Economics 12 Blogs

Chapter 2

Chapter 2 Article
Title: Electricity rates may rise 7 per cent
Source: http://www.canada.com/victoriatimescolonist/news/story.html?id=0b3ffa10-ac51-4e22-96b2-db08bc6c2ffe


During the upcoming fiscal year, B.C. Hydro will fall short of revenue by a large amount. The company expects for their net income to reduce by more than 80 per cent by April 1. As a result, Hydro might compensate for this loss by raising the current cost of electricity by seven per cent. This would raise the average homeowner’s monthly electricity bill by about $4.50. This idea is not for certain, but the company is seeking for a way to increase their profits. Hydro is required by law to make a 13.5-per-cent return on equity to give to the provincial treasury; but they will not be able to meet this requirement unless the company makes adjustments to their price rates. Hydro will file for a rate increase to take effect starting on June 1. However, it was discovered that Hydro is wording its rate application in such a way that would allow for them to go back later and make the increase retroactive to April 1. B.C. Hydro stated that the province’s growing dependence on imported electricity is the main reason why they need to increase the rates. Approximately 14 per cent of B.C.’s annual electricity supply is purchased in the U.S.. The reason for this being is because B.C. has not added any major new power source since 1984.

Chapter 2 focused mainly on supply and demand. In this article, the two terms had an effect on the resource electricity. This resource is definitely inelastic since it powers a large portion of things that we use in our everyday lives; there is really no alternative to electricity. B.C. Hydro knows this. It is hard for us to complain if the company decides to slightly increase the price rates for electricity consumption. Until a superior high-tech source of power is created to replace electricity, the demand for it will always remain high. The article also tells us that our province does not create enough electricity for us to use, which is why we must purchase it from the U.S.. This means that we still have a high demand for electricity, but we don’t have the supply to meet our needs. Therefore the supply of electricity costs more because we are purchasing the resource from another country.

I think electricity will remain as a very important resource to us for the next few decades. This is why I think that we should create more electric-power sources. Currently, we have to pay extra cash to receive electricity from the U.S. I think we would eventually save money if we invested our money into building new major power sources so that we could at least support ourselves without having the need to purchase electricity from elsewhere. As well, we could even profit from selling more electricity to other countries.

posted by 12yangee @ 12:24 AM