CEO’s Report: Analyzing the effects of COVID-19
Three months ago, states within Heartland’s customer footprint announced their first confirmed cases of COVID-19.
Since then, States of Emergency were declared, public schools were closed, and non-essential businesses were limited or closed. Social distancing recommendations led to many businesses shifting to work-from-home status and others were forced to lay off workers.
While all these measures were put in place for the safety and well-being of residents, as well as to ease the strain on hospitals, such measures are certain to have an impact on electric sales.
Heartland has been monitoring load data since COVID-19 started impacting the economy in the Midwest.
Measuring the impact
The first cases of COVID-19 in the Midwest appeared in early March. However, stay-at-home orders and business closings didn’t start happening until a few weeks later in most cases.
However, Heartland’s total customer load in March was just over 8% below that of 2019 and less than 3% below the five-year average.
While those numbers may seem significant, when weather-normalizing the data, total customer load was 3.8% below 2019 and 1.72% below the five-year average.
Weather normalization involves measuring the impact of weather on energy consumption. Because weather patterns vary from year to year, weather normalization adjusts energy usage so it can be compared to energy usage in other years over a longer period.
Comparing energy consumption from one year to the next only provides the change between those years. Weather has a significant impact on energy consumption and when it is “weather normalized,” you are comparing energy consumption over a normal weather period.
When adjusted for normal weather, loads in March were much closer to expected levels. In fact, greater than 75% of the variance seen in March can be statistically attributed to weather variations. The weather in March of this year was significantly warmer than normal while in March of 2019, it was much cooler than normal.
Looking at April of this year, when we saw an entire month of closed or limited business, total customer load was 5% below that of April 2019 and 3.5% below the five-year average. When adjusted for normal weather, April load variance was similar to the actual data, given that weather in April of this year was near the five-year average.
Therefore, a significant portion of the load variance seen in April can be attributed to non-weather-related factors, including the effects of COVID-19.
While we are still analyzing May loads, it is reasonable to expect the COVID-19 impacts to be larger due to continued business closings and decreased operations. While so far they have been reasonable, they seem to be increasing, evidenced by a 2% impact in March and 4 to 5% impact in April.
Even as businesses begin ramping back up, many will experience decreased product demand to the weakened economy. But, based on data we have seen thus far, we hope to see the effects start to decline as restrictions ease going into the summer months.
Despite these load fluctuations, prudent rate setting in the past has prepared Heartland for such a situation. We are not anticipating any rate impacts at this point due to the impacts of COVID-19.
Of course, we will continue monitoring the situation and rate stability will remain our priority.
We understand that while we are all trying to find a sense of normalcy in this situation, we still have a long way to go before we can truly be “back to normal.” We will do whatever we can to help our customers and provide the best service possible, through this situation, and always.
As we attempt to “get back to normal,” our staff returned to the office June 1st. We still take COVID-19 very seriously, but feel we have the proper controls in place to protect our employees. Of course, we remain flexible should the situation change.
We look forward to being able to see you all in person.