Hi Jed, Your analogy of the oranges is faulty. It presumes I can walk down the street to another store and buy them cheaper. The real situation is that, because Con Ed control the distribution system, I can't really deal with anyone but them. When the industry was deregulated, I looked into buying from other dealers. Prices were all about the same, if not more, because of the "problem" with the distribution system I described. Until the system is upgraded, the pricing will remain about the same regardless of whom I buy from.
In answer to your second statement, they are supposed to come once a month because the price ( and bill ) is calculated on a monthly basis. So for example, during peak summer months they charge me the peak price for an estimate ALWAYS over what I use. This results in my providing them with an interest free loan, which they ( eventually ) get around to paying sometime in the fall. If your argument held water, they would undercharge me about as often as they overcharge. In reality, they ALWAYS overcharge me. Because they estimate so often, their estimates are based on their estimates, not on my actual montly usage. Like I said, there is no reason they cannot behave ethically, as the gas company does. It just profits them more not to, and they apparently have enough political clout to do it without consequence. K. -----Original Message----- From: Jed Rothwell [mailto:[EMAIL PROTECTED] Sent: Tuesday, April 12, 2005 1:28 PM To: [email protected] Subject: RE: What if all cars ran on electricity . . . Keith Nagel wrote: Hi Jed, What's so hard to understand? If I can take a commodity worth 4 cents and sell it to you for 16 cents, I make a huge profit. If I install special meters that allow you to buy the same commodity for 4 cents, I don't make a huge profit. On the contrary, you might make a much larger profit selling it for less. This is Business 101. If you can sell much more electricity overall by lowering the price, you make a larger profit, and your own overhead expenses per kWh fall. Or, if you can encourage people to spread out their demand for electricity and use it during off hours, you make better use of your generator and distribution network which is often sitting idle making no money at all. Selling electricity at a huge premium -- a fixed price of 16 cents/kWh -- is like selling oranges in a grocery store for $5 each. Your store sits empty with no customers, while you pay employees and rent. At the end of the week you throw away thousands of unsold oranges. It makes much more sense to lower the price of oranges, increase the number of customers, and move more merchandise. As the wholesale price and customer demand varies, you tweak the price to optimize profits. Actually, if electricity costs 4 cents, you would not sell it for 4 cents, but rather 6 or 8 cents off-peak. At peak hours of the day you would raise the price to 25 cents. Overall the average cost would be well above 4 cents, even if it was a little lower than 16 cents. (Or it might be higher -- whatever is most profitable.) You would sell a lot more electricity, making much more profit, and you would spread out the use of electricity to reduce peak demand. Telephone rates have always varied by time of day, because the telephone equipment sits idle at night, and the phone company wants to encourage people to use it at night rather than during peak hours during the business day. The power companies cost is not actually fixed at 4 cents. Most of their expenses go to pay for the equipment and network, and if the equipment sits idle their "cost" is a lot higher. If they could sell much more electricity, their only additional expense would be for more fuel, and their overall cost per kWh might fall to 3 cents. Remember, I'm ALWAYS paying the peak cost, regardless of how much the commodity costs to manufacture. A good metering system would cut my electricity bill in half at least. And it would double power company profits -- which are very low. It is a win-win situation, just as it is when the grocery store tweaks the cost of oranges, or the telephone company offers you reduced rates or zero-cost service at night. Also, the readers are supposed to come once a month. Not in Atlanta Georgia or Adams County Pennsylvania, they aren't. It says right there in the small print on the electric bill that they estimate charges and they come two to four times per year. Where you live, I doubt they are supposed to come more often but they do not. The public service commission would be upset. Anyway, why would anyone care how often they come? As long as the charges are correct over the long-term who cares whether they vary a little month-to-month? In Atlanta, you can arrange to pay the entire bill a year ahead of time in return for a considerable discount. At the end of the year they read the meter and make adjustments. It would be a big advantage if the power company could monitor your usage from second to second with an electronic meter and remote control over your largest electric appliances. (The ones that do not mind being turned off abruptly -- not the washing machine!) However, I see no advantage to monitoring once a month compared to twice a year. - Jed
