Forecasting
Declining Residential Sales?
In the past three months, I’ve received three questions, all the same, “Why are my residential sales down?”
There are several reasons why a company may see declining residential sales, but searching for an economic reason is not the first course of action. The initial step is to validate the analysis.
Once the analysis is confirmed, the search for reasons begins.
For the past five years, Itron has conducted an annual benchmarking survey capturing historic residential class growth rates. Each year, more than 60 companies respond representing almost 50 percent of electric sales in United States and Canada.
For the first time in five years, the survey results show declining weather-normalized energy-weighted residential growth. The -0.38 percent growth in 2015 stands in stark contrast to the average annual growth of 0.42 percent from 2011 through 2014. The graph below shows the annual growth rates reported in the surveys.
When preliminary estimates were reported at Itron’s Energy Forecasting Meeting in April, the negative growth appeared to be a data anomaly to be ignored. Five months later, with repeated inquiries about low 2016 developments, the data anomaly is beginning to command attention.
During Itron’s Sept. 13, 2016 Brown Bag presentation, I conducted an inform poll among participants. “Who is experiencing declines in residential sales growth in 2016?” The response was 11 declines and 14 increases. While declines were just below half of the responses, they were certainly more than I expected.
Are we experiencing a simple 2015 data outlier or is this a developing trend? It may several years before a definitive answer is established, but that doesn’t negate our responsibility to monitor this development. Be sure to participate in our next survey in early 2017 to help us investigate this trend. If you missed our last brown bag, you may still register and view the recording.
There are several reasons why a company may see declining residential sales, but searching for an economic reason is not the first course of action. The initial step is to validate the analysis.
- Did you weather normalize your history?
- Is your weather normalization model and process good?
- Is your data free of billing issues?
Once the analysis is confirmed, the search for reasons begins.
- What are the macroeconomic indicators saying?
- What are energy efficacy programs doings?
- Is it behind-the-meter solar penetration?
- Could it be lighting impacts?
For the past five years, Itron has conducted an annual benchmarking survey capturing historic residential class growth rates. Each year, more than 60 companies respond representing almost 50 percent of electric sales in United States and Canada.
For the first time in five years, the survey results show declining weather-normalized energy-weighted residential growth. The -0.38 percent growth in 2015 stands in stark contrast to the average annual growth of 0.42 percent from 2011 through 2014. The graph below shows the annual growth rates reported in the surveys.
When preliminary estimates were reported at Itron’s Energy Forecasting Meeting in April, the negative growth appeared to be a data anomaly to be ignored. Five months later, with repeated inquiries about low 2016 developments, the data anomaly is beginning to command attention.
During Itron’s Sept. 13, 2016 Brown Bag presentation, I conducted an inform poll among participants. “Who is experiencing declines in residential sales growth in 2016?” The response was 11 declines and 14 increases. While declines were just below half of the responses, they were certainly more than I expected.
Are we experiencing a simple 2015 data outlier or is this a developing trend? It may several years before a definitive answer is established, but that doesn’t negate our responsibility to monitor this development. Be sure to participate in our next survey in early 2017 to help us investigate this trend. If you missed our last brown bag, you may still register and view the recording.