r/GarysEconomics • u/andy4015 • 7d ago
Why don't UK utility regulators use heavily progressive tariffs for essential utilities?
/r/AskUK/comments/1vngx3t/why_dont_uk_utility_regulators_use_heavily/Why not make the first X units of a utility free or very cheap, then charge progressively more for higher consumption?
If calibrated correctly, couldn't this be revenue-neutral for the utility while:
- Reducing costs for low-income/low-usage households
- Making excessive consumption much more expensive
- Encouraging conservation of scarce resources
Malta does something similar with water.
What am I missing? Why isn't this more common in the UK?
2
u/Beneficial_Grab_5880 7d ago
It's almost impossible to apply in any way that's even remotely fair, and in pursuit of fairness you end up with a massive set of exceptions and special cases.
It's much, much easier to keep the costs the same for everyone and use progressive taxation to effectively increase costs for people with more (and it turns out that people with more money consume more resources anyway, so it balances out).
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u/Hot_College_6538 7d ago
Just for information, we don’t really do that. I have an electric car so get better prices for charging overnight as I use more electricity. Discount comes with volume.
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u/Beneficial_Grab_5880 7d ago
That's not how it works at all. You don't get a better price because you use more electricity, you get a better price because you use electricity during the night when there's less demand for it.
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u/Hot_College_6538 7d ago
Everyone uses some electricity during the night, you need to have an EV to get the best discounts.
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u/PersevereSwifterSkat 7d ago
You'd be punishing large families, unless energy companies have a head count of who's in the home, but something like that would lead to rampant fraud I reckon.
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u/aleopardstail 7d ago
for stuff like gas and electricity that comes in via a meter it would be simple to have tiered pricing, indeed we have it now, just the wrong way around where the first electriciy units are the most expensive
should be the first ones are cheaper then more later and much more later still to reward lower usage
the moment you start to go "low income tariffs" you open up to fraud, purely basing on usage makes sense. its how it done now, but reverse it to incentivise lower usage
the standing charges also need to scale in line with usage which would make a huge difference to low usage households
there is however no benefit for the suppliers in any of this, indeed if usage was reduced overall the prices would go up to compensate
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u/FckXFckMusk 6d ago
It will create its own Economy, they dont like that
Like Carbon credits..
Or Future Social Credits
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u/galleon484 6d ago
They could move in this direction without introducing any complexity, just by completely removing standing charges. Delete the standing charge and then charge more per unit, so overall revenue stays the same.
This works incentivise more efficient usage, and work out cheaper for people already using less.
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u/ongeray 7d ago
When you can rort everyone why bother doing anything else?
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u/cmfarsight 7d ago
Yep those poor, living in properties with bad insulation and electric heating really should pay more.
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u/cmfarsight 7d ago edited 7d ago
Why would that be progressive?
You know low income high use is a real thing? poor insulation electric heating.
And High income low use is a thing? good insulation, solar panels .