Quote:
Originally Posted by fotze
If gas service skyrockets with these low gas prices, then somthing is very wrong with the system. Gas is pretty close to free right now. The economics to build some nat gas power plants has to be pretty good nowadays.
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Except that utilities are generally considered to be natural monopolies. The initial infrastructure costs are huge and with the economies of scale involved it is far easier for existing companies to add one customer - the additional cost (up to a point) is almost nil - than it is for a new firm to build and then capture customers.
Economically speaking, the current firms should always be aware of the risk of new generation and be keeping their price high enough to generate maximum profits, but low enough that it is not economical for a competitor to enter the industry.
As the costs of generation drop - alternatives generation becomes cheaper/more efficient (and even if nat gas is cheap, generation plants aren't) - then theoretically speaking the pricing should fall as existing firms attempt to remove any incentives new firms may have.