Supply, Demand, and the Price of Electricity

“Xcel Energy reported a 17 percent jump in earnings per share for the third quarter, but warned that electricity sales remain slack, and that it will seek a Minnesota rate increase.”

Star Tribune (10/26/2012).

OK, so it’s been 30(!) years since I studied economics in college.

And I do know that Xcel Energy is a regulated utility.

Still, isn’t the appropriate response to slack demand to lower rates?

Now, if the headline read, “Robust Demand Signals Need for a Rate Hike,” it would make sense to me.

P.S.:  Also militating in favor of a drop in electricity rates vs. an increase:  the cost of natural gas — a key input for electric utilities — has collapsed due to so-called “fracking” and other drilling advances.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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