Electricity production drops
US electricity production data is an important data point for investors tracking the power sector. The data shows the inherent demand for electricity in the country.
Weekly US electricity production fell by 7% for the week ending on January 23, 2015. A total of 76.7 million megawatt hours, or MWh, of electricity was produced between January 16, 2015, and January 23, 2015, in the US. Electricity output for the week before was 82.9 million MWh.
Interpreting production data
As noted from the above chart, this is the second week in a row that electricity production dropped in the US. Electricity production levels are down by more than 12% in the last two weeks. The current weekly US electricity production level is 10.5% lower than the electricity production for the same week last year.
These aren’t favorable signs for large US power producers held by the Select Sector SPDR Fund (XLU)—like Southern Company (SO), NextEra Energy (NEE), Exelon Corporation (EXC), and Dominion Resources (D). Lower electricity output will lead to lower revenue for power companies.
Weather is a key driver
Weather is a major driver of electricity demand. Warmer weather is the primary reason for the fall in electricity production in recent weeks. Severely cold temperatures in the eastern part of the US led to high electricity consumption during the first week of January. However, the winter has been milder in the last two weeks. This resulted in lower electricity consumption.
In the next part of this series, we’ll look at the regions in the US that are experiencing the highest slump in weekly power production.