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Cherry Picking Power Markets Will Be Key Going Forward

Cherry Picking Power Markets Will Be Key Going Forward

With total electricity sales likely to creep along at a snail's pace of 1.2% growth each year over the next five years, picking the right market to set up shop could be the difference between life and death for many power marketers and utilities, according to a presentation made last week by Mark J. Bock, senior economist on electric power from WEFA Inc.

Given such slow growth in electric sales, power market participants will be forced to increase sales (and revenues) by taking market share away from other players. Understanding where the best markets are, however, will be critical.

According to the Utility Market Intelligence model, created by WEFA, a seller of electricity could increase sales growth by as much as 100 basis points over the U.S. average by focusing on the fastest growing states. The second interesting point, Bock stated in his presentations Oct. 25 to the WEFA Energy Annual Conference in New York, is that only 200 basis points separate the fastest growing states from the slowest growing states. "Thus there isn't much room for error.

WEFA determined that the top 10 states likely to experience the fastest electric power sales growth over the next five years are Utah (1st), Arizona, Colorado, Florida, Nevada, Virginia, New Jersey, Delaware, Missouri and South Dakota.

By narrowing the selection process even further down to the metro level, power sellers could increase sales by nearly 250 basis points over the U.S. average, according to Bock. The top five metro areas likely to experience power sales growth over the next five years are Austin-San Marcos, TX (1st); Tuscon, AZ; Orlando, FL; Columbia, MO; and Charlottesville, VA.

Some states have more fast growing metro areas than others, however. States such as Arizona and Colorado have a few fast growing metro areas, in contrast to states such as Florida, where nearly half of all of its metro areas are ranking in the top 25 by WEFA. As result, seller would do better to focus their effort in a few select metro areas in some states while blanketing others with statewide marketing campaigns, said Bock.

Another factor that could determine winners and losers in a given market is the types of industries targeted. Some of the industries that fit into WEFA's "Big Winners" category, include nursing and personal care facilities, medical clinics, computer data processing facilities, business services groups, and engineering and architectural services firms.

Utilities and power marketers would be well advised to avoid what WEFA calls the "Time Wasters" and the "Dogs." Time wasters are those industries that are growing quickly but use very little power, while the dogs are those industries that use little power and are growing very slowly or even declining.

Rocco Canonica

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