)

# of Adults 0.0551 0.0551 0.0272

(0.0453) (0.0452) (0.111)
Weather -4.772 -4.774 -7.476
(3.996) (3.984) (9.049)
Income -0.00335 -0.00338 0.114
(0.0304) (0.0303) (0.0713)
Marital sts -0.0959 -0.0957 -0.365*
(0.0817) (0.0815) (0.193)

Optimal Bandwidth 11.22 11.28 1.89

Observations 64,832 64,832 64,496

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

37
Table 3: Triangle Kernel Local Linear Results for Different Cutoff Points: Income < $35k

RDs for each Changes at Left Most Digit Numbers – Cutoff Points

Bandwidth $ 10 $20 $30 $40 $50 $60 $70 $80 $90 $100

100% -3.340 4.797 -5.123 4.547 -11.57** -2.555 6.165 -14.84 -9.058 -16.47
(4.821) (3.281) (3.744) (5.038) (5.240) (7.831) (8.374) (10.44) (11.92) (14.95)
50% -0.285 3.745 -7.794 0.427 -19.62*** -7.855 -3.283 -10.17 -7.042 -33.13
(6.432) (4.605) (5.122) (7.080) (7.227) (11.16) (11.35) (15.01) (17.28) (20.91)
200% -8.61** 8.702*** -5.364** 2.519 -5.570 -3.498 1.590 -6.087 -9.688 -0.627
(3.840) (2.380) (2.699) (3.592) (3.852) (5.582) (6.111) (7.303) (8.198) (10.53)

Optimal 6.33 7.48 10.04 9.22 11.22 10.04 13.01 13.47 15.243 12.03
Bandwidth

Observations 64,832 64,832 64,832 64,832 64,832 64,832 64,832 64,832 64,832 64,832
Note: Standard errors in parentheses. Estimated threshold listed as regression titles.
*** p<0.01, ** p<0.05, * p<0.1

38
Table 4: Triangle Kernel Local Linear Results: $25 ≤Income < $35k, $50 Cutoff

Cutoff=$50 (1) (2) (3)

Bandwidth kWh ΔkWh Ln(kWh)

100% -17.80** -18.28** -0.0727*

(8.415) (7.556) (0.0387)
50% -27.40** -26.30** -0.112**
(11.69) (10.77) (0.0523)
200% -8.390 -11.41** -0.0539*
(6.082) (5.410) (0.0286)

Optimal Bandwidth 11.58 12.15 2.297

Observations 22,553 22,553 22,397

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

Table 5: Triangle Kernel Local Linear Results for Other Factors:

$25 ≤Income < $35k, $50 Cutoff

Cutoff=$50 (1) (2) (3)

VARIABLES kWh ΔkWh Ln(kWh)

Adults 0.106 0.105 -0.0380

(0.0719) (0.0703) (0.155)
Weather -2.196 -2.105 1.242
(6.893) (6.722) (13.74)
Marital sts. -0.131 -0.128 -0.0148
(0.128) (0.125) (0.280)

Observations 22,553 22,553 22,397

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

39
Table 6: Triangle Kernel Local Linear Results: $35k ≤ Income < $50k, CARE Program participants and entire Sample. There are no
significant and consistent discontinuities for this income group.

Cutoff $50 $50 $100 $100 $200 $200

Bandwidth kWh kWh (CARE) kWh kWh (CARE) kWh kWh (CARE)

100% 1.935 10.37 -5.036 -31.47 44.48 42.53

(6.416) (10.27) (15.66) (23.03) (54.37) (71.93)
50% 3.885 16.14 -8.642 -40.49 52.22 23.30
(8.920) (14.43) (23.27) (33.58) (81.59) (94.30)
200% 0.396 4.422 -3.209 -26.09 37.08 -25.57
(4.626) (7.244) (10.91) (16.22) (35.57) (51.22)

Observations 39,838 17,746 39,838 17,746 39,838 17,746

Note: Standard errors in parentheses. Estimated threshold listed as regression titles
*** p<0.01, ** p<0.05, * p<0.1

40
Table 7: Triangle Kernel Local Linear Results: $50k ≤ Income < $75k, CARE Program
participants and entire Sample.

Cutoff=$200 Aggregate CARE only

Bandwidth kWh kWh

100% -54.35* -118.1*

(29.65) (67.07)
50% -72.73 -199.6**
(44.99) (96.20)
200% -39.99** -62.90
(20.24) (45.01)

Optimal Bandwidth 20.06 19.91

Observations 68,510 20,848

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

Table 8: Triangle Kernel Local Linear Results for Other Factors at $200 Cutoff:
$50k ≤ Income < $75k, CARE Program participants and entire Sample

