The latest trend in the utilities sector could deliver an unpleasant 'jolt' (pun intended) to electric power generation companies, if it continues.U.S. electricity consumption unexpectedly dropped in Q2 and Q3, on a year-over-year basis, The Wall Street Journal reported Friday (subscription required), although The Journal cautioned that the data is early and incomplete.
Major electric power suppliers Xcel Energy (NYSE: XEL), Duke Energy (NYSE: DUK) and American Electric Power (NYSE: AEP) all reported declines in residential electricity use in recent quarters, compared to the previous year, The Journal reported.
An electric puzzle
Economist David H. Wang told BloggingStocks Friday electricity demand is a function of more factors than one might assume. The economic cycle, seasons, weather extremes, demographics, household formation, increased efficiency, technological change, and even popular culture trends are among the major factors affecting electricity demand.
Wang believes the major factor in the recent dip is the current U.S. recession. "I will defer to more-comprehensive U.S. Energy Department and power association data later, but I think without question the economic downturn is a major factor. When people lose jobs, many tend to give up housing and live with roommates or relatives. This decreases electricity use. Also, home foreclosures result in empty homes, which obviously use less energy than occupied homes."
Still, if the trend persists after the U.S. economy starts to recover, Wang said two other factors at work -- efficiency and demographics -- may suggest fundamental shifts in U.S. electric power use.
"Consumers and households are becoming more efficient. Again, in any recession, there is a natural tendency to use less power -- use less air conditioning, keep the room a little cooler in winter if you heat by electricity, shut off unnecessary lights, appliances, close down unused rooms etc. but technology also is playing a role." Wang said. "More homes are replacing incandescent light bulbs with fluorescent bulbs, which use about 60-70% less energy."
The other factor -- demographics -- involves the aging U.S. population. "The U.S. population is aging, with the Baby Boom generation is starting to retire, and we know that retired senior citizens use less energy per person than workforce adults."
Utilities Sector Analysis: It's too soon to tell if the electric use dip is cyclical or structural. Still, if electric use does not ramp-up when the economy recovers, that may be a sign of tech-driven efficiency and belt-tightening by a more-cost-conscious public. If the latter is the case, that would have revenue / earnings implications for utilities stocks. Stay tuned.
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Reader Comments (Page 1 of 1)
11-21-2008 @ 1:02PM
Well Balanced said...
This will not last long... since Americans are not in tuned to be steady. Even at $4. a gallon they race up and down the highways. All in a hurry to get home and complain. No balance is set within their limits. Simplicity has turned out to be a complex mode.
11-21-2008 @ 1:19PM
andyg8180 said...
@Well Balanced... while that may be true, every little bit helps... Those people may have installed energy efficient bulbs, turn off lights in other rooms, watch less TV or something... all that added will ultimately effect how much energy is consumed...
Even if you turn down the thermostat one degree this season, you've done something...
11-21-2008 @ 1:56PM
doug said...
tuneing intresting we americans are in tune when we are spending money in your country or any outher one on earth but when it comes time to help us then were ugly ,,, but the rest of the world sets there with there hands out 24/7 and not only that were supposed to defend them too ! well i am proud to be a american we have our ups and downs but we pull through it and were the most powerful country in the world , we will be fine
11-21-2008 @ 2:30PM
Mike O said...
I have done a number of things, including replacing every non-dimmable bulb with spiral CFL's, only using the air conditioner when the house (attic) fan won't do, replacing all TVs with flat panel LCD's, beefing up weather stripping on doors and windows, and even improving insulation in a few places.
My peak montly electricity bill this summer was about $97 for a 1400 sq ft house.
11-21-2008 @ 2:57PM
mauricio Lopez said...
I changed all my lights to flourescent hi efficient lights last year; I spent about 1000Kwhr per month on avg; this year I am averaging 750Kwhr per month. A 25% comsumption reduction!!!!! No recession, no real changes other than the bulbs!!!
This coming year I will install a Solar Panel generating station on my roof and I will Consume pretty close to ZERO!!!!& the Iranians & Hugo Chavez can drink their oil for all I care. Also as soon as the plug ins are out I am buying one!!!