Electricity Generation in the US Falls Marginally
27 Aug 2015
Electricity generation
The EEI (Edison Electric Institute) publishes electricity generation data weekly. The current report is for the week ended August 14. Electricity generation in the United States dropped to 88.0 million megawatt hours for the week ended August 14 compared to 88.7 million megawatt hours the week before. This implies a 0.8% fall in electricity generation week-over-week.
While lower week-over-week, last week’s electricity generation was higher than 83.2 million megawatt hours during the corresponding week in 2014.
Why is this indicator important?
More than 90% of the coal produced in the United States is used for electricity generation. The power utility segment is coal’s largest end user. As a result, coal and utility investors should watch electricity generation trends. Electricity storage is expensive, so most produced electricity is consumed right away. Electricity generation thus mirrors consumption.
What does this mean for coal producers?
Thermal coal is used mainly for electricity generation. Everything else being equal, a fall in electricity generation is negative for coal producers (KOL) like Peabody Energy (BTU) and Cloud Peak Energy (CLD), especially in the current environment of low natural gas prices.
You should note that weekly generation levels are subject to seasonal deviations. The impact on utilities (XLU) such as NextEra Energy (NEE) and Southern Company (SO) depends on the regional breakdown of electricity generation. We’ll take a look at this in the next part of this series.
source: http://marketrealist.com