Thursday, March 10, 2011

This is what happens if you make the price too high.

It's something that is well understood by the public but seems to be a bit of a blindspot for those in authority whether in government or utility companies. If you price a commodity too high or even attempt to ban it, then people will find a way around it legally or illegally. Happens with drugs, happening with cigarettes and tobacco and happening with alcohol. There are really times I am blessed by living 45 miles from Dover, I can make massive savings by doing a booze cruise as and whenever I need too, others will use "a man in a van" to buy their cut price ciggies, it happens all over the place and the righteous have only themselves to blame for trying to socially engineer out of demand something that the people clearly are not prepared to do without.
Now it's starting to happen with electricity...

BBC.
Criminal gangs are targeting people with electricity pre-payment meters in a doorstep fraud with hotspots reported in Kent, London and the Midlands.
Crimestoppers has warned people to be alert to the doorstep fraud and offered a £10,000 reward for information.
The fraudsters sell illegal, cut-price electricity top-ups by pushing a cloned key into people's meters to add credit.
Data from six energy companies has shown more than 120,000 people have been affected across the UK.
More than 5,300 incidents have been reported in Kent this year. Birmingham saw 6,978 incidents.
Across the country, customers have given the criminal gangs more than £7m, figures from British Gas, EDF Energy, E.ON, npower, Scottish Power and SSE have shown.
Over the last 13 years ever since governments got heavily into the climate levy scam, electricity and gas prices have risen well above that of inflation and this affects those particularly at the bottom end of the financial scale who struggle from week to week juggling their budgets and making decisions as to heat the house, top up the car or have something other than beans on toast as their main meal for once. So if someone comes along and offers a £10 top up for £5 what do you think is going to happen? Pretty much the same as what happens when someone offers cheap ciggies, booze or a half inched pay as you go mobile top up. No, I'm not saying everyone will do this, but if the government and by proxy the utility companied continue to squeeze us all financially then sooner or later people will look for ways around it. It will be unregulated uncontrolled and at times illegal and yes people will get caught, it won't stop others from doing it though and new scams will develop as the people doing it get more sophisticated. I rather expect that when the companies try to foist smart meters on us all that someone somewhere will develop a hack so they can't be controlled from outside or at least appear as if they are working when they aren't.
There's probably some natural law or formula out there to describe the phenomena of diminishing returns for price increases, the laffer curve I know describes it. Private industry know it quite well and it affects their pricing policies, however when governments become involved then this goes out of the window as they just raise prices and duties to fill their coffers without regard to the consequences. One of the consequences is of course that people will look for an alternative, happens every time, without fail legally or illegally. Prohibition in the USA shows what happens when governments interfere too much in the market, criminals step in to fill the gap because the demand doesn't go away it just goes underground.

2 annotations:

Dr Dan Holdsworth said...

If you look at the tech being proposed for smart meters, then you'll soon realise that it is hideously insecure and very, very open to hacking, spoofing and all manner of mischief. One good trick might be to use a spoofing unit to cause all the smart meters in an area to go into extreme power saving mode right as a major soap opera is on the telly; cue a horde of extremely annoyed customers.

microdave said...

There's a 6 page PDF study of the technology, and possible risks available here:
http://www.cl.cam.ac.uk/~rja14/Papers/meters-offswitch.pdf