(Bloomberg) -- Something’s happening in the electricity market that hasn’t happened in years.
Americans east of the Rocky Mountains are -- at least for now -- ramping up their power use.
High commodity prices have led to increased power demand from the oil and gas and metals industries, and so have changes to U.S. tax law, according to first-quarter earnings reports from some of the largest U.S. utility companies. Jobs growth and industrial activity have also boosted electricity sales.
Electricity demand grew from October to March on regional grids from Texas to the District of Columbia, according to research firm PIRA Energy Group, part of S&P Global Platts. The last year-on-year increase that lasted this long east of the Rockies was a nine-month period that ended in May 2014.
“The economy and load performance is as strong as it has been in years,” American Electric Power Co. Chief Executive Officer Nick Akins said on an April 26 earnings call.
The uptick is a deviation from a nationwide, multiyear trend toward flat or lower demand as energy-efficient appliances and rooftop solar panels have caught on and reduced loads. It may not be sustainable as Americans continue to swap out old appliances and equipment and commercial and industrial customers are increasingly using energy-storage technologies to save money, Morris Greenberg, PIRA managing director for North American power, said in an interview. Plus there’s the ever-present risk of an economic slowdown.
“It’s an unexpected boon,” Greenberg said. “We might see this trend play out this year and maybe into next year. But I wouldn’t have much confidence in extending it beyond that.”
The Energy Information Administration has forecast that the longstanding correlation between electricity use and economic growth may be less pronounced in the decades to come amid moves toward fuel efficiency.
Slackening demand has weighed on wholesale power prices in recent years, and so have a boom in cheap natural gas production from shale formations and the rise of wind and solar power. The rout has so far shown no signs of ending, even with the recent uptick in electricity usage.
The eastern part of the country stood in contrast to the west. PacifiCorp, a utility unit of Berkshire Hathaway Inc. that serves customers in six Western states including California and Oregon, reported a decline in use for the first quarter. Preliminary data from the Energy Information Administration show the growth didn’t extend to the West Coast, Colleen Regan, an analyst at Bloomberg New Energy Finance, said by phone.
But Midwestern utility American Electric Power reported that first-quarter retail sales were up among all classes of customers for the first time since 2011. Southern Co., which owns utilities in the Southeast, and Exelon Corp. both said retail power sales rose, with estimates adjusted for weather.
“There does seem to be a silver lining in some of these first-quarter reports,” said Paul Patterson, a utility analyst for Glenrock Associates LLC. “But it is too early to say whether or not we have a trend.”
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