We have a lot of gadgets and gizmos in America these days and I have heard of some parents even installing TV’s in all their kids rooms.
You would think of all the TV babysitters, iPads, iPad mini’s, Kindles, etc that somewhere along the way we would be consuming a ridiculously large amount of electricity.
What the energy information administration has discovered is that we will only see a 0.6% a year rise for industrial users and 0.7% rise for households.
These small demand increases will continue at about this same pace all the way until 2040 as far as government estimates can foresee.
Why is it that we are seeing demand slowly creeping up instead of the 8 % yearly consumption increase that we are used to?
According to the Wallstreet Journals findings, a lot of this has to do with the manufacturing sector really decreasing the amount of electricity and other energy that they use in the production of goods.
Some of the decrease is directly related with the recession as can be seen in years 2008, 2009, small increase in 2010 and down again in 2011.
It isn’t all about the recession though. We are using some spectacularly efficient appliances, light bulbs, and cars these days. We simply don’t have to use as much electricity to cool our house, warm the house, light the house, wash and dry clothes, etc.
The interesting downward trend in electricity consumption is causing less pollution but making it hard for electric companies to turn a decent profit. Since virtually all of our electricity is created on demand and not stored electric companies have a lot of capital tied up in electricity infrastructure.
Much of the electric utility infrastructure has been partially government controlled and regulated since it went into existence. The government basically called the shots on the infrastructure even though companies like TXU previously known as TU Electric and other such companies like Houston Power and Light built and owned the equipment.
If the regulators said they had to build it they built it and there was usually some type of reward, subsidy, or something to go along with it to make sure these companies kept pace with demand and the state had a reliable electric grid.
The government in a way has come to the rescue for these electric utility companies as they are regulating and enforcing the upgrades necessary to move and replace old 50’s technology to today’s smart grid high-voltage transmission lines. In just the last couple years the US has spent over $35 billion on these superhighways for electricity.
So even though electric utilities may not be making much money any more from the consumer in generating electricity they are still darn well making a decent bit from the government subsidies that they get paid in building out the new US smart grid.
The government regulators have set up the upgrade network for utility companies so that they can offer these companies large returns far greater than what they get selling retail electricity. The utilities can then charge excessively for these upgrades to the electric utility customer. The government in a way is adding yet another tax to the consumer through the TDSP portion of an electric bill. Electric utilities are encouraged to further upgrade and build out the electric grid and deal less in competitive retail sells. They will do this so long as the government is there to pay them for building out a bigger more upgraded electric grid.
You may start to notice new fees like, government service fees, TDSP add-ons, distribution surcharges, smart grid upgrade service fee, etc. in the transmission and distribution section of your electric bill.
These additional fees and charges are creeping up on many peoples bills to a degree that is overtaking their actual electricity costs. You may soon find yourself paying more for that electric pole, transformer, wire, and smart meter than you are for the electric service.
Companies like Energy Future Holdings have both a regulated side (Oncor Electric Delivery) and deregulated side (TXU Energy). I would assume as have many electric companies already that Energy Future Holdings may start putting most of their new investment energy in upgrading their electric grid equipment, poles, wires, etc. as they are guaranteed an above average return by the federal government.
Unfortunately the average electricity consumer is not guaranteed an average electric bill as can be seen by the people living in New York City who pay more for their transmission and distribution charges than they do for the cost of electricity.
Being in the federally regulated electric utility business seems to be good business as these regulated utility companies will make 11.7% to 12.9% return as set by the Federal Energy Regulatory Commission. This return is guaranteed and it isn’t based on load growth that has small room for error.
In summary I think the drop in demand for electricity is related to more efficient appliances, lights, etc. but I also believe it is related to a long lasting recession that will likely continue for a good 10 years.
What I think is going on in the electric utility industry is hand writing on the wall. I believe that the investment in the electric grid at this pace and using this many dollars has to do with the government attempting to prop up the economy with government created projects.
Don’t get me wrong, updating the electric grid is very good and needed but I just see the all at once strategy as a sign of something else. I truly believe that the government knows that the economy will be in the dumps for many years out. They are using this time to create the illusion that we are moving out of the recession and promising it will stimulate the economy when in reality we have a long hard road ahead of us. We have the new gadgets and efficient appliances but the jobs and consumer consumption are shrinking and they will continue to do so for many years.