I expect the opposite. As everyone moves to efficient light bulbs for instance, the utilities still want to make X% profit on Y revenue for Z customers, roughly, and will adjust numbers upwards until they stay at least at the same place.
This is exactly what has happened in Ontario. But a lot of that has come from boneheaded contracts that the government signed, which guaranteed payment for capacity, not usage. So the more demand falls, the more we pay per kWh, because the hydro companies are getting paid whether they actually generate power or not. The excess power is then exported for much less than what they're charging residents for it.
I suspect you're right on the money here as we've seen this before, most notably with the dying cable TV model. Declining viewership, increasing viewer age (younger viewers are more highly valued by advertisers as a general rule) and the abundance of cord-cutting streaming options (ie Netflix, Amazon Prime, Hulu, HBO, etc) are all trending in the wrong direction (for cable companies and traditional broadcast outlets). The result? Rising prices to make up for the revenue shortfalls from selling less bundles.
With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over.
Utilities have significant fixed costs. These are the capex costs of building plants and power infrastructure. These don't get any cheaper if consumers consume less power. The most likely response is simply to raise prices.
Solar in particular has been on a rapid decline in recent years. Utility price increases will only hasten adoption.
Here's another thing to consider: electricity tends to be more expensive during the day and cheaper at night. This is because industrial and commercial usage tends to be at peak during the day. Utilities typically need to maintain a base load on their infrastructure to cover peak usage so any usage at night is "free" for them essentially, hence the subsidized cost.
But consider this: in addition to residential usage of solar another response you'll see with increased utility prices is people installing batteries. This will not only store excess solar power but will allow customers to store power at night. Batteries too continue to get cheaper. I imagine that net this won't be good news for utilites either.
> With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over.
In the US, SlingTV offers the ability to get local Fox (NFC) and local NBC (Sunday night games) in their "Blue" package for $25/mo. You can jump up to "Orange" and get ESPN (Monday-night games) for $35/mo (but this package only allows you to run one stream to one device at a time). You do have the option to get both packages for the obvious cost, but at that point, you are coming up on the price of standard cable. SlingTV does have NFL Network, but Amazon got the rights to stream Thursday night games last season. Local CBS is still missing from Sling, so too bad if your team is in the AFC I guess.
MLB (MLB.tv), NHL (NHL.tv), NBA (NBA TV) all have their "out of network" streaming services that can be purchased without a cable TV sub, but watching in-network games can typically be done with a $10/mo VPN service.
In-network games for NHL/NBA/MLB are really what is left for disruption for the "big 4" US sports. But with Comcast tied NBC Sports and all of the regional channels, I suspect they will be holding on to those rights with a death grip.
The death knell for the cable companies will be when something challenges their virtual monopoly in high speed Internet.
Considering that younger people tend to watch sports in a different manner than previous generations (more smartphone / social media oriented, according to this study -- https://www.mckinsey.com/industries/media-and-entertainment/...) I suspect that even sports is not going to be a saving grace for traditional cable.
With 5G coming up and the possible promise of WISPs, fiber, satellite, or other technologies people are exploring to bring fast broadband outside cable, that death knell might be sooner than later.
For power, utilities are heavily regulated by the state, which might mitigate some of this "death spiral" to some extent. But, yeah, they do have that same issue of cable companies of being heavily invested in a legacy hardware network.
That being said, one counter example that comes to mind is the old copper-wire analog phone systems. In the US, most of the old Ma Bell monopoly transitioned to a more mobile oriented business (Verizon or AT&T) over time. Landlines have been on the decline for the last couple decades, but my impression is that the telephone companies were able to adapt instead of getting caught out for the most part, or trying to play legislative-bully against mobile.
In contrast, the cable companies (my impression again) seem to be resisting technological trends and trying to use legislative strong-arming to sustain their business model, rather than reforming (their legal fights against muni broadband being a good example here). I do not see this as working long-term, at all.
Unfortunately my impression is that the power companies are more comfortable emulating the cable companies (fighting to make solar power less viable to consumers for instance) instead of transitioning business models gracefully...
This is a debate in the industry with wide-ranging implications. It basically boils down to will we have a wireless future as the primary means of Internet delivery or will we not?
And there's no clear answer. Sure 5G (even 4G) is fast but could it handle, say, all of Manhattan using it with no fixed line Internet? I have my doubts even with the 5G focus on concurrent connections. Or if it could it may just suck a lot of the time.
Wired (particularly fiber) has many distinct advantages:
1. The lifespan of the infrastructure is like 30-40+ years, possibly much longer;
2. Once you have the fiber in place it's pretty easy to change the lasers at either end and boost the speed, likely to 10Gbps+ if required;
3. Fiber unlike wireless doesn't suffer from interference and the amount of data you can get down a conduit with all the fiber strands you can fit is simply gigantic.
But of course wireless doesn't have the massive upfront capex cost that a fixed-line network does. As much as people (reasonably) deride the US cable industry, high speed Internet pretty much exists in the US because of riding the coattails of the infrastructure that was built in the latter part of the 20th century. Who knows where we'd be without it?
If you had to build that infrastructure from scratch today the cost would be astronomical. This isn't unique to cable or telecommunications either. It seems like in virtually every Western country the cost of infrastructure has ballooned to the point where many things that exist now would just be uneconomical to create now (eg rail and subways in major US cities) and that's going to be a huge problem going forward.
