When Deregulation Hurts: How Electricity Marketing Practices Raise Prices for Low-Income Communities

Since the 1970s, U.S. policymakers have deregulated industries like telecom, airlines, and electricity to promote competition and lower prices. But in deregulated electricity markets, particularly for residential customers, competition hasn't always meant fairness—especially for low-income households.

A 2022 Energy Institute at Haas study finds that price discrimination is a key reason why competitive electricity prices vary so widely—even for the same power in the same city. In Baltimore, for example, a quarter ofretail energy households paid over 35% more than the median electricity price, and the top 5% pay double. Unsurprisingly, those paying the most often live in lower-income neighborhoods.

The culprit? Aggressive marketing tactics. Electricity suppliers in deregulated markets often use door-to-door or telemarketing strategies that target households less likely to shop around or switch plans—often those in low-income, densely populated areas. This type of marketing doesn’t just push higher prices; it’s also inefficient. The study estimates that unproductive marketing eats up 12% of the industry’s variable costs.

Key findings include:

Low-income areas face higher marketing intensity, leading to more expensive plans.

Firms exploit consumer inattention and search barriers, raising prices over time.

Most of the income-price gap (85%) is driven by supply-side marketing cost differences, not consumer behavior.

High electricity costs in poor communities have serious consequences, from unsafe indoor temperatures to decreased spending on food and medicine.