‘Dark clouds’ ahead for electricity companies — report

Source: By Carlos Anchondo, E&E News reporter • Posted: Sunday, November 8, 2020

The ongoing COVID-19 pandemic and “depressed economic conditions” could mean financial trouble for electric utilities across the United States, according to a new report.

The study, released earlier this week from economic consultancy the Brattle Group, said that although utility earnings went up by 8.9% in the second quarter, a continued spread of COVID-19 and its economic fallout could mean “dark clouds” ahead for electricity companies.

The second-quarter earnings increase — which resulted largely from cost reductions — “may not be sustainable,” analysts said in the report, “especially if defaults arise from COVID-19 in coming months.”

The study, which looked at the impacts of COVID-19 across the energy sector, said electricity demand nationwide in September was 7% lower than the September average over the prior four years. The bulk of reductions came from regional grids in Midwestern and Mid-Atlantic states, according to the report.

Overall, the analysis said, electricity consumption in the United States is expected to be 2.2% lower in 2020 than last year.

Financial hardships for Americans are likely to increase as COVID-19 spreads during the winter months, translating into an uptick in “utility non-payments and depressed energy demand,” the report said.

“We may have come through a more halcyon time of pandemic consequences than the coming winter,” it said.

At the start of the pandemic, groups pressured utilities to ban electricity and water shut-offs, noting the economic hardship many households would face in paying their electricity bills as people lost their jobs (Energywire, March 19).

While the Brattle study said public money for income replacement and moratoriums on utility bills and rent have helped to alleviate pandemic-induced economic suffering, it noted that “many of these programs are declining or expiring at the same time as a possible surge of COVID-19 cases.” By October, utility shut-off moratoriums in 20 states have expired, although several states are evaluating extensions, Brattle said.

“There is a risk that the relatively successful economic coping to date may unwind, and financial hardships on individuals and corporations will increase, if we cannot stabilize pandemic problems fairly quickly,” the report said.

Last week, White House coronavirus adviser Dr. Anthony Fauci told Yahoo Finance that the country is at the “highest baseline we’ve ever been, which is really quite precarious.”

As for oil prices, they have stayed around $40 per barrel, where they’ve been since July, as new outbreaks of COVID-19 continue to weigh on air and vehicle travel.

Airline passenger traffic, for example, is 68% lower than last year’s levels, the report said.

Furthermore, the study noted that oil is not expected to cross $50 per barrel, for the Brent benchmark, until 2024. The U.S. oil rig count has declined to levels not seen since the pre-shale oil drilling era, Brattle said.

More than 234,000 people in the United States have died from COVID-19, according to data from The New York Times.