Excel energy increase rates

Currently, Xcel customers pay 3.1 cents per kWh. After the rate change, customers using less than 500 kWh will fall into the Tier I category and pay 9.8 cents per kWh.

If you use more than 500 kWh, the rate will increase to 14.3 cents per kWh.

http://www.thedenverchannel.com/money/23677368/detail.html

The problem is that because government grants Excel a monopoly on energy it means that market cannot dictate the price. Is this price increase truly justified? It is impossible to say because in a free market, there would be competition and if a company raised its prices unnecessarily the competition would see it as an opportunity to take customers from the offending competitor, so these decisions would not be made lightly. In a free market the tendency is for prices to drop over time, once you adjust for the government's printing of money (inflation).

This price increase was approved by the PUC (government) so in theory Excel had to prove the increase was needed, but in reality it only means they to convince a couple of people of the need for the increase, in a market based system they would need to convince each of their customers of the need for the increase, because if they made an increase in price and their competition did not, they would lose profit instead of gaining it. This also acts as a market incentive to be as efficient as possible.

Alas we will never know what the market would dictate as the price, because there is no competition. I might be able to add a windmill or solar panels to my house (as long as that doesn't violate any city codes, and I can get a building permit from the government, etc), but it would be completely illegal for me to sell off my extra energy to you for retail. I can sell it back to the electric company, but at the rate they are willing to pay, which might be much less than what you might be willing to pay.

Comments

[Josh Medley]

Hi Guys,
Your info there is misleading - if you check the article you cited, yes the current price is 3.1 cents - but you compared that to the price after increase for kw including all other fees (14.3 cents) NOT the price per kw only (9 cents). This applies only to kw used beyond 500 kw. The first 500 are billed at the lesser rate 4.8 cents. I'm not saying anything about the question of markets or whether the price increase is valid - I'm just commenting that you hurt your own case when you report numbers inaccurately to support you theory!

[severin]

Thanks Josh, I got the numbers a bit mixed up there. I will edit the post.

[Gary]

They need the extra cash to pay for thier $15000 dollar board dinners. Why since they have a monopoly on energy can we not have a vote by Denver consumers as to price increase!