Have you ever read your electricity bill? They do just that. Your first 1000kWh cost 0.07$ apiece, your second 1000kWh cost 0.12$, your third 0.14$ (for example)
quite a few of the providers in Texas are exactly the opposite strangely.. they bill a surcharge for using less than some fixed KWh. i.e. I get charged $5 if i use less than ~500KWh in a month.
That's demand pricing, which is the other pricing option.
The two models I am familiar with:
- Normal tiered pricing. Low usage is cheap per kWh; high usage is expensive per kWh. This is because of inflexible production capacity.
- Demand rates. You pay a large fixed price, get a lower kWh price, and (this is key) contractually agree to never exceed X amperes. The higher X is, the higher your fixed price. This is a special plan structured for people who need a lot of power, but only at a modest rate of consumption- think baseboard heaters. Again, this model is constrained by inflexible production capacity.
Not the parent poster, but it works the same way in Thailand. Here in Bangkok first 150 kWh are cheapest, 150-400 are more expensive and 400+ is the most expensive tier.
Is this actually how electricity bills work? Mine has always been included in my rent, but I don't see anything like that on the sample bill for my local utility. Nor does that pricing scheme make any sense to me. Why would the utility charge you more for your second 1000kWh than for your first?
> (grandparent) I don't understand why the telcos think massively penalizing people for going over is a useful pricing model.
It makes no sense to me, either. It's like they don't actually want to sell more bandwidth.
Maybe demanding big penalties from people who accidentally go over is more profitable than actually selling to people who actually want more bandwidth.
British Columbia, where hydroelectricity is cheap and plentiful, has a two-tier structure like that. The cut-off isn't exactly 1000 kWh, of course.
The logic is that the utility company plans for generating a "usual" baseline amount, and peaks and use beyond anticipated "norm" are more expensive since you have to spin up/buy additional capacity. In B.C. at least the tiers are set up so that the first category will cover most "average" use.
Also in many places electricity prices are government-regulated to a greater or smaller extent, and a government might structure pricing like that to try to reduce overall energy use or subsidize the lowest users who might be presumed to be poorest.
If anything, if you agree to use a lot of power you will have a larger fixed price, but a lower per kWh price.