this post was submitted on 10 Apr 2024
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Yes. Services like gas and water are natural monopolies - it doesn't make sense to roll out two or three separate lots of distribution pipes, so you always just have one service available to you. The best option is to have them as government owned services.
And yet, I can choose from dozens of different energy companies for electricity and gas.
You're choosing from vendors to deal with the regional vendor. You're just paying someone to pay the company in your area. The company you pay in this scenario literally offers you zero value. They simply exist to extract money from you.
Alternatively, these services could be provided to you at a lower cost as part of your annual tax bill under a collaborative cooperative.
That's not how it works.
The price you pay has 2 main components: a fixed component for network costs. This part is always the same and only depends on the type of hookup you have (e.g. an industrial power connection would cost more than a residential one). It goes to the owner of the physical power network (this depends on where you live) who uses it for things like maintenance (and of course a little profit). The network operator does not provide power themselves.
The variable component is based on your usage and goes to the power company. The power companies provide the actual power to the national grid. While it may be true that the power coming out of my outlets wasn't produced by the company I'm contracted with, that doesn't really matter. Electricity is electricity. What matters is that each power company has to provide the amount of energy used by their customers to the national grid. Say company A has 100 customers that on average used 1 kilowatt-hour each, and company B has 50 customers that used the same amount on average. Then company A has to provide 100 kilowatt-hours to the national grid and company B has to provide 50 kilowatt-hours.
How they provide that power is up to them, and usually varies. The larger energy companies have their own power plants, wind and solar farms. Smaller companies may buy energy in bulk from the larger ones and try to sell it at a profit to consumers. Energy companies may also buy or sell to/from other countries, depending on capacity and demand.
Point is that they don't just forward you the bill from a local company, they actually have to provide the power and outside of a few small 'virtual' energy companies they do produce that power.
DOZENS? Dozens. For real, dozens??? Please list for me every utility company that will actually provide electricity service to your home. If it's actually more than two I will donate $25 to a charity of your choice right now. Not ones that operate in your state/county, but ones that will actually service your home. No cap, my Visa is ready. I'll post the receipt.
52 to be precise
I'm gonna commit to this. How does this work? I looked and according to the Internet TenneT is the sole operator of the national electrical grid in the Netherlands. Do you have 52 power lines running to your home? What do these companies do if they don't actually produce the electricity or operate the grid?
I have precisely one power company that services about 5 million residents here where I live. No other options. This is the case for almost all Americans as far as I'm aware, outside of a few specific municipality-run power organizations, but those are exceedingly rare.
In Australia, and I assume the Netherlands, the transmission network is separately owned and run by government corporations. While multiple private companies are allowed to generate power and sell to customers on the government owned grid.
Interesting, I've never heard of this before but I suspect you're right. Was it always this way in Australia? I can't for the life of me figure out how America could be convinced to make its way towards this, but this sort of arrangement seems like a pretty ideal middle-ground.
TenneT runs the what is called the ‘koppelnet’ (linking network). This is a high-voltage network that links the power stations together and also links to the europe-wide electrical high voltage network. Locally, the distribution networks form the link between the high-voltage net and your home. It first goes to a medium-voltage network and finally a low-voltage network. In my case the distribution network is owned by Enexis.
Neither Enexis or TenneT produce power. TenneT is owned by the government, Enexis is a private company but these are heavily regulated (e.g. there are caps on how much profit they are allowed to make).
As a consumer, you pay a fixed amount per day for use of the distribution network. You pay this through your normal energy bill. This is specified separately on the bill. In my case this means I pay €426,95 a year to Enexis. This fee is purely based on the size of my connection to the grid, in my case 3 phase 25 amps. It doesn’t change if I use more or less power.
As for where my electricity comes from? I don’t know, because it changes constantly and with how electricity works, I’m not even sure if this question makes sense. All power producers together keep the grid supplied with enough power. Power stations across the country are linked together and how the generated power is distributed is monitored and adjusted constantly. This also includes capacity from other European countries, as those grids are linked too.
Lots of people have solar panels nowadays and if they produce more than they need they can supply that back to the grid as well and get paid for it (it basically means their electricity meter runs backwards).
A bunch of them do produce the electricity, but as I said the power plants are connected to the nation-wide linking network. There is no direct relation between any of these power plants and my home. They can also pay someone else to produce it for them. This could be someone in a completely different country. A bunch is produced locally through solar panels and sold to the power company by consumers.
Some smaller companies may not produce anything themselves and just buy it somewhere, but where als can vary day by day and hour by hour. They will buy it wherever they can get the best deal at that time.
