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November 20, 2007

Everyday Economics

A lesson in consumer surplus:

It's a sad moment when compact fluorescent lightbulbs freely distributed from California utility companies get sold on eBay. Rumor has it that some even appeared in a Reno hardware store.

The purloined lightbulbs bear stickers stating that they were subsidized by utilities, such as Pacific Gas and Electric Co. and Southern California Edison, so they're easy to recognize. The utilities bought and distributed the free lightbulbs with money from Californians' electricity bills to try to save energy throughout the state. Now the utilities expect to get energy savings from only about 80 percent of the bulbs.

So if you didn't know, when you give things away for free, people might re-sell them on eBay. (See also: time value of money.)

If PG&E really wanted Californians to consume less energy, they should charge them more, like through some kind of peak pricing scheme. Oh wait!

Posted by Zach Wendling at November 20, 2007 12:05 PM

Comments

PG&E's peak pricing scheme isn't aimed at "Californians," but at big businesses, a few of which have business schedules which allow them to use less electricity during peak times in exchange for lower prices the rest of the time.

If you read down the page you linked to, you might notice that having a peak demand of 200 kilowatts is a requirement to participate. That's much more than any home would consume.

Posted by: wahoofive at November 20, 2007 04:10 PM | permalink

What're you talking about wahoofive? If you read down the page you allegedly read, you might notice the requirement is simply that you "billed maximum demand of 200 kw or greater during any one of the past 12 billing months." This is easily met by most households.

The average household in America in 2006 used 888 kilowatt hours per month, on average, easily meeting that particular requirement, and certainly meeting it at least one month out of the year.

(Lest we forget, Al Gore, our model environmentally-friendly citizen, used 18,414 kilowatt-hours per month on average in 2006, also meeting the minimum requirement.)

Posted by: Joshua Claybourn at November 20, 2007 04:20 PM | permalink

Josh,

I think wahoofive is right, actually. Keep in mind that a kilowatt is a rate of energy consumption, whereas a kilowatt-hour is a measure of total energy consumed. Since there are 720 hours in a 30-day month, a household which consumes 888 kilowatt-hours per month is averaging just over one kilowatt of average power usage.

Posted by: Eric Seymour at November 26, 2007 03:10 PM | permalink

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