The increase in household electricity consumption and the imbalance between electricity supply and demand represent one of Iran’s most critical energy challenges. In response, the government implemented the Removing Obstacles for Power Industry Development to control electricity consumption and encourage high-consuming households to save energy. However, the effect of this law on electricity consumption hasnot yet been examined. Therefore, this study aims to investigate the dynamic effects of the law on household electricity consumption and the moderating role of inflation. The novelty of the research lies in analyzing the law’s dynamic impacts and isolating the influence of inflation on the outcomes. The results indicate that the law has a significant negative effect on electricity consumption: the law’s coefficient is negative and significant in both the first and second years after implementation, although smaller in the second year. Moreover, the interaction term between inflation and the law is positive and significant. In other words, the law has a deterrent effect on electricity consumption, but its impact diminishes over time and under inflationary conditions. Therefore, it is recommended that pricing reforms be implemented gradually and alongside inflation control policies to ensure sustainable electricity savings.