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Low sales growth challenges utilities' traditional business models, Fitch says

From the October 30, 2013 issue of Public Power Daily

Originally published October 30, 2013

By Robert Varela
Editorial Director
U.S. electric utilities face an ongoing period of low sales growth that will challenge their traditional operating profiles and force utilities to broaden their product offerings, according to a Fitch Ratings report. Electricity efficiency gains, demand-side management programs and distributed generation have reduced customer consumption and cannibalized traditional, utility-supplied power, Fitch said. Utilities will have to include efficiency, distributed generation and demand-side management as part of their product portfolio going forward, the credit rating company said.

Energy efficiency, whether mandated or promoted by cost savings, continues to play a significant factor in dampening retail sales, as does net metering and distributed generation, the report said. Fitch also noted that the economic recovery and expansion since 2009 has done little for electricity sales growth. 

The Energy Information Administration recently revised its forecasts for retail U.S. electricity sales growth to 0.7 percent per year through 2040. However, given the trend of declining per capita consumption, EIA’s long-term forecasts for electricity sales growth are optimistic, the report said. Per year electricity sales growth of "perhaps just 0.5 percent seems attainable, although further inroads of efficiency likely will prove even 0.5 percent per year electricity sales growth as too optimistic." Fitch said it expects substantial regional variance from the national forecast with growth in the Southeast and Southwest. 

Low electricity sales growth will pressure unit costs and challenge the economics and benefits of future capital investments and rate design, as costs are allocated over a changing customer profile, the report said. Fitch said the economics of energy efficiency are compelling, as the benchmark levelized cost of electricity used to compare the cost of energy efficiency programs is substantially less than all forms of conventional or renewable power generation. Fitch expects reductions in electricity sales to increase at a rate of approximately 50 percent per year for the foreseeable future from the maturation of state efficiency programs as well as new federal standards on lighting and household appliances.

The full report, Power Down II: Efficiency Gains Short Circuit kWh Sales, is available at


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Senior Vice President, Publishing 
Jeanne Wickline LaBella

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro