Electricity retailing
Encyclopedia
Electricity retailing is the final process in the delivery of electricity
from generation
to the consumer. The other main processes are transmission
and distribution
.
ing began at the end of the 19th century when the bodies which generated electricity for their own use made supply available to third parties. In the beginning, electricity was primarily used for street lighting
and tram
s. The public could buy once large scale
electric companies had been started.
The provision of these services was generally the responsibility of electric companies or municipal authorities who either set up their own departments or contracted the services from private entrepreneurs. Residential, commercial and industrial use of electricity was confined, initially, to lighting but this changed dramatically with the development of electric motor
s, heaters and communication
devices.
The basic principle of supply has not changed much over time. The amount of energy used by the domestic consumer, and thus the amount charged for, is measured through an electricity meter
that is usually placed near the input of a home to provide easy access to the meter reader.
Customers are usually charged a monthly service fee and additional charges based on the electrical energy (in kWh) consumed by the household or business during the month. Commercial and industrial consumers normally have more complex pricing schemes. These require meters that measure the energy usage in time intervals (such as a half hour) to impose charges based on both the amount of energy consumed and the maximum rate of consumption, i.e. the maximum demand, which is measured in kVA
.
around the world.
The supply of electricity to homes, offices, shops, factories, farms, and mines became the responsibility of public utilities
, which were either private organizations subject to monopoly
regulation
or public authorities owned by local, state or national bodies.
In some countries a statutory or government-granted monopoly
was created, which was controlled by legislation (for example Eskom
in South Africa
).
Electricity retailing in the period from approximately 1890 to 1990 consisted of managing the connection, disconnection and billing of electricity consumers by the local monopoly supplier.
In many utilities there was a marketing
function which encouraged electricity usage when there was excess capacity to supply and encouraged conservation when supply was tight.
was deregulated
to open up the supply of electricity to competition. In the United Kingdom
the Electricity Supply Industry was radically reformed to establish competition, including a market in advising users about switching supplier
. This trend continued in other countries (see New Zealand Electricity Market
and deregulation
) and the role of electricity retailing changed from what was essentially an administrative function within an integrated utility to become a risk management function within a competitive electricity market
.
Electricity retailers now provide fixed prices for electricity to their customers and manage the risk involved in purchasing electricity from spot markets or electricity pools. This development has not been without casualties. The most notable example of poor risk management (coupled with poor market regulation) was the 2001 California electricity crisis
, when Pacific Gas and Electric and Southern California Edison
were driven into bankruptcy by having to purchase electricity at high spot prices and sell at low fixed rates.
Customers may choose from a number of competing suppliers. They may also opt to pay more for "green" power, i.e. electricity sourced from renewable energy
generation such as wind power
or solar power
.
An electricity provider is often known as "the electric company" or "the power company".
ShopForEnergy.com
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
from generation
Electricity generation
Electricity generation is the process of generating electric energy from other forms of energy.The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday...
to the consumer. The other main processes are transmission
Electric power transmission
Electric-power transmission is the bulk transfer of electrical energy, from generating power plants to Electrical substations located near demand centers...
and distribution
Electricity distribution
File:Electricity grid simple- North America.svg|thumb|380px|right|Simplified diagram of AC electricity distribution from generation stations to consumers...
.
Beginnings
Electricity retailRetail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
ing began at the end of the 19th century when the bodies which generated electricity for their own use made supply available to third parties. In the beginning, electricity was primarily used for street lighting
Lighting
Lighting or illumination is the deliberate application of light to achieve some practical or aesthetic effect. Lighting includes the use of both artificial light sources such as lamps and light fixtures, as well as natural illumination by capturing daylight...
and tram
Tram
A tram is a passenger rail vehicle which runs on tracks along public urban streets and also sometimes on separate rights of way. It may also run between cities and/or towns , and/or partially grade separated even in the cities...
s. The public could buy once large scale
electric companies had been started.
The provision of these services was generally the responsibility of electric companies or municipal authorities who either set up their own departments or contracted the services from private entrepreneurs. Residential, commercial and industrial use of electricity was confined, initially, to lighting but this changed dramatically with the development of electric motor
Electric motor
An electric motor converts electrical energy into mechanical energy.Most electric motors operate through the interaction of magnetic fields and current-carrying conductors to generate force...
s, heaters and communication
Communication
Communication is the activity of conveying meaningful information. Communication requires a sender, a message, and an intended recipient, although the receiver need not be present or aware of the sender's intent to communicate at the time of communication; thus communication can occur across vast...
devices.
The basic principle of supply has not changed much over time. The amount of energy used by the domestic consumer, and thus the amount charged for, is measured through an electricity meter
Electricity meter
An electricity meter or energy meter is a device that measures the amount of electric energy consumed by a residence, business, or an electrically powered device....
that is usually placed near the input of a home to provide easy access to the meter reader.
