Bunching for Free Electricity

This paper documents the impacts of Thailand's Free Basic Electricity program on electricity consumption behavior. Under the program, households who use less than 50 units are exempt from paying their electricity bill in that month, while households who use more than 50 units have to pay for the full amount. The program thus creates a large notch in the household's budget set. In contrast to existing literature that finds little or no bunching, we observe a distinct bunching of electricity consumption around the threshold. Nonetheless, the excess bunching is still small compared to the overall distribution. We provide possible explanations on the role of various optimization frictions.