Utilities React to Reduction in Electricity Consumption

In her news article and blog, Rebecca Smith examines the reduction in electricity consumption in the U.S. - the causes and how utilities have reacted to remain profitable.
January 7, 2013, 12pm PST | Irvin Dawid
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The population is increasing, and we've become more reliant on electric-powered devices - either the plug-in type or those that need to be recharged frequently, yet the increase in power consumption for households is a mere .7% annually - and projected to remain there through 2040, according to the Energy Information Administration (EIA). Industrial users are also consuming less too - increasing .7% annually.

How can this be? Rebecca Smith provides the perspective from the utility sector - and their investors.

"The erosion of U.S. manufacturing has contributed to the consumption slowdown. Industrial electricity use, which includes manufacturing, accounts for about a quarter of the nation's total. From 1998 to 2010, the electricity used for manufacturing fell 18% as industrial processes grew more efficient and companies produced fewer goods in the U.S."

As for households, as a result of federal regulations requiring greater energy efficiency, all those gadgets and appliances are far more energy efficient than they might otherwise have been.

While this may sound like good news for the environment, it has put stress on power providers.

Rather than investing in new power plants, some utilities are investing in high-voltage transmission lines "because federal regulators are allowing them to collect above-average returns from customers on those outlays to encourage new investment in the nation's aging power networks."

In her blog, Smith takes a deeper look into the drop-off in energy consumption.

"Changes in demographics have an impact. The steady migration of Americans from cooler to warmer states has cut electricity use because cooling a building requires less energy than heating one (although many people assume the opposite). 

Milder winter temperatures from 1960 to 2010 also helped chip away at electricity consumption, according to the Energy Information Administration.

About the only bright spot for utilities – looking ahead to largely lackluster sales for commodity electricity – is the transportation sector. 

To encourage plug-in cars, many utilities are rolling out special electricity rates for cars that give them a cut-rate deal if they charge overnight, when the electric system has loads of excess capacity."

Learn the facts about electricity consumption from the EIA.

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Published on Thursday, January 3, 2013 in The Wall Street Journal
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