Depends on Your Income
Steve Mitnick has authored five books on the economics, history, and people of the utilities industries. While in the consulting practice leadership of McKinsey & Co. and Marsh & McLennan, he advised utility leaders. He led a transmission development company and was a New York Governor’s chief energy advisor. Mitnick was an expert witness appearing before utility regulatory commissions of six states, D.C., FERC, and in Canada, and taught microeconomics, macroeconomics, and statistics at Georgetown University.
An interesting question about the value of electricity is this. Is the value proposition for all utility customers the same?
Suppose one defines value as a good or service’s benefit-to-cost ratio. In other words, the value proposition of a good or service is better if you can buy it for less. And not as good if you must buy it for more.
Let’s just look, here, at residential customers. All households generally receive a roughly similar benefit from electric service. For lighting their home, space conditioning, and running machines and devices in the home.
But households vary as to how much of their buying power they expend for electric service. Even if their monthly bills are the same.
A high-income household may expend one percent or even less of its total expenditures on electricity. And they may expend even less in terms of a percent of their income, what we call their energy burden for electricity.
For these households, their share of wallet to pay electric utility bills is a tiny fractional slice. Leaving ninety-nine percent or even more to purchase all the other goods and services they need and want, from groceries to gas to gifts.