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July 05, 2005

Where Oh Where Is Our Peak-Load Electricity Pricing?

On the radio, right now, a cricket is chirping in an attempt to convince me to "flex my power" and buy a more energy-efficient washing machine. This kind of campaign is driving Jim Hamilton (and me) up the wall:

Hamilton writes:

Econbrowser: Some like it hot: And thus we continue in the great tradition of California regulators, who seek with great diligence, earnestness and, dare I say, ingenuity, to try to balance supply and demand every day by telling each one of us exactly what we need to do. As long as we all maintain the proper spirit and check up on the Conserve-O-Meter as the day progresses, I'm certain that all Californians can be counted on to do the right thing, ensuring the equality of supply and demand as a result of conscientious attention to civic duty.

I suppose that it's because I'm an economist that I find this mindset a bit baffling. I do not understand why the California Energy Commission assumes that people will pay more attention to "flex your power now" alerts than they would to something that actually affects their pocketbook. Call me cynical, but I somehow figure that adding to the dandy phrase "flex your power now" the explanatory sequel "because if you don't, it will cost you more" could give the program just a bit more effectiveness.

As noted by Peak Oil Optimist, some stabs at peak load pricing are being explored in the state on a piecemeal basis, such as our local San Diego supplier's plan to charge the largest electricity users a higher rate when the need for conservation is greatest. But there seems to be considerable reluctance to implement such schemes for all electricity users. In part I suppose this represents the view that regular people (as opposed to heartless big companies) don't like to have to pay for more for electricity at some times than others. But regular people don't like to turn down their air conditioners when it's hot, either, and they like it even less when there's a general blackout and nothing happens when you flip any switches. My big idea is to let people choose between (a) and (b) in order to make sure that (c) doesn't happen.

Or maybe the regulators reckon that companies are smart enough to figure out how to lower their electricity use when there's a strong enough financial incentive to do so, but ordinary people aren't. Though one wonders, if they trust me with a Conserve-O-Meter, why don't they trust me with an electric bill?...

Posted by DeLong at July 5, 2005 02:14 PM