U.S. utilities expect uneven demand recovery in 2010

By Eileen O'Grady

FORT LAUDERDALE (Reuters) - Utility executives gathered at the Edison Electric Institute financial conference offered a mixed bag of forecasts for electric demand in the coming year, with some saying slumping industrial sales have stabilized and others less optimistic that a recovery has begun.

"I've never seen so much uncertainty about demand," said Daniele Seitz, vice president of Dudack Research Group in New York. While some utilities are seeing the impact of recently approved rate increases that will protect them from slumping demand, "2010 is going to be difficult for the group," Seitz said.

Some utilities like American Electric Power Inc (AEP.N) said the drop in power use in the industrial sector was less severe in the third quarter than earlier in the year.

CMS Energy (CMS.N) expects total electric sales to be 4.4 percent lower in 2009 than 2008 and flat at best next year as sales continue to shrink by 1 percent in the first half of the year before rebounding.

"The economy and the power business are fellow travelers," said Larry Makovich, senior power adviser of IHS Cambridge Energy Research Associates.

Makovich said the current slump in demand is cyclical, not structural, and predicted a "bump in demand that will surprise people."

For New York, however, Consolidated Edison's (ED.N) chief financial officer Robert Hoglund said the utility saw its summer peak load fall for the first time in 30 years, even when adjusted for cooler weather.

Since New York did not see the economic downturn as early as some areas of the country, it will take longer for the recovery to arrive, Hoglund said.