Explaning deregulation or : What Happened to My Power Bill ?

Here we will give a brief description of the business workings of the electrical grid and how you pay for your power. There is really more to it than this, but this is the basic flow.

Electricity is a product that is produced and distributed much like any other item that you purchase. In order to maintain a reliable and sufficient supply for the consumer, a complex and integrated grid has been setup. The various aspects of this grid are owned and or controlled by various companies, organizations and commissions. In order for the grid to function properly, it must be able to respond to the changing demands put upon it and it must be profitable for the companies involved. If it is not profitable, the company will go bankrupt like any other company.

The cost of the produced electricity is basically the first 2 boxes. The next 3 boxes relate to the transmission or delivery of the electricity. Without this system, no power can get from the generating plants to the consumer.

Most of what we deal with in the Micro-Generation Regulation has to do with the local distribution and the Electricity Retailer, since those are the 2 entities that deal with the consumer. The Electricity retailer, much like a department store, buys electricity and then sells it to the consumer. The wires owner is the trucking company that brings the goods to the store and to the consumer (Blue boxes). What has made this whole process rather confusing is that the consumer now sees all the various costs involved in getting the electricity. This would be much like going to the department store and having the cost for a computer, for example, broken down into the various costs involved in getting the computer to the consumer. So now, instead of seeing the computer priced at $899.00 it will list the following.

Design of computer $100.00

Development costs $ 90.00

Raw material $ 75.00

Labour $ 110.00

Benefits for employees $ 50.00

Software for computer $ 150.00

Marketing $ 100.00

Transportation $ 120.00

Retailer costs $ 100.00

Profit $ 4.00

The average consumer will now be incensed at all the “extra” costs, but realistically, these are all a part of what goes into making the whole product. The same applies to the electrical grid.

Why we are billing in this manner is still a hot topic of conversation, but that is how it is for now.