Of course this isn't a binary problem. The future may be a hybrid (eg wireless last-mile).
As for your point about cable companies fighting competition at the regulatory level, absolutely true. It's not a simple issue however. As much as cable companies are desperately fighting commoditization (they don't want to be the provider of dumb Internet pipes), an overbuild with a fixed-line network doesn't make much sense either economically.
It's why we only have one water network, one gas network and one electrical grid (per region; many in the US have this deluded view that regional monopolies are somehow "competition"). It's also why utilities are highly regulated as they are monopolies. It's also why ISPs need to be regulated as a monopoly. Internet is the so-called 4th utility.
But this regulation will prevent naked price gouging. It will however impact the cost per kWh and ultimately regulators will have to relent to let them raise prices to cover costs.
It's kind of a beautiful vicious cycle. As renewables and efficiency increase, power prices increase, which increases the incentives to switch to renewable sources and efficient consumption.
To reinforce this, I was reading an article (can't remember the source now, unfortunately) about Caesar's switching to solar power and having to pay the Nevada utility ~$90 million dollars to offset the "lost revenue" to the utility.
Caesar's wasn't obligated to pay, but they chose to to prevent the utility from passing that cost on to the residential customers.
Found some sources. Closer to $50 million than $90 million, and these imply that Caesar's didn't have as much of a choice in it as in the source I first read (but can't find).
In a way, this is all kind of a free market solution to energy over-use (I'm not saying this happens all the time), companies develop electronics to be more efficient so that customers will look at how much less they'll spend on electricity, so energy companies will (due to their monopolies in many parts of the world) raise prices to keep their revenues consistent, which means there's an incentive to make electronics even more efficient.
Residential efficiency isn't really driving the drop though. It's big users moving to on site solar and the like. Residential lighting (the residential component seeing the biggest improvements in efficiency) is about 3% or 4% of the market ( https://www.eia.gov/tools/faqs/faq.php?id=99&t=3 ), so even huge improvements aren't going to upend the market.
Trying to raise prices on commercial and industrial users just makes alternatives that much more attractive. There's a similar effect with residential hot water and space heating, both huge components of residential usage.
Generation and transmission, at least, are auctioned to the lowest bidder through RTOs. Collusion to inflate prices is prohibited. The RTOs are the industry self-regulating, but post-Enron the industry is under a lot of scrutiny and nobody wants the government to take over regulation. The resource (electricity) is completely fungible, so providers can only compete on price. So at least at the generation/transmission levels, I think competition might actually prevent what you're predicting.
It's worth noting that generation occurs in different groups based on how expensive it is to increase or lower output, which is necessary constantly because usage fluctuates cyclically:
1. Hydroelectric is cheapest to scale up and down, so there's incentive to inflate prices and wait for high-usage times, especially when water levels are low.
2. Fossil fuels are mid-price to scale up and down, so there's some incentives for inflating prices, but fuel prices are also a factor.
3. Nuclear is extremely expensive to scale up and down, so there's incentive to try to always be the lowest price. Turning off and on is sometimes more expensive than selling generation at a loss.
4. Wind/solar are cheap to scale up/down, but are weather/time dependent and therefore unpredictable and uncontrollable to an extent. You can scale down cheaply by dumping energy into the ground, but you may not be able to scale up at any cost.
It should be clear from this how important hydroelectric is to our power system's pricing. Nuclear/wind/solar often result in the most competitive generation costs, but if hydroelectric goes up in cost, nuclear would have to scale generation up and down more often at great cost. When wind/sun are good, there's competition for flexibility, but when they aren't, hydroelectric controls the price of adjusting generation. So I think that if companies adjust their numbers up to maintain profits, it will mostly be hydroelectric generation.
I don't understand the effects of wind/solar on the market as well, because they weren't as large a sector when I worked at an RTO. However, I am under the impression that efficient energy storage would have a large impact on allowing wind/solar to compete with hydroelectric on ability to scale up/down. And this is urgent, because the inflated cost of hydroelectric's scaling is capped at the cost of fossil-fuel scaling, which is only going up in price in the long run.
If electricity wasn't a monopoly, the answer would be an obvious yes: falling demand and falling costs both indicate falling prices.
But given that it is a monopoly that is supporting huge amounts of fixed costs (infrastructure and debt payments) there will be significant pressure to increase costs.
I predict that both will occur, increasing the already significant disparity between regional electricity prices.
This really depends on the model used for utilities. Here, for instance, transmission is a monopoly (held by the old state monopoly generator), but generation is not; generators and companies who sell electricity (who aren't necessarily the same) pay fees to the transmission monopoly, but they themselves aren't monopolies.
My local electric utility just got a rate hike approved by the state utilities commission and is already pushing for another. They're putting the costs of cleaning up the 2014 coal ash spill in the Dan River on customers, the bastards. As long as utilities are permitted to make mistakes and pass the costs of cleanup on to taxpayers or their customers, they will, and bills will rise.
A significant proportion of utilities are regulated by states' Public Utility Commission, and the utility bring rate cases to the PUCs every so often, which set theoretically regulated rates of return on equity (which therefore in turn drives prices).
So -- vastly oversimplifying -- unless the PUC targets a lower ROE, it's unlikely to see electricity prices fall.
While demand might be slowing, it's still very inelastic. We can improve efficiency, but we absolutely can't live without lots and lots of electricity.
