Economic impacts from the pandemic are hitting utilities, states, and cities. Important data for South Carolina hit the street last week. The South Carolina General Fund Revenue Monitor was issued June 11. Significant negatives for state income. $520 million shortfall (table below).
Is it surprising news? Not with the headlines that have been out there about the pandemic and all our experience with staying home. Though unhappy news, it is solid data. It provides numbers for people and businesses to use in their planning.
The pandemic economy is a challenge for electric utilities of all kinds, all over. Electric utilities are capital intensive businesses. “Moody’s noted that a deeper economic downturn may lead utilities with weaker financial metrics to cut capital spending ‘to maintenance levels,’ or just enough to maintain reliable and safe service.” (Source)
Millions of people have been out of work. Many utilities are not disconnecting customers for back bills. Some states let utilities recover unpaid bill costs through additional charges. Corporate cash flows can go down until rate increases happen. (Source – right)
Reduced power sales are an issue – less revenue for utilities to operate. The Post and Courier reported that Santee Cooper and Dominion Energy had reduced energy demand of 8 percent and 9 percent in April. Duke Energy reported a drop for its multi-state system.
Another concern, the increase in costs to meet the challenge of the pandemic, like expenses for protecting staff from COVID-19. Losses from uncollected or extended customer payments in the lockdown are a factor. (Source)
Money goes out in new ways, too. Berkeley Electric Cooperative in South Carolina reportedly will return $4.5 million in account deposits to customers for an economic boost.
Utilities need to keep their customers well informed about numbers that can affect customers. Thinking in particular about Santee Cooper, whose customers owe the debt that Santee Cooper incurred. Last we heard was that the company had some $7.2 billion in debt.
Check the further energy and economic implication of the pandemic: “Meanwhile, utilities face new challenges created by the shifting C&I [commercial and industrial] and residential loads. Demand from residential air conditioning is up ‘about 40%,’ which is ‘a real concern’ for system operators and customers … ‘Electricity bills could go very high in June, July, and August when it gets hot.’” (Source)
Bottom line is that customers could see big bills when the temperatures go up and when the moratorium on paying bills is off.
The pandemic will create a changed utility industry. No more business as usual, it appears. One business leader on CNBC said, “It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before.”