Garrett: Normal won’t be back
Published 8:22 pm Tuesday, March 31, 2009
“Normal won’t be back,” was a major part of a message delivered by Mike Garrett, the president and CEO of Georgia Power Company, to the Bainbridge Rotary Club on Tuesday.
Garrett, who served as district superintendent in Bainbridge from 1979 through 1982, offered differences in current economic indicators versus those same indicators in 2004, the last time he spoke before the local Rotary Club.
Housing starts were close to an all-time high in 2004, natural gas prices were around $5 per Btu, coal was priced around $40 per ton, and gasoline prices were around $1.60 per gallon.
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In the last five years, housing starts statewide have decreased by 50 percent, natural gas prices have increased 478 percent, coal prices peaked at $250 per ton, and gasoline prices spiked at $4 per gallon
“The $4 per gallon gasoline, I think, is probably one of the things that started the economic crisis that we’re in today” said Garrett.
The “bubble that we were living on” that was the easy availability of sub-prime mortgage loans also helped cause the recession that the country now finds itself.
“The banks, to their credit, didn’t cause this all by themselves, they had a lot of help from the government. They were required to make a lot of loans that wouldn’t have made if they didn’t have to” continued Garrett.
The natural gas price spike affected consumers in two ways, the cost that a consumer pays for natural gas services residentially and for the price paid for electricity. Georgia Power’s electricity rates have increased 30 percent in the last five years, an increase attributable to the higher costs of fuel needed to produce electricity, according to Garrett.
After listing reasons why the economy entered a recession, Garrett gave his opinion of what’s ahead for the economy.
“What we are in now is a total reset. We have been through the downturn in the economy and if we haven’t reached the bottom, we are pretty close to the bottom. Interest rates can’t get much lower,” Garrett said.
Garrett believes that the residential housing market will be first to make a recovery, although the housing starts will not return to 2005 levels, when Georgia Power installed 60,000 new power meters. A normal level of new installations is 40,000 per year. But the commercial market, which started slowing in September of 2007, will be much slower to come back.
“While in a staff meeting, I wrote NWBB on the board, that means ‘Normal Won’t Be Back.’ I then added ATS to the board, ‘Any Time Soon.’ But I don’t know that we want to get back to the 2004-2007 levels, I think we want to come back with some reasonableness to this economy.”
Garrett said that the business sector that causes the most concern is the industrial sector. The state of Georgia has lost a lot of industry in this downturn and there are a lot of industries with “one foot on the banana peel.”
“I would say that about 70 percent of what we have lost, won’t come back,” said Garrett.
Georgia Power is also in line to construct the first nuclear plants in the country since 1979. The cost of generating a kilowatt hour of electricity via nuclear technology costs a fraction of the same kilowatt hour produced by coal or natural gas.
Construction of these plants will begin in 2011 and the first will become operational in 2016 and the second in 2017.
“If this country is going do what it’s going to do in terms of growth and energy needs, we’re going to have to do it with nuclear power. It is proven to be safe and efficient. We’ll have two units on line in 2016 and 2017,” explained Garrett.