At 21:36 1-6-01 -0400, John Giorgis wrote:
>How do you choose who gets that last MW of
>electricity? Indeed, if the price were capped for $30 for that last MW,
>there might well be 1,000 buyers who would each want that last MW. How
>does the supplier choose?
>
>Here are the possibilities I can come up with:
>1) The supplier uses its own biases to choose who gets the last MW. i.e.
>the last MW goes to friends or cronies of the supplier.
>2) The supplier holds a random drawing among all those desiring to purchase
>the last MW. This, however, is often highly unequitable as no weighting
>is conducted by need. Lighting a neon sign has the same weight as
>lighting a hospital.
>3) The last MW is auctioned to the highest bidder. Thus, the person who
>values the last MW of electricity the most will pay the highest price for
>the last MW. After all, nobody will pay more for a MW of electricity
>than the value that MW of electricity imparts to the user - unless
>compelled to do so by a government. Thus, there is an upper limit on the
>price of electricity in that the supplier cannot charge more than the value
>the MW will impart to the user.
I prefer option #4: before an energy crisis is even expected to occur, a
list is made of who will need energy more than anyone else. Top of the list
would be, for instance, hospitals, followed by emergency services, followed
by ... <etcetera>. In case of an energy crisis, the organization at the top
of the list is offered that last MW. If it doesn't accept the offer, it's
offered to #2, and so forth.
The problem with option #3 is, of course, money vs necessity. If the last
MW is auctioned, it will go to the highest bidder, not necessarily the one
who needs the energy most. Let's say there are two parties in the race: the
local hospital (that needs the power to run all their medical equipment)
and the local stadium (that needs the power to light the stadium for the
Superbowl). If the hospital can only afford to pay $1,000 for the last MW,
but the stadium people offer $1,500 for it, it will go to the stadium, not
to the hospital -- even though one can argue that live-saving medical
equipment is more important than a sports match.
Of course, the stadium folks could be very nice, buy that last MW, and
donate it to the hospital... <smile>
Jeroen
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