I don’t understand how there can be multiple electricity companies if the power comes from the same power line.
What I mean is, how is the power I’m getting different from the power my neighbors are getting? It’s the same power, so how can so many different
companies charge different amounts for it?
In: Economics
There are two kinds of companies: power generators and power distributors. Power distributors are the people with the wires that run to your house. This is a super-highly regulated monopoly, and so these companies make very small profits for very long periods of time.
However, there is much more money to be made generating power. There are many possible fuels, and all sorts of environmental factors to price in. These companies produce the power and feed it into the network.
The distribution companies send control signals, called demand signals, to the power generators telling them how much to make. There is a lot of complexity here, as some power plants can change output quickly and others can’t.
Your money gets allocated to the company that made power corresponding to your usage. Of course those probably weren’t the actual electrons you used, but if you take 100 out and your company put 100 in, that’s good enough to say “you paid for your power”.
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