Utilities fear weak demand for electricity a sign of fundamental change in consumption.
With each passing day, it becomes clearer this is no ordinary economic downturn.
Data show Americans aren't just cutting back in traditional ways: Paring non-essential purchases and getting by with fewer luxuries. Rather, there are fundamental shifts going on in the way we live.
These emerging trends evidence a shift not just in purchasing habits, but in lifestyle.
According to the Wall Street Journal, businesses and households alike are using less energy. Specifically, large utility companies like Minneapolis-based Xcel Energy (XEL), Charlotte's Duke Energy (DUK) and American Electric Power (AEP) in Ohio are seeing steeper drops in electricity consumption than in previous downturns.
To be sure, energy demand weakens as the economy slows. Consumers buy fewer electronic gadgets, drive less and generally use less stuff that needs to be turned on.
This time, however, executives are worried fundamental behaviors are changing. Jim Rogers, CEO of Duke Energy, told the Journal consumption is falling even in places where prices are stagnant. "Something fundamental is going on."
Xcel CEO Dick Kelly said for "the first time in 40 years [he's] seen a decline in sales" to homes.
Actionable ideas, instant analysis. Real-time from bell to bell.
Minyanville's Buzz & Banter - 14 day FREE trial
If the pattern persists, it could cause utilities to drastically change their business model. Typically, purveyors of power count on small, but consistent growth in energy demand. They build this assumption into their business models, which plays an integral role in expansion plans and breaking ground on new plants. Coupled with the rising cost of capital resulting from the credit crisis, this means Americans are likely to see higher energy prices in the future.
And while the data is far from conclusive, it could be an early sign that we are (begrudgingly) embracing the concept that less is, actually, more.
Minyanville's Kevin Depew and others have been cataloguing this shift in consumer behavior, as broad deflation grips society. More than just lower prices, deflation is taking hold in all aspects of our lives. It's a slow process, to be sure, but one that is undeniably gaining momentum as social mood darkens and the public rejects consumerism.
Despite lower gas prices, Americans are still driving less. Ever hungry for bigger offerings from McDonald's (MCD) and Burger King (BKC), restaurants are increasingly being forced to inform their customers just how bad an idea it is to eat a Triple Whopper with cheese. Someday, the lesson may actually stick.
Confucius once said a journey of a 1000 miles begins with a single step. Turning off the lights when you leave a room may be that first step. Watching less television may be the second. Maybe, just maybe, spending less time on Facebook could be that third step that sets the whole thing running down hill.
Hey, a guy can dream right?
The information on this website solely reflects the analysis of or opin=
=3D =3D3D ion about the performance of securities and financial markets by =
the wr=3D iter=3D3D s whose articles appear on the site. The views expresse=
d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi=
a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web=
site is intended to con=3D stitute a recom=3D3D mendation or advice address=
ed to an individual investor =3D or category of inve=3D3D stors to purchase=
, sell or hold any security, or to =3D take any action with re=3D3D spect t=
o the prospective movement of the securit=3D ies markets or to solicit t=3D=
3D he purchase or sale of any security. Any inv=3D estment decisions must b=
e made =3D3D by the reader either individually or in =3D consultation with =
his or her invest=3D3D ment professional. Minyanville write=3D rs and staff=
may trade or hold position=3D3D s in securities that are discuss=3D ed in =
articles appearing on the website. Wr=3D3D iters of articles are requir=3D =
ed to disclose whether they have a position in =3D3D any stock or fund disc=
us=3D sed in an article, but are not permitted to disclos=3D3D e the size o=
r direct=3D ion of the position. Nothing on this website is intende=3D3D d =
to solicit bus=3D iness of any kind for a writer's business or fund. Mi=
ny=3D3D anville mana=3D gement and staff as well as contributing writers wi=
ll not respo=3D3D nd to em=3D ails or other communications requesting inves=
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter