PCCA Journal 4th Quarter 2013 - page 16

PCCA Journal|4
th
Quarter 2013
16
Flat electricity demand has proven a particularly stubborn
challenge for electric utilities since 2008. This was first attrib-
uted to the economic slowdown, then conservation effective-
ness, with many expecting that growth would soon return.
There is a strong case to be made that the age of increasing
electricity demand may have passed.
Demographic trends, improvements
in energy efficiency, energy manage-
ment, and distributed generation will
keep electric demand growth below 1
percent in the future
8
(Exhibit 6). Op-
erating and securing funding needed
for capital construction in an era of
low or no growth is a challenge for
all industry participants.
Funding the needed spending on
electric infrastructure in the absence
of demand increases will fall on
ratepayers at higher levels than in the
past. Pushing needed rate increases
through utility commissions will
prove more difficult as rates have
been rising above the rate of infla-
tion since 2005.
9
For a family earning
$50,000 per year in 2001, electricity
consumed 2.8 percent of after-tax income. By 2012, this same
family would spend 3.9 percent of income on electric power.
10
There is regional variation to this challenge that is counter
intuitive. States that have the lowest power cost may have
the most difficulty raising rates. In tradi-
tionally low-cost states that rely on coal
for electric generation (South, Midwest,
and Mountain West), power prices have
been increasing as regulation has resulted
in significant spending on or shuttering
of coal plants. These areas, such as West
Virginia, have seen the largest cost in-
crease and are already under rate pressure
due to increased generation cost. Efforts
to obtain funding for T&D projects will be
competing with these spending priorities.
The Northeast, which relies primarily on
natural gas, is seeing falling power prices.
This creates an opportunity for utilities in
these markets to invest in infrastructure
improvement with less impact on ratepay-
ers.
Gas pipelines face different challenges.
The cost decline of natural gas along with
very little demand for new construction
related to housing growth have allowed
utilities to invest in infrastructure replace-
ment while the consumers’ gas bills
Rocketing to Success
Continued from page 15
Exhibit 5
U.S. Labor Participation Rate
Percent of Population > 16 inWorkforce
Exhibit 6
U.S. Electricity Demand Growth, 1950-2040
Annual percentage change and 3-year moving average
1...,6,7,8,9,10,11,12,13,14,15 17,18,19,20,21,22,23,24,25,26,...68