In other words, I read it as:
You want the utility to supply you electricity at the "fuel" cost/kWh of the
energy delivered to you + a profit margin but ignore the cost of capital to
provide the infrastructure which is the same whether you require 1kWh
/month or 10000 kWh/month. If you had no outages then what is the cost/kWh
of your emergency supply? I would suggest infinite $/kWh. Simple economics
that you use with respect to buying a car- capital cost amortised over
lifetime +operating cost.
It's not the "demand curve" but the cost of capital +fuel to supply the
demand at any time + the capital cost of capacity which must be there (a
100MW unit which happens to be off line due to low demand, has the same
capital cost that it would at full load.).
The utility can handle this by some formula where capital costs are lumped
in the bill independent of load, which would be honest, but "politically"
undesirable. " I have to pay this whopping amount when I have been in Italy
on a wine and food tour for the whole month and my nght lights only drew
1kWh?". Hence rates that were based on decreasing cost/kWh with load in the
days when Reddy Kilowatt was encouraging use of electrical energy and fossil
fuels were cheap and plentiful and pollution was restricted to "put the
outhouse downhill from the well"
Regulation does limit greed when the utility has to justify its rates (I
used to live in such a region . De-regulation and market forces were
supposed to do the same through market competition- but in many cases,
hasn't had this effect as far as the consumer is concerned because MBA's
don't realize that a utility and a grocery store operate under different
financial regimes and outlooks.
There, I have got this off my chest and have probably pissed off a bunch of
people. I hope you are not one of them because, from what I have seen, you
think.
--
The economics for delivery of electricity were well thought out in the
early years of the Twentieth Century where the concepts of 'demand'
and 'diversity' were created.
The Chicago electricity mogul Samuel Insull was looking for ways to
lower the cost and increase the market share of his electrical service
and came across the 'demand' meter, which had been invented and was
usefully employed in Great Brittain to measure the maximum power
consumption for a set period of time during each monthly billing
period.
Suppose you have factory A and factory B as electrical customers.
Both use 10000 kWh per month, but...
Factory A spreads the load evenly throughout the day and evening
hours.
Factory B has short periods when electricity usage soars to a very
high level.
Who should pay the higher overall bill at the end of each month?
With the concept of 'demand', factory B is going to require bigger
generators, place more demands on transformers, (larger size)
distribution, and transmission for the peak load periods. Even though
most of the time this equipment is idle, it has a cost and must be
financed and paid for. Often this cost is higher then the amount of
electricity that is supplied in kWh.
Factory A has more or less a constant, smaller and predictable load.
It can be served with far less capital cost.
Note that the capital cost is mostly paid for by the utility (for the
equipment on the utility side of the meter). The utility must have
some means of recovering this cost that avoids just passing it along
to other customers.
Thus, both companies might pay the same per kWH, but factory A must
pay for the greater peak demand it imposes on the system. It gets
more complex than that, but this is the basic idea.
Beachcomber