See the last sentence of notes from the source data for your figure at http://www.eia.gov/totalenergy/data/annual/pdf/secnote2.pdf
(Section 2 of http://www.eia.gov/totalenergy/data/annual/):
Currently, of electricity generated, approximately 5 percent is lost in plant use and 7 percent is lost in transmission and distribution.As for thinking beyond "Stage One", I think that we conservatives often note this when liberals ignore it (e.g., losing revenue when raising taxes too much). Therefore, it's frustrating to me to see when conservatives don't consider it.
One thing that conservatives must come to grip with is that while the Free Market is GREAT at many things, it's not a panacea, and phenomena like The Tragedy of the Commons (see William Forster Lloyd) are very real. Unless we address such things, we're very easy to dismiss as living in a snobbish fantasyland that ignores reality.
Agreed, not all systems...it is dependent on the distance IIRC.
As for making an error in one direction, I would rather make that error in the direction of the free market, rather than government control.
Of course, that is my opinion...:)