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Utilities Face Short Term Budgeting Pressure

Paul Korzeniowski's picture
B2B Content producer Self-employed

Paul is a seasoned (basically old) freelance B2B content producer. Through the years, he has written more than 10,000 items (blogs, news stories, white papers, case studies, press releases and...

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  • Oct 12, 2021 8:51 pm GMT
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The pandemic’s ripple effects continue to be felt by utility executives. Many energy producers are now feeling pressure to raise wages, but such moves could eat into profitability, according to a Gartner Inc. survey.

The pandemic disrupted business and reduced revenue in many market segments including energy. Electricity consumption fell by7% in 2020, the highest on record since the US Energy Information Administration (EIA) began tracking the sector in 1949.

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Businesses have been trying to recoup their losses as the markets respond to the ongoing fallout. As a result, consumer pricing and inflation have been rising.

Demands for Higher Pay Rise

Consequently, employees find themselves struggling to cover their rising expenses. In response, many want a pay raise. In the second quarter 2021, 60% of organizations experienced wage inflation, nearly double the amount compared to the previous quarter.

The demands come at a vexing time. Nearly three in four CFOs cited the risk of lower profitability as their top concern as they try to meet workers’ demand for higher wages. Actions that executive leaders took during the early days of the pandemic have contributed to the challenges that they now face. Many energy organizations shortened their planning time horizons and passed their rising costs to customers, How well these moves will work is an open question.

The pandemic forced utility executives to rewrite business plans. They continue to grapple with its impact. Wage inflation is emerging as the latest area in need of adjustments, one that presents them with very difficult decisions.

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