Random thought on energy markets. Make it legally mandatory that electricity retailers can only charge consumers by the kWh (this wouldnt apply to large buyers who negotiate from the grid wholesale). They can charge more for kWhs at different times of the day and what not, but no fixed costs imposed upon the consumer (or in a less extreme version, cap these fixed costs at some low but non-zero number.) Network costs are in a certain sense fixed, but theyre not fixed at the margin per consumer, which is what the current pricing model assumes. That is to say - a huge amount of the networks capacity exists to be able to reliably deliver peak supply, which I dont remember exactly but might be three or four times average supply. And plenty of people arent using much energy during those peak periods, but theyre all paying the same $X per quarter for a connection. So consumers have incentives to change behaviour in a way that cuts the costs of peak supply that they impose on the generators, but not on the distributors. As demand is dropping due to home solar panels and energy efficiency, as it has been, the same rising cost for the grid - it doesnt go down because infrastructure investment is forward looking, and because a reduction in average consumption might not do a lot to reduce peak consumption, etc - comes to be an increasing portion of electricity bills. Whereas if all charges were proportional to kWh consumption, thatd be in a sense the opposite extreme in terms of incorrect pricing. But it leads to reasonable incentives for consumers. To pay for the grid under this model, each retailer would have to periodically negotiate a price for access for all their consumers, covering the fixed cost out higher margins per kWh. As large corporations, the retailers and distributors can devise all sorts of complicated contracts between them, and/or be subject to some carefully designed auction process or something, that itd be too burdensome to ask consumers themselves to understand.
Posted on: Fri, 15 Aug 2014 05:59:02 +0000
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