Rachel Anderson – Sloan Foundation

Monday, March 18, 2024

12pm-1pm
VPD 203 and Zoom

Abstract: Starting in the late 1990s, several U.S. states enacted legislation to restructure their electricity markets. Thirteen introduced competition for retail electric service, allowing households to shop for contracts with competitive firms in the same way they shop for cellular service plans.

In theory, competition could lower prices and increase the variety of products for sale. In practice, consumers only benefit if they can search for good deals and avoid contracts with hidden fees. When households have different search or switching costs, they can end up paying very different prices for the exact same service. And if those differences correlate with consumers’ socioeconomic characteristics, the resulting distribution of prices can be regressive.

My research shows that this is exactly what happened in Connecticut. Using a novel dataset that identifies both the price that customers pay and the zip code in which they live, I find that customers living in the state’s poorest zip codes paid significantly more for competitive retail electric service than customers living in above median income zip codes.

Differences in households’ search and switching costs cannot entirely explain this gap.  Nor can differences in their preferences for contracts that offer a higher renewable energy content or long-term fixed prices.  Rather, my analysis shows that customers in low-income zip codes are more likely to enroll in contracts with retailers that sell the most expensive contracts. This result is consistent with evidence from state investigations concluding that several retailers especially targeted low-income customers with deceptive marketing activities.

Bio: Dr. Rachel Anderson is an applied microeconomist whose research interests span energy economics, labor economics, industrial organization, and applied microeconometrics. Her recent works include measuring the distributional effects of retail electric competition on consumer welfare; evaluating the effectiveness of state and federal subsidies for utility-scale solar PV; developing methods for analyzing matched datasets where observations are linked to multiple possible outcomes; and identifying the social and economic factors associated with Turkish female labor force participation.

Rachel joined the Alfred P. Sloan Foundation as the Program Associate for Economics after completing her PhD in Economics at Princeton University in September 2022. At Sloan, Rachel has helped to select and award more than $20 million for policy-relevant research projects on industrial strategy, regional economic development, transportation, the economics of caregiving, and the economic analysis of science and technology – applied economics work directed at helping people understand the world and live better lives. Rachel also speaks Turkish and Spanish, and enjoys cycling, swimming, painting, social dancing, and travel.