Cutoff=$200 Aggregate CARE only

VARIABLES kWh kWh

Adults -0.0411 0.361

(0.135) (0.305)
Weather -7.266 -30.72
(11.58) (28.97)
Marital sts. -0.00741 0.00186
(0.173) (0.417)
100% -54.35* -118.1*
(20.24) (45.01)

Optimal Bandwidth 20.06 19.91

Observations 68,510 20,848
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

41
Table 9: Triangle Kernel Local Linear Results: $75k ≤ Income < $100k, CARE Program participants and entire Sample

Cutoff $100 $100 $200 $200

Bandwidth kWh kWh (CARE) kWh kWh (CARE)

100% 0.422 24.75 24.19 125.8*

(10.72) (21.26) (26.12) (71.69)
50% -1.818 57.26* 8.778 118.6
(14.96) (29.84) (38.66) (103.8)
200% -1.980 18.19 17.96 108.8**
(7.522) (14.80) (18.48) (51.34)

Observations 56,215 15,780 56,215 15,780

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

42
 Table 10: Triangle Kernel Local Linear Results – computed using bootstrap. Bootstrapped standard errors were estimated using the
same regressions tested earlier to check the validity of the RD method. Bootstrapping gives results almost identical to the earlier
estimation.

(1) (2) (3) (4) (6)

$25 ≤Income < $35k Income < $35k $50k ≤ Income < $75k $50k ≤ Income < $75k $75k ≤ Income < $100k
VARIABLES c=$50 c=$50 c=$200 CARE c=$200 CARE c=$200

100% -17.80** -11.57** -54.35* -118.1* 125.8*

(8.837) (5.211) (32.17) (70.28) (73.57)
50% -27.40** -19.62*** -72.73 -199.6** 118.6
(13.65) (7.394) (50.54) (85.74) (112.3)
200% -8.390 -5.570 -39.99* -62.90 108.8**
(6.035) (3.665) (22.05) (47.66) (54.10)

Observations 22,553 64,832 68,510 20,848 15,780

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

43
 APPENDIX A

2010 Energy Efficiency Survey Participants:

Pre – and Post – Survey RD Analysis of 2008 and 2010
Monthly Consumption

Table A1: Triangle Kernel Local Linear Results of Pre – and Post – Survey Period:
Income < $35k of HEES participants, $50 Cutoff.

Cutoff = $ 50 Pre-Survey Post-Survey

Aggregate CARE only Aggregate CARE only
VARIABLES kWh kWh kWh kWh

100% -6.062 -19.20** 3.295 -8.146

(4.968) (7.466) (6.852) (11.72)
50% -4.592 -24.71** 8.129 -16.44
(6.935) (9.890) (9.856) (16.58)
200% -1.685 -15.67*** 8.668* -1.606
(3.571) (5.571) (4.702) (8.066)

Observations 131,123 33,051 68,412 17,244

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

Table A2: Triangle Kernel Local Linear Results of Pre - and Post – Survey Period:
Income < $35k of HEES participants, $100 Cutoff.

Cutoff = $100 Pre-Survey Post-Survey

Aggregate CARE only Aggregate CARE only
VARIABLES kWh kWh kWh kWh

100% -2.976 -11.72 13.41 36.47*

(9.975) (17.70) (17.60) (20.24)
50% 0.467 -2.095 39.57* 34.91
(14.23) (26.09) (23.14) (28.25)
200% 2.133 -8.953 -3.857 14.16
(6.993) (12.14) (11.68) (14.87)

Observations 131,123 33,051 68,412 17,244

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

44
Table A3: Triangle Kernel Local Linear Results of Pre – and Post – Survey Period:
$50k ≤ Income < $75k of HEES participants, $200 Cutoff.

Cutoff = $200 Pre-Survey Post-Survey

Aggregate CARE only Aggregate CARE only
VARIABLES kWh kWh kWh kWh

100% -5.599 -54.92* 17.53 -59.75

(13.58) (29.69) (20.77) (41.68)
50% 0.467 -62.76 18.17 -55.73
(19.63) (38.75) (28.62) (59.35)
200% -5.224 -40.88* -6.134 -42.57
(9.583) (22.20) (14.50) (28.47)

Observations 241,546 48,346 126,024 25,224

Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

Figure A1: Polynomial Smoothing Function of Pre-Survey Period of Survey Participants.

Income < $35k, at $50 Cutoff for kWh

Note: Income < $35k and in CARE plan. Bandwidth = 12.57. Triangular Kernel.

45