Electric utilities survey shows economic impact, regulatory uncertainty

Overland Park, Kan., February 18, 2010 — In a recent survey by Black and Veatch, respondents from the U.S. electric power industry voiced worries about grid reliability, regulatory woes and the future of coal-fired generation.

Black and Veatch’s fourth annual survey of utility leaders polled 329 participants from the public sector (municipal, state and federally owned) and investor-owned utilities.

Key findings of the survey include:

·         Many utilities’ industrial and commercial sales have been severely or seriously eroded by the recession, and less than one quarter of respondents think electricity usage in their area will grow by more than 1.5 percent annually in the next ten years. Growth expectations have ratcheted down.

·         Nuclear energy was selected as the generation technology that is best suited to help the country meet environmental standards, followed by wind power and natural gas. The rapid rise of natural gas in the rankings — it was deep in the pack in last year’s survey — indicates growing confidence in gas as an economically and environmentally attractive bridge to a lower carbon future.

·         Wind power projects are underway or planned within the next 3-to-5 years by nearly 79 percent of survey takers. Solar technology also achieved significant penetration, with 73 percent of respondents reporting projects underway or planned within the 3-to-5 year horizon.

·         Electric utility spending on programs for energy efficiency and demand-side management is surging, to almost 2 percent of revenue. The survey responses indicate that the industry is spending an amount equivalent to about 15-20 percent of its pre-tax earnings – to get customers to use less of its product.

·         Capital spending on new electric infrastructure has declined for two years in a row – for the first time since the 1930s. Generating plants are the asset group in biggest need of replacement. Information technology systems followed close behind, reflecting the priorities placed on the smart grid and the need for improved security against cyber attacks that have crippled power grids in other countries.

·         Carbon emissions maintained its place as the dominant environmental concern for electricity industry leaders, with water supply second. However, in a separate question asking survey respondents if they believed there was a future for coal-fired generation, more than 75 percent selected the response: “Yes, when fiscal realities are fully considered.” 

·         While a majority of respondents expect some form of carbon legislation to be in place by 2012, more than 70 percent do not favor the cap and trade system embedded in current legislative proposals. Some 52 percent of the respondents believed that the United States cannot afford carbon legislation.

·         Fewer utility managers are worried about the aging workforce issue in the immediate future, reflecting the deferral of retirement for many older workers as the declining stock market impacted their financial portfolios. However, some respondents voiced a concern about a retirement balloon in the next 2-3 years, as soon as the markets recover enough to make retirement affordable again.

Black and Veatch is a global engineering, consulting and construction company specializing in infrastructure development in energy, water, telecommunications, management consulting, federal and environmental markets.



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