All that matters is that they make sure they provide enough energy to the national grid to cover the use of their customers. How it’s actually distributed is completely separate.
Note that due to how the energy market works, electricity prices change hour by hour. In my case I have a contract with a fixed price for a certain amount of time (1 year, but you can get longer contracts), but it’s also possible as a consumer to get a completely flexible contract. That means the price you pay for electricity changes every hour, based on the actual market price (plus a markup for the energy company of course). Especially during the day when lots of solar power is available, the price can drop a lot. There have even been cases where the price was negative for a short while (i.e. you got paid to use electricity) due to overproduction. If you have a flex contract, your energy company usually has an app that will tell you the current price and the expected price for the next couple of hours.
So if their power plant goes down 5 million people are without power? That sounds extremely fragile.
So I've been thinking a lot about this. With a few exceptions you're actually pretty close to describing what we have in the States. There is more than one power producer in my state, and all the producers feed into the same grid whose infrastructure is regulated by the government. If a producer fails to produce, I can still get access to the electricity on the grid, but the key difference is that most of the delivery infrastructure is fully owned and operated by the same companies that do the production. I think we're getting hung up on the difference between provider and producer, which in America is mostly always the same thing.
It sounds like the Netherlands does in fact have two power providers then in the form of Enexis and TenneT, at least as I understand the term "provider" as we use it here. Or do you also maintain contracts/payments with individual power production firms that you haven't already described? What is the benefit of maintaining a contract with any of these companies if they already sold the power to Enexis/TenneT and they don't do any other administration services?
Our system is indeed fragile and I wish we could figure it out. I was a little off, DTE Energy services 2.3 million customers for power. We regularly experience outages affecting people into the hundreds of thousands. There's no incentive for them to improve the infrastructure since they're a monopoly. Most of the power here is delivered via free-standing poles instead of underground lines, which are obviously prone to issues related to wind/snow/trees. It fucking sucks. Even just separating the delivery system from private business would be a monumental shift.
That used to be the case here as well, but these companies got split up into a network company and a power company when the government decided to open up the energy market for competition.
You misunderstand. Power companies do not sell their power to TenneT or Enexis. It’s the other way around: power companies pay TenneT and the local network owner (Enexis is just one of them) for transporting the power they generate to their customers. These are the fixed network costs that get passed on to the consumer.
TenneT, Enexis and the other network companies own the power distribution infrastructure, and they basically charge for access to their network.
Saying there is only one power company because Enexis delivers the power to my house is like saying there is only one online shop because the postal service delivers all my online orders to my door.
Just like I can order something from Amazon, or bol.com, or CoolBlue, I can also buy power from any of these 52 power companies. It all gets transported by TenneT and Enexis just like all my packages are transported by PostNL. And just like when I order something online, I don’t have a contract with the delivery service: the delivery service is contracted by the seller. Just like the PostNL shipping costs show up on my bill, so do the energy transport costs. I still only have a contract with the energy company.
The energy company either generates the power themselves (analog to Amazon shipping from their own warehouse) or they can pay someone else to generate the power they sold me (analog to Amazon drop-shipping a purchase). The company I currently buy my power from (Essent) has several power plants, but they may buy additional power on the open market, or sell it if they have spare capacity. This varies hour by hour.
Since all electricity is the same, there is no need to transport the exact energy produced by my energy company to my house. Or to use the packages analogy: imagine every online shop only sold 1, identical product. Online store A sold 3 products to customer 1, 2 and 3, and online store B sold 2 products to customer 4 and 5. Since all products are exactly the same, they don’t bother putting address labels on them, company A just sends 3 unmarked packages to the postal service warehouse, and company B sends 2 unmarked packages. Since it’s all the same, the postal service just tosses all the incoming packages onto one big pile. They then deliver a random package from that pile to customers 1 through 5, it doesn’t matter which as they’re all the same anyway. Why keep track when there is no point? The only thing that matters is that if company A tells the postal service to deliver 3 packages to their customers, they should also send 3 packages to the postal services’ warehouse. No need to keep track of individual packages, but number of packages in and out must match for each online store.
Power outages are extremely rare here and usually only affect a small group of houses. With the exception of the high-current linking network, all our power lines are underground so they aren’t affected by things like falling trees and the like.
I gotta be honest, your replies are very wordy and I'm having trouble following.
