Have you ever read your electricity bill? They do just that. Your first 1000kWh cost 0.07$ apiece, your second 1000kWh cost 0.12$, your third 0.14$ (for example)
If anything, if you agree to use a lot of power you will have a larger fixed price, but a lower per kWh price.
Same up here in Washington for service to a single family residence through a single meter for customers of PSE [2].
[1] http://www.cpuc.ca.gov/NR/rdonlyres/6AF20251-011C-4EF2-B99D-...
[2] https://pse.com/aboutpse/Rates/Documents/elec_sch_007.pdf
The two models I am familiar with:
- Normal tiered pricing. Low usage is cheap per kWh; high usage is expensive per kWh. This is because of inflexible production capacity.
- Demand rates. You pay a large fixed price, get a lower kWh price, and (this is key) contractually agree to never exceed X amperes. The higher X is, the higher your fixed price. This is a special plan structured for people who need a lot of power, but only at a modest rate of consumption- think baseboard heaters. Again, this model is constrained by inflexible production capacity.
> (grandparent) I don't understand why the telcos think massively penalizing people for going over is a useful pricing model.
It makes no sense to me, either. It's like they don't actually want to sell more bandwidth.
Maybe demanding big penalties from people who accidentally go over is more profitable than actually selling to people who actually want more bandwidth.
The logic is that the utility company plans for generating a "usual" baseline amount, and peaks and use beyond anticipated "norm" are more expensive since you have to spin up/buy additional capacity. In B.C. at least the tiers are set up so that the first category will cover most "average" use.
Also in many places electricity prices are government-regulated to a greater or smaller extent, and a government might structure pricing like that to try to reduce overall energy use or subsidize the lowest users who might be presumed to be poorest.