Brattle Principal Ahmad Faruqui Authors Article Addressing Arguments against Dynamic Pricing

Brattle Principal Ahmad Faruqui has authored an article discussing dynamic pricing, which has been published in the June 2019 issue of Public Utilities Fortnightly.

The article, “2040: A Pricing Odyssey: How to Price Electricity When the Grid Goes 100% Green,” examines the common objections to the implementation of dynamic pricing and demand charges. Arguments against dynamic pricing include: customers won’t be able to understand the rates, customers won’t respond to the rates, the rates are unethical, the rates will harm low-income customers, and the rates will remove the incentive for energy efficiency.

Dr. Faruqui’s article points out that in regards to the arguments that customers won’t be able to understand the rates and, therefore, will not respond to them, there is already evidence in other areas to the contrary. Customers experience dynamic pricing when buying airline tickets, renting a car, and even when paying at parking meters when prices are different in the evenings and on weekends. Several states have already begun to offer and implement dynamic pricing options for customers; and in Arizona, more than 50% of customers have chosen one of the dynamic pricing options.

The full article can be found on the Public Utilities Fortnightly website.