(RTTNews) - Electric utility company American Electric Power Co., Inc. (AEP: News ) reported Thursday a 18.4% year-over-year increase in profit for the third quarter, helped by rate increases and cost cutting. This was partially offset by weak industrial demand amid the economic downturn, mild weather as well as a quarterly revenue drop.

Earnings per share for the quarter remained flat with last year, but topped analysts' expectations by eight cents, while quarterly revenues missed consensus estimate. The company also raised the low-end of its prior ongoing earnings forecast range for fiscal 2009.

American Electric, one of the largest electric utilities in the U.S., provides electricity to more than 5 million customers in 11 states. American Electric owns more than 38,000 megawatts of generating capacity in the U.S, and also owns the nation's largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

The utility sector is more or less protected from general factors such as consumer sentiment amid severe economic downturn, as it is difficult for people to live without their services. They are highly regulated and have less competition as the territories are more or less insulated from peers, resulting in only one electricity provider in most towns. Also, their revenues are consistent as customers pay the bills in time for continuity of service.

However, like other utility companies, American Electric has been hit hard by weak demand for power amid the severe economic crisis. The slowdown in residential and commercial real estate growth has also impacted the utility companies' steady profits. The economic crisis has forced people to be more prudent in their electricity usage, with the weather also having a key role in determining electricity usage, as cooler weather translates to less use of electricity.
In a statement, chairman, president and chief executive officer, Michael Morris said, "We're pleased with our results, especially considering the number of factors that worked against us in the third quarter. This was the coolest summer in 30 years for the Eastern states that we serve and the fourth-coolest summer in 30 years for our customers in the Southwest Power Pool - Oklahoma, Arkansas, Louisiana and northeast Texas. The cool summer weather reduced both retail and wholesale sales.

According to the Energy Information Administration, total U.S. electricity consumption fell 1.6% in the 2008 and is forecast to decline by 3.3% in 2009, and then grow by 1.3% in 2010 as the improving economy leads to slowly recovering industrial sector electricity sales.

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