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Mean average fixed cost per year for each of the following: Credit, Direct Debit, and Pre-Payment

Credit Customers

The mean average fixed cost per year for credit customers would be the summation of the average fixed cost per year in each Town/City divided by the number of Towns/Cities.

Mean average fixed cost for credit customers =, this would give 81.50 pounds/year

Direct Debit Customers

Mean average fixed cost per year for direct debit customers would be the summation of average fixed cost per year in each Town/City divided by the number of Towns/Cities.

Mean average fixed cost for direct debit customers =, this would give 65.91 pounds/year

Prepayment Customers

The mean average fixed cost per year for Prepayment customers would be the summation of average fixed cost per year in each Town/City divided by the number of Towns/Cities (Department of Energy & Climate Change, 2015, p.3).

Mean average fixed cost for credit customers =, this would give 82 pounds/year

Factors that may contribute to differences in the different cost structures

From the above mean fixed averages, it can be noted that the mean average fixed cost for prepayment is slightly higher than that for Credit (by 0.5). However, the mean average fixed cost for direct deposit is considerably low (by 16.09). This could be because the companies are trying to encourage customers to go for the direct debit method of payment since they receive instantly thereby relieving companies of extra administrative costs on the sale of electricity (Fitzptarick, 2014, p. 1).

Direct deposit payment is a reliable and paperless means, which makes it efficient and environment friendly. On the other hand, credit and prepayment are less reliable as compared to direct payment. In addition, the former involves more transactions, which come with increased costs in structuring. In essence, administrative costs associated with managing direct deposit customer’s account are less than that of either managing credit or prepayment customer (Beggs, 2009, p. 22-35).

Factors contributing to a higher cost per unit with regards to electricity consumption

Cost structuring is usually done to recover various costs incurred in the generation, transmission, distribution, and sale of electricity. In this regard, several factors can cause variance in different cost structures. For instance, different utility companies have different tariffs based on their method of recovering the above-named costs. The main factors that affect differences in cost per unit cost include the cost of generation, cost of sale, transmission costs, and distribution costs.

For instance, In Northern Ireland, energy policy and taxation have influenced its high pricing in conjunction with fuel mix cost at the wholesale level (Lynch, 2013, p. 7). In addition, a market size that consists mainly of small scale industries factors in due to economy of scale issues (Beggs, 2009, p. 22-35).

Discussion of what Influences the geography of the region, have on the pricing of electricity

Once electricity has been generated, its transmission is needed since it cannot be stored. Transmission occurs over long distances around the country. In this respect, the geography of the region over which transmission lines pass is a vital factor in pricing electricity (Smith, 2015, p. 1). For instance, inhospitable terrain would require the construction and maintenance of huge and complex infrastructure as compared to hospitable terrain, which would require large but standard infrastructure. From this aspect, it can be noted that regions with hostile terrain would cost highly in construction and maintenance thereby influencing the pricing of electricity. Therefore, the extra cost incurred in hostile regions during transmission of electricity is recovered from the consumers through higher electricity prices (Beggs, 2009, p. 22-35).

Reference List

Beggs, C 2009, Energy: Management, Supply and Conservation, 2nd edn, Elsevier Butterworth-Heinemann, Oxford, UK.

Department of Energy & Climate Change 2015, . Web.

Fitzptarick, L 2014, Web.

Lynch, S. 2013 NI Electricity Prices: Data and Comparisons. Web.

Smith, C 2015, , media release. Web.

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