Customers are usually charged a monthly service fee and additional charges based on the electrical energy (in kWh) consumed by the household or business during the month. Commercial and industrial consumers normally have more complex pricing schemes. These require meters that measure the energy usage in time intervals (such as a half hour) to impose charges based on both the amount of energy consumed and the maximum rate of consumption, i.e. the maximum demand, which is measured in kVA
KVA
KVA may refer to:*Kavala International Airport "Alexander the Great", IATA airport code* kilovolt-ampere* Kungliga Vetenskapsakademien, the Royal Swedish Academy of Sciences* Kings View Academy, Private School...
.
Monopoly supply
The rapid growth in electric appliance usage in the early part of the 20th century contributed to an explosive growth in electrificationElectricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
around the world.
The supply of electricity to homes, offices, shops, factories, farms, and mines became the responsibility of public utilities
Public utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
, which were either private organizations subject to monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
regulation
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
or public authorities owned by local, state or national bodies.
In some countries a statutory or government-granted monopoly
Government-granted monopoly
In economics, a government-granted monopoly is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of...
was created, which was controlled by legislation (for example Eskom
Eskom
Eskom is a South African electricity public utility, established in 1923 as the Electricity Supply Commission by the government of South Africa in terms of the Electricity Act . It was also known by its Afrikaans name Elektrisiteitsvoorsieningskommissie . The two acronyms were combined in 1986 and...
in South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
).
Electricity retailing in the period from approximately 1890 to 1990 consisted of managing the connection, disconnection and billing of electricity consumers by the local monopoly supplier.
In many utilities there was a marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
function which encouraged electricity usage when there was excess capacity to supply and encouraged conservation when supply was tight.
Creating a market
In 1990 there was a significant development in the way electricity was bought and sold. In many countries, the electricity marketElectricity market
In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use...
was deregulated
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
to open up the supply of electricity to competition. In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
the Electricity Supply Industry was radically reformed to establish competition, including a market in advising users about switching supplier
Energy switching services in the UK
Energy switching services are a kind of company that has come to exist since the EU began deregulating the gas and electricity markets, to open them to international competition, in 1996. Progress has been uneven across member countries, but in the UK there is now open competition among suppliers...
. This trend continued in other countries (see New Zealand Electricity Market
New Zealand Electricity Market
New Zealand's electricity market is regulated by the Electricity Industry Participation Code administered by the Electricity Authority . The Authority was established in November 2010 to replace the Electricity Commission and its publication explains how the market works.- Overview :Until 1987,...
and deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
) and the role of electricity retailing changed from what was essentially an administrative function within an integrated utility to become a risk management function within a competitive electricity market
Electricity market
In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use...
.
Electricity retailers now provide fixed prices for electricity to their customers and manage the risk involved in purchasing electricity from spot markets or electricity pools. This development has not been without casualties. The most notable example of poor risk management (coupled with poor market regulation) was the 2001 California electricity crisis
California electricity crisis
The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001 was a situation in which California had a shortage of electricity caused by market manipulations and illegal shutdowns of pipelines by Texas energy consortiums...
, when Pacific Gas and Electric and Southern California Edison
Southern California Edison
Southern California Edison , the largest subsidiary of Edison International , is the primary electricity supply company for much of Southern California, USA. It provides 14 million people with electricity...
were driven into bankruptcy by having to purchase electricity at high spot prices and sell at low fixed rates.
Customers may choose from a number of competing suppliers. They may also opt to pay more for "green" power, i.e. electricity sourced from renewable energy
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
generation such as wind power
Wind power
Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....
or solar power
Solar power
Solar energy, radiant light and heat from the sun, has been harnessed by humans since ancient times using a range of ever-evolving technologies. Solar radiation, along with secondary solar-powered resources such as wind and wave power, hydroelectricity and biomass, account for most of the available...
.
An electricity provider is often known as "the electric company" or "the power company".
See also
- ChellowChellowChellow is open source Energy accounting software for checking the correctness of UK electricity bills.Energy accounting software is a class of software products used for tracking, managing, processing, reporting and analyzing for accuracy of utility bills and energy information...
- Distributed generationDistributed generationDistributed generation, also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or distributed energy, generates electricity from many small energy sources....
- Eugene Green Energy StandardEugene Green Energy StandardThe Eugene Green Energy Standard was an international standard to which national or international green electricity labelling schemes could be accredited to confirm that they provide genuine environmental benefits...
- Net meteringNet meteringNet metering is an electricity policy for consumers who own renewable energy facilities or V2G electric vehicles. "Net", in this context, is used in the sense of meaning "what remains after deductions" — in this case, the deduction of any energy outflows from metered energy inflows...
- MicrogenerationMicrogenerationMicrogeneration is the small-scale generation of heat and power by individuals, small businesses and communities to meet their own needs, as alternatives or supplements to traditional centralized grid-connected power...
- Peak demandPeak demandPeak demand is used to refer to a historically high point in the sales record of a particular product. In terms of energy use, peak demand describes a period of strong consumer demand.- Peak load :...
and off-peak - Vehicle-to-gridVehicle-to-gridVehicle-to-grid describes a system in which plug-in electric vehicles, such as electric cars and plug-in hybrids , communicate with the power grid to sell demand response services by either delivering electricity into the grid or by throttling their charging rate.Vehicle-to-grid can be used with...
ShopForEnergy.com