Thursday, April 27, 2006

Brian Fallow on Electricity

BF has a good commentary piece on the electricity conundrum today in the Herald. Near the end he quotes Professor Lew Evans of Victoria University and Richard Meade of the Institute for the Study of Competition and Regulation:
The only reason voluntary savings campaigns are needed during dry-year winter crises is that many consumers, including residential ones, are insulated from wholesale prices by fixed-price contracts. If those prices don't move to ration a scarce resource, other means are required.
Why do people assume that residential customers should be the first to feel blackouts? They have paid through the nose for their fixed-price contracts (2-3x spot prices) so they should be the last on the queue for getting cut off. How on earth does it make sense for large, sophisticated electricity users to get their electricity cheap when it's easy and then get it at the expense of everybody else when it starts to run out? Methinks someone's trying to have their cake and eat it too.


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