The NERC Fan: A Retrospective Analysis of the NERC Summary Forecasts

Summary forecasts of the growth in demand for electricity, published annually since 1974 by the North American Electric Reliability Council, have proved to be excessively optimistic, although the projected growth rate has been revised downward each year. Should forecasters have been able to do a better job of predicting the slowdown in demand growth since the early 1970s? Should they have responded more quickly as actual demand growth fell short of projections? Our objective in this article is to provide some partial answers to these questions by comparing the published NERC Summary Forecasts (NSF) with benchmark forecasts provided by simple models representing well-established techniques. One alternative forecast is provided by the exponential smoothing/Box-Jenkins method (ES/BJ) and another by a simple dynamic demand equation that uses real price and real income as explanatory variables. We conclude that relative to ES/BJ, the NSF were not excessively optimistic. Relative to the simple demand equation, ...