I would in fact say that you have only one (well, two) power providers. You have one mail delivery service, presumably random-online-shop.com isn't providing you mail service right? That's the same thing here. Your "provider" doesn't produce the energy. They, like in the packages example you used, are simply handing off the "packages" to your power provider (the mail service) who then administers and provides you with your power (delivers your mail). They have the power at that point, it's on their grid, and you want the power, so they give you the power. You're still paying the other company, to pay Ennexis, to provide the power. These companies just make it.
And again, if all the packages are the same, there's no difference and it doesn't matter, why would you sign a contract with any of these companies specifically? Why doesn't the entire NL just buy from the cheapest company if it's all the same to you as an end-user of the network?
Anyway at this point I'm just happy to be able to push a new idea on other folks here. The concept of govermment-run programs is still scary for some reason, but we do public/private partnerships very well here. It could just be that we have different understandings of the word "provide", which I'm fine with. Who am I to tell the Dutch what words mean lol. Feel free to redeem your Charity Coupon™️ if you'd like. Thanks for the chat.
No, it's not. The power company is analog to Amazon or another webshop. The network company is analog to the postal service.
They actually do produce the energy, the network company doesn't. The power company owns the power plants that actually generate the electricity, or they sub-contract to a company that does (this is a simplification, in reality it's more dynamic than that).
You're playing semantic games here.
The network company only transports the energy, it's not theirs. Just like the postal service doesn't own the contents of the packages they deliver. It's briefly in their possession, but it's not their property. And just like with the postal service they are only paid for transport. If I order a €10 bag of cat litter on Amazon, the postal company gets paid €5,95 to deliver it to my door. If I order a €2000 laptop, they also get paid €5,95. If I use 1 watt-hour of energy on a particular day , Enexis gets €1,16 for delivery it. If I use 1000 watt-hours on that day, they also get €1,16.
Let me put it this way: let's say you got a new pair of sunglasses. You meet a friend and he says, "cool shades, where did you get them?". What will you answer?
Because while the actual power is the same, the contracts aren't. There is no "cheapest company", there is maybe a cheapest company for my particular situation. There are many differences between power companies and the products they offer.
So it entirely depends on your preferences as a consumer. Do you want a guaranteed price or do you want to take a little bit more risk? How much risk? What kind of service do you want? Just the bare minimum or do you want more?
How do you send different supplier's water down the same pipes while making sure customers get the supplier they're paying for's water?
Quite simple actually. The supplier knows how much water it puts in the pipes, and consumers have meters that measure how much water they take out of the pipes.
Water is water... It doesn't matter if you're not getting the exact same water molecules put in by your supplier.
Think of it like this... You have a jug of water. The supplier puts in a glass of water, and you (the consumer) take out one glass of water. The quantity of water in the jug stays the same, but you pay the supplier for how much water you took out.
It works the same way with electricity.
Tap water is not just water. Water has a bunch of other things in it besides water. The main reason I can think to choose a different water supplier than the cheapest is the water quality. If the cheap supplier is gonna crap up all the water for everyone else, what's anyone incentive not to go with the cheap supplier? Doesn't that pretty quickly devolve into a monopoly?
With electricity, it is just electricity and people have opinions about how that electricity is generated. But even there, it's usually not a good thing. It leads to high pressure, scammy sales tactics that result in higher bills for no benefit.
Can be solved by putting a certain quality requirement for putting water into the pipes. Suppliers can compete on price.
It's not realistic to have multiple pipe systems covering the same area. Digging pipes is very expensive. Digging multiple networks of pipes is insane. This solution is the best compromise to have multiple suppliers serve in the same area.
If the only difference is price, how does that not just devolve into a monopoly or shitty sales tactics to try to trick people into paying more for the same product?
Hypothetically, what if my electricity, in my shitty profit seeking corporation, cycles inconsistently?
What if my equipment at my rinky-dink substation fluctuates between something absurd like 40hz to 70hz.
This would be extremely dirty electricity\ electromagnetic pollution.
If you're all using the same wires, you're subjected to those problems even if you don't contract with them. So multiple suppliers doesn't fix the issue. It just introduces more suppliers who can have those problems.
Exactly! A shitty race to the bottom even for electricity is my point.
Never under estimate capitalism's ability to create a shittier alternative, is all I'm saying.
That would destroy the entire grid and a lot of equipment. It's why texas had rolling blackouts a few winters ago, it's a fine balance between supply and demand to maintain stable voltage and frequency. Failure to do so can result in a LOT of damage. If you don't have enough supply, you have to reduce demand.
Why would this electric company care? Would the company not sell the customers a solution?