Hacker News new | ask | show | jobs
by Revisional_Sin 276 days ago
The system works fine for electricity and gas, because the grid itself is maintained by the government. You have private energy producers competing to produce electricity, and private energy companies buying it off them and selling it to the consumer. Maybe it would be more efficient if it was maintained solely by the state, but it's not too bad.

Unfortunately, the water system doesn't work that way. It has been parcelled off to various private companies, giving them a natural monopoly.
1 comments
Nursie 276 days ago
I’m not sure “works fine” is a great descriptor of the UK energy sector… people do get the energy they need, at least, but they have to be on the watch for better deals all the time and make sure not to become a ‘profitable customer’ aka sucker.

The price-discovery aspect of supply seems a bit broken as well - suppliers bid daily on their price to supply power, and the cheapest X units are selected (where X is the daily demand), then they all get paid out at the level of the most expensive provider in the selected mix. Seems to me that it leaves the consumer significantly overpaying, though it must be a nice little earner for those that can provide cheap power.

But you’re right that water is in a worse state due to the monopoly side of things.

link
Revisional_Sin 276 days ago
Huh, I did not know about the wholesale price issue, that's pretty bad.

It also incentivises avoiding cheap sources from dominating the market.

link
Nursie 276 days ago
It's my understanding, though don't take it as 100% gospel truth.

I can see that the model does incentivise both cheaper energy sources (more over-pay leads to greate investment possibilities) and pricing honestly. If the scheme chose the cheapest X units and paid them out at their bid rates, there would be incentive to bid as close as you can to what you predict the day's cutoff would be... but it does seem likely to not achieve the best overall price.

link
jgraham 276 days ago
It's true, see https://www.carbonbrief.org/factcheck-why-expensive-gas-not-...

From that article:

> The UK’s electricity market operates using a system known as “marginal pricing”. This means that all of the power plants running in each half-hour period are paid the same price, set by the final generator that has to switch on to meet demand, which is known as the “marginal” unit.

> While this is unfamiliar to many people, marginal pricing is far from unique to the UK’s electricity market. It is used in most electricity markets in Europe and around the world, as well as being widely used in commodity markets in general.

The thing that's unique about the UK is that the marginal price is almost always (98% of the time) set by the price of gas. That means when the gas price increases, the wholesale price of electricity, and hence consumer bills, increase in direct response.

Of course the situation is also made worse by the fact that gas is used directly for heating and cooking in a high proportion of British homes.

link