Methods for Analyzing Sales Trends Looking at...

© 2007, Itron Inc.

Methods for Analyzing Sales TrendsLooking at Florida

Energy Forecasting GroupLas Vegas, May 15 to May 16

© 2007, Itron Inc.

The 2008/2009 Budget Year ForecastFor many utilities, development of the 2008/09 customer and sales forecast has proven to be extremely challenging> High energy prices – expected rate increases> Collapse of the housing market> Slowing economic activity> End-use changes

• Air conditioning efficiency increasing faster than saturation

Where are sales going in 2008?> To tell the story you need to understand what is driving

demand

© 2007, Itron Inc.

Florida Utilities Had All These ProblemsDramatic fall in customer growth beginning in the second half of 2007Flat residential average useEconomic forecasts that were more pessimistic with each new monthly economic forecast releaseExpected rate cases and (hopefully) higher rates by 2009

© 2007, Itron Inc.

Residential Sales Trend (GWh)

Average Annual Growth 2001 - 2007: 2.6%

Average Annual Growth 2001 - 2007: 2.6%

Weather Normalized Average Annual Growth 2001 - 2007: 2.8%

Weather Normalized Average Annual Growth 2001 - 2007: 2.8%

Given history, management had expectations of atleast 2.0% sales growth in 2008 and 2009

Management was somewhat surprised when told theywould be fortunate to see 1.0% sales growth in 2008

© 2007, Itron Inc.

Factors Driving Demand

Driven byIncome, Price,

Billing Days, End Use Factors

Driven by HDD,Heating saturation

and efficiency trends

Driven by CDD,Cooling saturation and

efficiency trends

Need to separate customer usage trends from customer growth to figure out what is happening

© 2007, Itron Inc.

Residential Sales

To understand expected sales growth you needto untangle average use from customer growth

© 2007, Itron Inc.

Residential Average Use (kWh per customer)

Weather Normal Average Use Growth: 0.4%

Moving AverageMoving AverageMonthly Average UseMonthly Average Use

Flat average use growth – why?

© 2007, Itron Inc.

Estimated End-Use Sales (Annual Average Use)

Other Use

Cooling

Slight decline in per household cooling and heating usage over the last five years

Heating

Cooling 39.0%

Other Use 54.0%

Heating 8.0%

© 2007, Itron Inc.

Cooling Efficiency Trends

3.0

6.0

9.0

12.0

15.0

1990 1995 2000 2005 2010 2015 2020 2025

Effic

ienc

y [B

TU/W

h]

CAC HPCool RAC

With 100% cooling saturation and strong heat pump penetration efficiency gains are over riding other factors driving cooling use

© 2007, Itron Inc.

Usage growth will largely be driven by “plug loads”

1993 2007 2030Source: Energy Information Administration, US News & World Report

© 2007, Itron Inc.

Quarterly Household Income Growth

-2.0%-2.0%

2007 1.37%2008 -1.62%2009 -0.37%2010 1.33%

But electronic purchases likely to slow in 2008 and 2009

Actual Forecast

2002 to 2006: 2.0% growth2002 to 2006: 2.0% growth

© 2007, Itron Inc.

Average Use Per Billing Day (kWh)

moving average

Since 2006, average use may actually be trending downwards

Average use per billing day (kWh)

Not likely to see much average use growth in 2008

Increasing vacancy rates may be contributing to this trend

© 2007, Itron Inc.

Residential Average Use Trends (kWh per day)

Florida

Southeast

Midwest

Northeast

Softening average use trends for many utilities

© 2007, Itron Inc.

Double-Whammy for Florida Utilities

2.6% customer growth between 2000 and 2006

0.5% customer growth in 2007

Sales have been driven by customer growth

Not likely to get much help from customer growth in 2008

© 2007, Itron Inc.

Quarterly Florida Household Growth

2007 1.40%2008 1.40%2009 1.80%2010 2.30%

2001 to 2006: 2.4% growth2001 to 2006: 2.4% growth

Actual Forecast

1.2%1.2%

© 2007, Itron Inc.

Commercial Sales

Actual Growth: 2.4%Weather Normalized Growth: 2.2%

Actual Growth: 2.4%Weather Normalized Growth: 2.2%

2006 to 2007Actual Growth: 2.2%

Weather Normalized Growth: 1.6%

2006 to 2007Actual Growth: 2.2%

Weather Normalized Growth: 1.6%

Strong commercial sector sales growth

Actual 2007 sales growth were relatively strong,but weather normalized sales were just 1.6%

© 2007, Itron Inc.

Commercial Sales vs. Commercial Output

Commercial Output

CommercialSales (Gwh)

Strong correlation between commercial

output and sales.

Strong correlation between commercial

output and sales.

© 2007, Itron Inc.

Commercial Sales Drivers

07:Q1 3.9%07:Q2 4.0%07:Q3 3.6%07:Q4 2.6%08:Q1 1.5%08:Q2 0.7%08:Q3 0.6%08:Q4 1.0%09:Q1 1.9%09:Q2 2.9%09:Q3 3.7%09:Q4 4.3%

07:Q1 0.7%07:Q2 0.6%07:Q3 0.3%07:Q4 0.1%08:Q1 -0.1%08:Q2 -0.1%08:Q3 -0.1%08:Q4 0.1%09:Q1 0.2%09:Q2 0.3%09:Q3 0.4%09:Q4 0.5%

Output Growth Employment Growth

No likely near-term help from commercial business activityNo likely near-term help from commercial business activity

© 2007, Itron Inc.

Commercial Sales Projection

Commercial Sales

Actual

normalized growth: 2.2% normalized growth: 2.2% 0.8% growth 0.8% growth

Sales per dollar output model

2.5% growth 2.5% growth

© 2007, Itron Inc.

ConclusionsUnlikely to see 2.0% sales growth in 2008> Don’t need a sales model to reach this conclusion

• Residential sales 1.5% to 2.0%• Commercial sales 1.0% to 2.0%

Customer growth (both residential and commercial) will drive electric sales growth

• No real sales turn around until residential housing market firmsup

© 2007, Itron Inc.

What does the data tell youSignificant information about likely sales trends can be gleanedfrom historical sales data > Need to break out customer growth from use per customer

growth

You can generally get a good picture of class usage trends by calculating 12-month moving average of actual and weather normalized sales

Examine average use and customer correlation with economic drivers> Households, Income, Employment, and Output

Look at quarterly sales as well as monthly sales trends and growth pattern

© 2007, Itron Inc.

What is Happening in Your Service Area?

Residential Sales Trend> Average use growth> Customer growth> Primary drivers in your current forecast

Commercial Sales Trend> Sales growth> Customers growth> Drivers

Other Loads> Industrial> Lighting> Wholesale

Methods for Analyzing Sales Trends Looking at...

Documents

Transcript of Methods for Analyzing Sales Trends Looking at...