The “Correct” price for electricity is one price to be connected to the grid and several more relating to one’s power used, power factor, peak demand, and the like.
The average price paid is lower than the “correct” price, because charging the “correct” price adds lots of measuring and billing costs. It’s better to allow some subsidizing to be happening than to spend more just to make sure it isn’t.
An easy way to do it would be to charge the “correct” marginal cost for all kWh and have a separate fixed fee. My water bill is something like $50 fixed and then a small amount for the water I use after it; the electric bill could work the same. Ronald Coase argued that here
Commercial meters have priced kW for a long time and I think the reason residential didn’t was more along the lines of they’re more homogeneous than the meter costs. But either way, it seems everyone is getting smart meters now and you could match it up to theory exactly if it were politically feasible.
The political problem is that some people would be charged more; regression to the mean suggests that those people would be the ones who currently pay the least. The people who pay the least are the people who use the least power.
In a proper cost-sharing setup, dividing the fixed cost of maintaining each portion of the grid among the people served by that portion of the grid, pricing would be fiendishly complicated and appear unfair: Consider ten rural houses roughly in a line sharing a single branch line from the distribution station: each of these houses would be charged equally for their use of the larger distribution network, but the first house would be charged with 1⁄10 the cost of maintaining the first segment of their shared circuit, the second house would be charged that plus 1⁄9 the cost of the second segment, and so forth.
Or is it: If someone builds an 11th house at the end of that line, and the added load requires that the first segment be upgraded (to a line with higher maintenance costs) to handle the additional load, how is that cost fairly distributed? (What if the 11th house is added in the middle of the line?)
A $X+$y/kWh system makes more sense, but there is no system which is perfectly fair and appears to be fair to most people.
The political problem is that some people would be charged more; regression to the mean suggests that those people would be the ones who currently pay the least. The people who pay the least are the people who use the least power.
Everything you say is true, but your implied argument is flawed (you are implicitly making an “all A are B, all C are B, therefore all A are C” argument). If we had a fixed fee, and were discussing the possibility of eliminating it, your argument would apply just as well.
Sorry- that made much more sense as a lead-in to the self-redacted segment where I pointed out that the higher-spending (and presumed higher-income) users were subsidizing the poor, and suggested that might be a feature.
The “Correct” price for electricity is one price to be connected to the grid and several more relating to one’s power used, power factor, peak demand, and the like.
The average price paid is lower than the “correct” price, because charging the “correct” price adds lots of measuring and billing costs. It’s better to allow some subsidizing to be happening than to spend more just to make sure it isn’t.
An easy way to do it would be to charge the “correct” marginal cost for all kWh and have a separate fixed fee. My water bill is something like $50 fixed and then a small amount for the water I use after it; the electric bill could work the same. Ronald Coase argued that here
Commercial meters have priced kW for a long time and I think the reason residential didn’t was more along the lines of they’re more homogeneous than the meter costs. But either way, it seems everyone is getting smart meters now and you could match it up to theory exactly if it were politically feasible.
The political problem is that some people would be charged more; regression to the mean suggests that those people would be the ones who currently pay the least. The people who pay the least are the people who use the least power.
In a proper cost-sharing setup, dividing the fixed cost of maintaining each portion of the grid among the people served by that portion of the grid, pricing would be fiendishly complicated and appear unfair: Consider ten rural houses roughly in a line sharing a single branch line from the distribution station: each of these houses would be charged equally for their use of the larger distribution network, but the first house would be charged with 1⁄10 the cost of maintaining the first segment of their shared circuit, the second house would be charged that plus 1⁄9 the cost of the second segment, and so forth.
Or is it: If someone builds an 11th house at the end of that line, and the added load requires that the first segment be upgraded (to a line with higher maintenance costs) to handle the additional load, how is that cost fairly distributed? (What if the 11th house is added in the middle of the line?)
A $X+$y/kWh system makes more sense, but there is no system which is perfectly fair and appears to be fair to most people.
Everything you say is true, but your implied argument is flawed (you are implicitly making an “all A are B, all C are B, therefore all A are C” argument). If we had a fixed fee, and were discussing the possibility of eliminating it, your argument would apply just as well.
Sorry- that made much more sense as a lead-in to the self-redacted segment where I pointed out that the higher-spending (and presumed higher-income) users were subsidizing the poor, and suggested that might be a feature.