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Why do electricity get more expensive if you use more?

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Elfdemon posted on Sun, Jan 27 2013 6:06 AM

There is something "unusual" about the price of electricity. Not sure about America, but in many countries electricity has a "progressive" pricing structure, like progressive income tax. The more you use, the more you pay. Even in America, it seems you pay more during day time than night time because supposely less people use it during the night so ideally it would discourage you from using electricty during the day.

Generally you get a discount if you buy more of a product or service, but it is totally different when it comes to electricity. Is this something specific about this product, or is it because of government intervention/ green-ideology?

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Modern electrical generation takes place in large, static plants, and as such the absolute supply of electricity is pretty static.  That is, if demand ramps up, they have to use more of the capacity of the existing plants.  If demand peaks up further, then there's a hard limit to how much they can provide, they can't just turn on more assembly lines or whip up another plant.  Instead they have peak or emergency generators, that often run off of natural gas or kerosene, which are more costly to run.

There are also things to consider, like how the power companies are all legal monopolies, doesn't exactly allow for more innovation.

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Marko replied on Mon, Jan 28 2013 2:39 PM

In HEs one thing they'll do is release water from a higher accumulation reseirvour into a lower one, producing extra electricity at peek times, then pump it back up at night.

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