Good Times for Building a Data Center? Surprise Drop in Power Use Jolts Utilities

WSJ writes on how utilities are reacting to changes in electricity use by utilities.

Surprise Drop in Power Use Delivers Jolt to Utilities


An unexpected drop in U.S. electricity consumption has utility companies worried that the trend isn't a byproduct of the economic downturn, and could reflect a permanent shift in consumption that will require sweeping change in their industry.

Numbers are trickling in from several large utilities that show shrinking power use by households and businesses in pockets across the country. Utilities have long counted on sales growth of 1% to 2% annually in the U.S., and they created complex operating and expansion plans to meet the needs of a growing population.

What is scaring the Utility companies.

The data are early and incomplete, but if the trend persists, it could ripple through companies' earnings and compel major changes in the way utilities run their businesses. Utilities are expected to invest $1.5 trillion to $2 trillion by 2030 to modernize their electric systems and meet future needs, according to an industry-funded study by the Brattle Group. However, if electricity demand is flat or even declining, utilities must either make significant adjustments to their investment plans or run the risk of building too much capacity. That could end up burdening customers and shareholders with needless expenses.

To be sure, electricity use fluctuates with the economy and population trends. But what has executives stumped is that recent shifts appear larger than others seen previously, and they can't easily be explained by weather fluctuations. They have also penetrated the most stable group of consumers -- households.

This looks like it is a good time to build a data center or at least lock in future capacity as utilities look for revenue growth.

Some utilities are even thinking of changing their rate schedules.

Utilities are taking a hard look at the way they set rates and generate profits. Many companies are embracing a new rate design based on "decoupling," in which they set prices aimed at covering the basic costs of delivery, with sales above that level being gravy. Regulators have resisted the change in some places, because it typically means that consumers using little energy pay somewhat higher rates.

One good change about this economic environment is it is driving some of the biggest changes in world economies since the industrial revolution.  Change is always painful, but in the long run good.