HOW MARGINAL COSTS INFLATE UTILITY BILLS

Following a comment requesting a fuller explanation of marginal costing in the sphere of electricity production, I have responded by adding an attachment below. And now as well a Graph showing the difference in the movement of prices set by marginal costs and market value.

3 Responses to HOW MARGINAL COSTS INFLATE UTILITY BILLS

  1. luisgac says:

    Hi Brian,
    Here I come again from the MR blog and I am really confused on the issue of marginal prices etc.
    I will read this document carefully because I really do not understand the way energy prices are set on the European market. What does marginal prices mean?
    It is a situation similar to what Marx describes in the theory of differential rent where the “individual value or individual prices of production” generated by the capitals that produce with the worst conditions of production determine the market value, and therefore the capitals of medium efficiency obtain extraordinary profits? Or are we talking about regulated prices, that is, not free market prices such as value-prices or production prices? If it is about prices regulated by the state, then that price, depending on the situation, will be higher or lower than production prices and, therefore, the energy sector will receive or transfer surplus value to other production sectors.
    Well, I guess I’ll find out by reading the document.
    Greetings.

    • Greetings, your comment revealed my post to be incomplete. As a full explanation cannot be given via a comment, I have posted an attachment which you will find here. I hope that clarifies the situation. The use of marginal costing in the electricity industry shows why its use is counter-productive.

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