2010 Report - Pennsylvania Public Utility Commission

energy within a competitive generation market, reasonably accurate projections are necessary toidentify new capacity requirements and stimulate capital investment. Accurate forecasts are alsoneeded to plan for future expansion of the transmission and distribution network.Prior to 1973, customer load growth patterns remained relatively consistent, permitting utilities toforecast growth using a straightforward method such as linear regression analysis. This approachbasically extrapolated future levels of demand from historical data. Although no one could foreseethe 1973-74 Arab oil embargo and the 1979 energy crisis, or reasonably predict the effects ofconservation and load management strategies and new technologies, the time trend approach failedto reflect the resultant dramatic changes in consumptive patterns, indicating a need for moresophisticated forecasting techniques.Between 1940 and 1970, residential demand rose at a nominal levelized (average) rate of 6.6percent per year, while the cost of electricity decreased at an annual average rate of 2.0 percent. 50Between 1970 and 2009, residential demand and cost increased at annual rates of 1.3 percent and4.1 percent, respectively. Between 1994 and 2009, the state’s energy demand grew an average of1.0 percent annually. Residential sales grew at an annual rate of 1.5 percent and commercial at 2.1percent; industrial sales declined an average of 0.4 percent per year. During this same period, theaverage residential cost of electricity increased at an annual rate of 1.1 percent, going from anaverage of 9.46 cents to 11.21 cents per kWh. Figure 11 compares the changes in residential costand usage from 1940 to 2009.Figure 11 Average residential cost and use (cents per kWh or MWh per year)1211Utility Restructuring109876kWh per year543Cost per kWh21050 Total Residential Account 440, FERC Form 1.Electric Power Outlook for Pennsylvania 2009-2014 23