EIA:US Electricity Demand Seen Rising 1.9% In 2010, 2% In 2011

NEW YORK (Dow Jones)--U.S. electricity demand is projected to climb over the next two years as the economy improves and summer temperatures return to average levels, according to a government forecast released Tuesday.

In its monthly Short-Term Energy Outlook, the Energy Information Administration raised its power demand outlook for the year, forecasting a 1.9% increase. The agency had projected growth of 1.6% in its forecast a month ago.

The agency gave its first projection for 2011 demand, forecasting 2% growth as industrial demand continues to recover. The projected gains come after the U.S. posted two years of declines in electricity demand driven by the recession.

The EIA, which is the Department of Energy's statistical unit, continues to forecast a drop in residential power prices this year, while seeing a slight rebound in 2011. The agency forecasts a 0.9% decrease this year and a 1.4% increase next year. Last month, the EIA estimated the same decrease in residential prices for 2010. Residential electricity prices last posted an annual decline in 2002, according to EIA statistics.

"Many utilities have made downward fuel cost adjustments recently as a result of lower fuel costs in 2009. These adjustments have been offset somewhat by the need to increase revenues to cover the capital costs of expanding renewable energy generation," the EIA said.

The EIA forecasts U.S. coal production will continue to decline this year, dropping an additional 4.6%. The agency is projecting a strong return in growth in 2011 with domestic coal production rising 6.5% as power consumption increases and exports rise. The EIA in December had projected coal production would decline by 2.5% in 2010.

After sharp declines last year in coal consumption by power plants, the EIA projects demand will increase by almost 4% this year. This is equal to its December estimate of a nearly 4% rebound. The recovery is expected as power demand grows and coal-fired power plants again become cheaper to run than most natural gas-fired power plants. The agency forecasts coal consumption by the power sector to increase 2.5% in 2011.

The EIA said it expects the country's emissions of carbon dioxide from the burning of fossil fuels to rise 1.5% this year after falling an estimated 6.1% in 2009. The agency had forecast the same increase for 2010 last month. As for 2011, the EIA expects CO2 emissions to continue to climb, growing an additional 1.7%.

"However, even with increases in 2010 and 2011, projected CO2 emissions in 2011 are still expected to be lower than annual emissions from 1999 through 2008," the EIA said.

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

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(END) Dow Jones Newswires

January 12, 2010 12:55 ET (17:55 GMT)


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