Even though it’s based on preliminary data, the emerging trend in US electricity consumption is nothing if not curious.

Surprise Drop in Power Use Delivers Jolt to Utilities:

An unexpected drop in U.S. electricity consumption has utility companies worried that the trend isn’t a byproduct of the economic downturn, and could reflect a permanent shift in consumption that will require sweeping change in their industry.

Numbers are trickling in from several large utilities that show shrinking power use by households and businesses in pockets across the country. Utilities have long counted on sales growth of 1% to 2% annually in the U.S., and they created complex operating and expansion plans to meet the needs of a growing population.

“We’re in a period where growth is going to be challenged,” says Jim Rogers, chief executive of Duke Energy Corp. in Charlotte, N.C.

The data are early and incomplete, but if the trend persists, it could ripple through companies’ earnings and compel major changes in the way utilities run their businesses. Utilities are expected to invest $1.5 trillion to $2 trillion by 2030 to modernize their electric systems and meet future needs, according to an industry-funded study by the Brattle Group. However, if electricity demand is flat or even declining, utilities must either make significant adjustments to their investment plans or run the risk of building too much capacity. That could end up burdening customers and shareholders with needless expenses.

…

Dick Kelly, chief executive of Xcel Energy Inc., Minneapolis, says his company, which has utilities in Colorado and Minnesota, saw home-energy use drop 3% in the period from August through September, “the first time in 40 years I’ve seen a decline in sales” to homes. He doesn’t think foreclosures are responsible for the trend.

Duke Energy Corp.’s third-quarter electricity sales were down 5.9% in the Midwest from the year earlier, including a 9% drop among residential customers. At its utilities operating in the Carolinas, sales were down 4.3% for the three-month period ending Sept. 30 from a year earlier.

American Electric Power Co., which owns utilities operating in 11 states, saw total electricity consumption drop 3.3% in the same period from the prior year. Among residential customers, the drop was 7.2%. However, milder weather played a role.

See the article for a little more detail, but you get the idea.

So, what the heck is going on here? I don’t know, but it feels to me like a relatively new phenomenon: ETSD (economic traumatic stress disorder). After the way many US consumers were slapped around this year by $4 gasoline, plus the combined feeling of economic fragility thanks to plummeting house prices and 401(k) plans, plus the relentless news about the US auto industry about to blink out of existence, plus the much tighter credit markets, I’m guessing a lot of mah fellow Amurricans are keeping an uncharacteristically tight grip on their consumption of just about everything. We’ve seen numerous reports that this is going to be a particularly dismal holiday season for the retail sector, further anecdotal support for my ETSD theory. Similarly, we’re being told that we’re driving less and not responding to the precipitous drop in gasoline prices.

Has the law of supply and demand been repealed, and no one remembered to include me on the e-mail distribution list? Well, no. One thing we always have to keep in mind in economic matters is timing. In this case, the gasoline price shock was recent and painful enough that many consumers are still wary of even cold water after having been scalded once. And the other immense sources of stress and uncertainty I mentioned are all ongoing. I expect those factors to play a continuing role in shaping the American consumer. Stocks (and, therefore, 401(k)’s) won’t rebound until well into 2009, and even then they’ll likely show a distinct loss compared to early 2008.[1] Housing prices won’t begin to rebound until the glut of homes disappears on the US market, which could take years. Almost any realistic scenario one can conjure up for the US car makers results in a big hit to US consumers in terms of real income as well as confidence for at least a couple of years.

In other words, if it were just the gasoline price shock at work, I would expect this drop in electricity consumption to disappear pretty quickly, thanks to the short memories of most consumers. But with these longer lived factors in the mix, and the “oil crunch”, as the IEA calls it, coming in just another two years, we could very well be in the early stages of a new age of consumer austerity here in the US.

That could have dramatic consequences for energy and environmental issues, as utilities and many other large companies in the energy sector could be much less willing to make major investments to upgrade power grids or adopt cleaner technologies. Think about car companies (those still standing, that is) trying to justify spending billions to develop new vehicles, like plug-in hybrids, in a years-long lull in consumer spending. On the other hand, a pronounced drop in electricity consumption, combined with making electricity generators pay for their externalities (like CO2 emissions), could make it slightly easier for some coal plants to be abandoned completely.

My point, in case I’ve been too subtle: Economically speaking, we’re currently in that corner of the map labeled “here be dragons”. There is no rule book for what happens next or how we should deal with our ongoing ETSD, but the reduced consumption pattern that’s emerging is certainly telling us how a lot of Americans are responding.

[1] Not to get off-track here, but let me point out one more time the utter insanity of the entire 401(k) system. We have millions of people investing very important (to them) money, very often in their company’s stock or equities in general–people who have no bloody clue what they’re doing in the investment world. This was a stupendously bad idea, and with all the people panicking and puling money out of 401(k) plans (and mutual funds) now, after they saw a big drop in their value, we’re seeing how much worse it’s made the whole situation. And no, my wife and I didn’t lose a penny in the market downturn. Similarly, we lost nothing in the dot-com bust, even though we had a financial adviser telling us to move a lot of money into tech stocks when the NASDAQ was just under 4,000. It’s currently well under half that figure.