While most of the concern relating to electric utilities has been increasing worry over a lagging national infrastructure, whose upgrading and repair have been delayed for decades, the impact of ever-cheaper solar panels, especially imports from China, and long-term installation loans by electric power providers, have begun to cut into conventional utility demand. Part of this generosity by utility services systems is based on mandated supplemental power generation targets, imposed by federal initiatives.
Although post-recession population growth was expected to substantially increase electric demand by now, such growth has actually reversed, after the initial post-recession recovery that had come close to reaching 2007 demand levels earlier in the year. Despite the expansion of residential, as well as commercial and industrial solar systems, in addition to the growing power generating use of natural gas, the electrical industry’s regulations are in a quandary. They have to balance encouraging renewable power with the continuing need to prevent blackouts and brownouts in this conversion interim.
Late in 2013, federal regulators curbed Arizona Public Services’ planned charge to solar panel owners to mitigate the costs of grid maintenance. This was being pushed onto renewable energy users, but regulators indicated their intent to make balanced recommendations for cost-sharing.
This dramatic technological change impacting America’s utilities will also affect a traditional conservative investment sector, due to the steady dividends in the 5% range, supported by secure financial foundations due to its consistently ongoing and growing demand needs.
This has already resulted in a substantial value reduction in utility stocks, while most of the U.S. equity markets were marching higher. Utilities had been a favorite investment vehicle in light of practically non-existing returns on most fixed income investments in a lengthening time frame of record low interest rates.
With the current year in an embryonic state, the unfolding of this paradox will likely develop as the expectant economic growth is manifested.
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