Strategic and price-dependent responses to opt-in time-of-use tariffs: Evidence from Jeju Island, Korea

Abstract

This study investigates the impact of an opt-in time-of-use (TOU) tariff on household electricity consumption in Jeju Island, South Korea. Using electricity consumption data for one year of before and after the introduction of the tariff in September 2021, we employ both traditional and staggered difference-in-differences (DID) methodologies to analyze intraday and daily electricity usage. The results from the traditional DID and staggered DID approaches are broadly consistent. The findings reveal that TOU-enrolled households effectively shifted their electricity usage to off-peak hours while reducing peak-hour consumption, aligning with the tariff objectives. The responses of households in the treatment group varied across sub-periods, depending on fluctuations in the energy charge. Furthermore, the study suggests the presence of potential strategic behavior among high-consumption households that switch to TOU tariffs to reduce their bills without significantly adjusting their consumption patterns. These findings underscore the importance of consumer awareness and thoughtful tariff design for achieving effective demand-side management.