In the past three months, I’ve received three questions, all the same, “Why are my residential sales down?”
There are several reasons why a company may see declining residential sales, but searching for an economic reason is not the first course of action. The initial step is to validate the analysis.
Did you weather normalize your history?
Is your weather normalization model and process good?
Is your data free of billing issues?
Once the analysis is confirmed, the search for reasons begins.
What are the macroeconomic indicators saying?
What are energy efficacy programs doings?
Is it behind-the-meter solar penetration?
Could it be lighting impacts?
For the past five years, Itron has conducted an annual benchmarking survey capturing historic residential class growth rates. Each year, more than 60 companies respond representing almost 50 percent of electric sales in United States and Canada.
For the first time in five years, the survey results show declining weather-normalized energy-weighted residential growth. The -0.38 percent growth in 2015 stands in stark contrast to the average annual growth of 0.42 percent from 2011 through 2014. The graph below shows the annual growth rates reported in the surveys.
When preliminary estimates were reported at Itron’s Energy Forecasting Meeting in April, the negative growth appeared to be a data anomaly to be ignored. Five months later, with repeated inquiries about low 2016 developments, the data anomaly is beginning to command attention.
During Itron’s Sept. 13, 2016 Brown Bag presentation, I conducted an inform poll among participants. “Who is experiencing declines in residential sales growth in 2016?” The response was 11 declines and 14 increases. While declines were just below half of the responses, they were certainly more than I expected.
Are we experiencing a simple 2015 data outlier or is this a developing trend? It may several years before a definitive answer is established, but that doesn’t negate our responsibility to monitor this development. Be sure to participate in our next survey in early 2017 to help us investigate this trend. If you missed our last brown bag, you may still register and view the recording.
Mark Quan is a Principal Forecast Consultant with Itron’s Forecasting Division. Since joining Itron in 1997, Quan has specialized in both short-term and long-term energy forecasting solutions as well as load research projects. Quan has developed and implemented several automated forecasting systems to predict next day system demand, load profiles, and retail consumption for companies throughout the United States and Canada. Short-term forecasting solutions include systems for the Midwest Independent System Operator (MISO) and the California Independent System Operator (CAISO). Long-term forecasting solutions include developing and supporting the long-term forecasts of sales and customers for clients such as Dairyland Power and Omaha Public Power District. These forecasts include end-use information and demand-side management impacts in an econometric framework. Finally, Quan has been involved in implementing Load Research systems such as at Snohomish PUD. Prior to joining Itron, Quan worked in the gas, electric, and corporate functions at Pacific Gas and Electric Company (PG&E), where he was involved in industry restructuring, electric planning, and natural gas planning. Quan received an M.S. in Operations Research from Stanford University and a B.S. in Applied Mathematics from the University of California at Los Angeles.
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