UPDATE: EIA: US Electricity Demand Seen Dropping 3.3% In '09

 
   (Updates with projected rise in electricity prices this year.) 
 

NEW YORK (Dow Jones)--U.S. electricity demand is forecast to fall 3.3% this year and then slowly rebound in 2010 as the government left its power consumption outlook mostly unchanged Tuesday.

In its monthly Short-Term Energy Outlook, the Energy Information Administration said it expects declines in power sales to slow in the second half of the year, especially in the Southwest where warm weather has increased demand. Next year power demand should grow 1.3% as industrial sector sales, which have been hit hard by the recession, begin to return.

Last month, the EIA estimated demand to decrease 3.3% this year and increase 1.2% in 2010.

The EIA continues to forecast an increase this year in residential power prices driven by the cost of new power plants and high-voltage line upgrades. The agency forecasts a 2.1% rise this year, while projecting a 1.6% drop in power prices next year driven by declines in the prices of natural gas and other power plant fuels.

Last month, the EIA estimated a price increase of 2.5% this year and 2.1% in 2010.

The U.S. has experienced a surge this year in what's known as fuel switching with natural gas-fired power plants becoming cheaper to run then coal-fired power plants. But the EIA expects this trend to reverse next year with generation from coal-fired plants climbing 1.8%, while generation from gas plants falls 1.3% as new coal plants start operating.

The EIA forecasts U.S. coal production will decline 8.4% this year amid high utility inventories, lower consumption and fewer exports. The agency is forecasting a 2.3% decline in production in 2010 as inventories and imports offset increased consumption and a growth in exports. The EIA in September projected coal production would decline by 8% this year and 1.4% in 2010.

The EIA projects a more than 9% decline in coal consumption by power plants amid slumping demand and an increase in generation from natural gas and renewable sources. Consumption should rebound more than 2% next year. The government had forecast last month a 8.2% decline in coal consumption by the power sector in 2009 and 1.8% increase in 2010.

-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com

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October 06, 2009 08:47 ET (12:47 GMT)


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