Power use in homes dropping, AEP says

Apr 27 - Mark Williams The Columbus Dispatch, Ohio

American Electric Power's residential customers are apparently responding to higher gasoline prices by adjusting the thermostat.

AEP, one of the nation's largest power generators, reported last week that residential sales of electricity fell 4.6 percent in the first quarter as gasoline prices rose toward $4 a gallon.

Milder weather also was a factor in the quarter compared with a year earlier.

"The cost of gasoline puts pressure on household budgets," said Michael Morris, the company's chairman and CEO, after the company's annual shareholders meeting in Columbus yesterday.

AEP's 5.3 million customers in 11 states can't do much about the price of a gallon of gasoline, but they can reduce how much electricity they use to try to save a few dollars, he said.

"Americans know how to conserve."

It's hard to say whether the first-quarter frugality will become an industry trend. Most utilities have yet to release their financial results for the quarter.

Residential electricity consumption is forecast to fall 1.9 percent this year, according to the federal Energy Information Administration, primarily because experts say that this summer will be cooler than last.

The decline in residential consumption, though, comes as power demand by AEP's industrial and commercial customers rose in the quarter compared with a year earlier amid slow improvement in the economy. U.S. sales of electricity to industrial and commercial customers are expected to rise this year.

Morris said the residential decline also might reflect the company's effort to help customers curtail consumption. It also could reflect higher costs of electricity.

The proliferation of personal electronics -- cellphones, iPods, video games, flat-screen televisions and other devices -- exploded between 1997 and 2005, according to the Edison Electric Institute, an industry group. Gadget use, and the increase in that period in the number of households, also increased residential power use.

Demand from that sector leveled off from 2005 until last year, when demand rose 6.3 percent, institute figures show.

"The notion of customer conservation is something we definitely want to keep an eye on," said analyst Paul Franzen of the investment firm Edward Jones.

Morris elaborated last week on residential customers' recent habits when he talked to analysts about the company's first-quarter report.

"So I think what you're seeing here is a pretty reasonable family response to the overall escalation of a number of prices in the marketplace that they deal with every day. Food's more expensive. Gasoline's more expensive," he said. "Customers are, at long last, doing some of the energy conservation that we felt would come our way eventually."

The annual meeting yesterday was the first that AEP has held in Columbus since 2004. The company has been holding the meeting in cities throughout its service territory.

Morris said coal will remain important for the company's power generation, but natural gas will play a bigger role as AEP looks to continue to slash emissions of carbon dioxide and other pollutants.

The company plans to complete a natural-gas-fired plant in Ohio next year along with a coal-fired plant in Arkansas that will be far more efficient than older coal-fired plants.

At the same time, the company is looking to boost production at its nuclear-power plant in Michigan, and retire some of its older, coal-fired generation plants or retrofit others with pollution controls.

"It's not inexpensive," he told the 100 or so shareholders who gathered for the meeting. "It isn't without huge challenges."

mawilliams@dispatch.com