The utility business is fascinating and bizarre to me, and this can only mean I’m a hapless, pathetically boring person. But that is what it may look like to the uninformed. It’s like soccer, baseball, or Indy car racing. If you don’t like these games/sports, you just don’t get it.
First off, from business and investor perspectives, utilities are not growth stocks, and they haven’t been for decades. Essentially, they are like US treasuries. I learned this in a 1989 personal finance class. Geezers invest in utilities for the steady dividend. Clearly, I wasn’t interested in a paltry 7% yield coming out of one of the greatest decades of stock market performance, ever. Now, I might be. The conclusion here seems to be any utility that complains about energy efficiency cutting into their growth is, uh, attempting to score political points with the uninformed.
This isn’t to say that being an executive with a utility is a piece of cake. Without getting into the details, because I don’t know the details, my advice is this: diversity is your friend. Your shareholder bosses want bond-like, steady returns. It isn’t a casino. Putting all the chips on one horse serves up investors and customers with undo risk.
For example, in the latter stages of last decade, Exelon sold off its coal power-generating assets in anticipation of carbon trading and the cost of emissions rising rapidly. That didn’t work out so well. Now they are stuck with a fleet of aging nuclear plants, and their stock price has tanked by 60% since 2008. Like bonds, investing in a utility may seem like an uber safe play, but the 2008 Exelon shareholders are not likely to see the day of returning to that lofty stock price. Consider that after a 60% drop in price, it needs a 150% increase just to get back to even. One beauty of investing is exponential growth. The ugly is after taking a dive, the mountain looks a lot taller from below.
Then there is energy efficiency and how that affects revenue and growth. The uninformed would think that in a free market a utility would never want its customers to not buy more of its product. Not so. In speaking with producers of energy tracking and monitoring software – the kind that helps customers manage, e.g., minimize, their energy use – they are successfully selling to utilities in deregulated countries (New Zealand) as a value added service to differentiate themselves from competing utilities. The competitive energy market is like the competitive food market in this way. You don’t see commercials for Cheetos imploring people to lounge on their sofa gorging themselves with a pound of Cheetos in one sitting. Just buy some, man. That’s all we ask. We’ll make more for when you run out.
Besides, like utility customers, if customers binge on Cheetos, pretty soon they’ll have diabetes or die. Dead people and dead companies are not good customers. Enjoy in moderation, like booze. Here is another mostly free market that actually promotes moderation and discourages underage consumption, which would seem to be bad for the bottom line, if one were to use the under-informed view that encouraging lower sales is bad for the seller. It’s a public relations play and most likely a sincere one.
When you think about it, utilities actually have it better than Budweiser in some ways. Bud doesn’t get cost recovery for lower sales. It doesn’t get money from captive customers to pay for their multi-million-dollar anti-bingeing ads.
Come to think of it, Michaels doesn’t like taking peoples’ money for a study or analysis we know is not going to work out for the customer. For example, do you really want a combined heat and power study for a college campus? The simple payback will be 28 years and it will cost $400 billion (only the latter of which is an exaggeration). We are driven by helping customers be more profitable and more successful and not by doing meaningless work for a few bucks.
Smart business benefits the customer and/or makes life easier or more enjoyable. There are multitudes of examples saying, “No. You don’t want to buy that from us. It’s a waste of your money and won’t benefit you.” – (nor will it benefit our company in the long run).
Therefore, why a utility would encourage customers to use a little less of its product makes a lot of sense!
 I remembered this from somewhere – it was Doritos / Frito Lay – the parent of Cheetos.