2010 Report - Pennsylvania Public Utility Commission

Most utilities have employed a combination of econometric and end-use forecasting methodswhich, although more sensitive to economic and engineering variables, were slow in adjusting tothe overall decrease in load growth, since they are also based to a great extent on historical data.Econometrics is a statistical method combining the theories of economics and statistics for analysisof data, seasonal adjustment and model simulation. The end-use technique involves an explicitcount of various energy consuming appliances or processes to which an energy use per unit isassigned.Several factors affect the demand for electricity and among the most influential are economicgrowth, technological changes, energy supply, prices of electricity and other energy sources, andweather conditions. Industrial sales are more affected by economic conditions, whereas residentialand commercial sales are most sensitive to weather conditions. Some of the key variables used bymost large utilities in forecasting are: number of customers, appliance saturation, electricity price,population, per capita income, local employment, heating degree days, cooling degree days,appliance efficiencies, industrial output, natural gas prices and household size.To illustrate the relationship between input variables and electrical usage, Figure 12 compares theyearly changes from U.S. Gross Domestic Product (GDP), in constant 1995 dollars, with energydemand.Figure 12 Relationship between annual changes in GDP and energy demand10%8%6%4%2%0%-2%-4%-6%GDPEnergy Demand-8%1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000In addition to these key variables, the relatively unknown impacts of recently approved EnergyEfficiency and Conservation Plans, pursuant to Act 129 of 2008, and the current economicdownturn will make accurate forecasting a challenging pursuit. Although the Act 129 targetreductions in energy consumption and peak demand are factored into the forecasts, the actual24Pennsylvania Public Utility Commission