dlprmb14oct08 economic & demographic consequences of eliminating price caps on electricity rates...
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![Page 1: Dlprmb14Oct08 Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania Rose M. Baker David L. Passmore](https://reader036.vdocument.in/reader036/viewer/2022070307/551a77fe5503463e778b6274/html5/thumbnails/1.jpg)
dlprmb14Oct08
Economic & Demographic Economic & Demographic Consequences of Consequences of
Eliminating Price Caps on Eliminating Price Caps on Electricity Rates in Electricity Rates in
PennsylvaniaPennsylvania
Economic & Demographic Economic & Demographic Consequences of Consequences of
Eliminating Price Caps on Eliminating Price Caps on Electricity Rates in Electricity Rates in
PennsylvaniaPennsylvania
Rose M. BakerRose M. Baker
David L. PassmoreDavid L. Passmore
![Page 2: Dlprmb14Oct08 Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania Rose M. Baker David L. Passmore](https://reader036.vdocument.in/reader036/viewer/2022070307/551a77fe5503463e778b6274/html5/thumbnails/2.jpg)
dlprmb14Oct08
Penn State Workforce Education & Penn State Workforce Education & Development InitiativeDevelopment Initiative
Rose BakerRose Baker
David PassmoreDavid Passmore
DirectorDirectorCenter for Regional Economic & Center for Regional Economic & Workforce AnalysisWorkforce Analysis
DirectorDirectorCenter for Regional Economic & Center for Regional Economic & Workforce AnalysisWorkforce Analysis
Professor & DirectorProfessor & DirectorPenn State Institute for Research inPenn State Institute for Research inTraining & DevelopmentTraining & Development
Professor & DirectorProfessor & DirectorPenn State Institute for Research inPenn State Institute for Research inTraining & DevelopmentTraining & Development
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Regulation, Deregulation, Caps…Regulation, Deregulation, Caps…
Natural monopolyNatural monopoly– GenerationGeneration– TransmissionTransmission– DistributionDistribution
Regulation Regulation DeregulationDeregulation Rate CapsRate Caps
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Methods…Methods…
• Baseline forecast of the Baseline forecast of the Pennsylvania economy through Pennsylvania economy through 20152015
• Rate removal forecast conducted by Rate removal forecast conducted by simulating 10% increase in simulating 10% increase in electricity rates through 2015electricity rates through 2015
• Benchmark of effects of rate Benchmark of effects of rate removal =removal =– Rate removal forecast Rate removal forecast minusminus– Baseline forecastBaseline forecast
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Scenarios through 2015 for Scenarios through 2015 for residential, commercial, & industrialresidential, commercial, & industrial
PP QQxx SalesSales==
10%10%Over 2006Over 2006
priceprice
Three megawattThree megawattforecasts:forecasts:• • Linear growthLinear growth• • Linear +10%Linear +10%• • Linear – 10%Linear – 10%
Three sales Three sales forecasts forecasts for price – for price – quantity quantity pairspairs
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REMI policy variables…REMI policy variables…
• Electricity Fuel Costs—Electricity Fuel Costs—IndustrialIndustrial
• Electricity Fuel Costs—Electricity Fuel Costs—CommercialCommercial
• Consumer price Consumer price (equivalent amount) — (equivalent amount) — Household operationHousehold operation
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JobsJobs—4,183 to 8,000 loss initially; —4,183 to 8,000 loss initially; 6,000 to 11,700 by 20156,000 to 11,700 by 2015
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Gross state productGross state product—$365 million to —$365 million to $672 million loss initially; $718 million $672 million loss initially; $718 million to $1.3 billion by 2015to $1.3 billion by 2015
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Real disposable incomeReal disposable income—$636 —$636 million to $1.3 billion loss initially; million to $1.3 billion loss initially; $720 million to $1.5 billion by 2015$720 million to $1.5 billion by 2015
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PopulationPopulation—3,624 to 4,851 loss —3,624 to 4,851 loss initially; 9,824 to 19,028 by 2015 initially; 9,824 to 19,028 by 2015
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Implications Implications ? ?Depends on your perspective…Depends on your perspective…
• Impact on economy and Impact on economy and demography depends on demography depends on perspective perspective
• Impact on individual Impact on individual households could be households could be substantialsubstantial
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Impact on economy & Impact on economy & demography…demography…
• Substantial, in terms of Substantial, in terms of absolute numbersabsolute numbers
• Small, as a % of total Small, as a % of total economy and economy and demographydemography
For every 10% price increase
For every 10% price increase
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Impact on individual households…Impact on individual households…
• Small, but real, risk of job and Small, but real, risk of job and income lossincome loss
• Risks and changes affect low Risks and changes affect low income household more than high income household more than high income householdsincome households
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Two changes in lifestyle likely…Two changes in lifestyle likely…
• Conservation — Reduce Conservation — Reduce electricity expenditures as electricity expenditures as part of household part of household operationsoperations
• Substitution — Shift Substitution — Shift expenditures to pay for expenditures to pay for higher electricity costshigher electricity costs
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What will the rate cap removal mean What will the rate cap removal mean for households & businesses?for households & businesses?
Your thoughts?Your thoughts?
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dlprmb14Oct08
Economic & Demographic Economic & Demographic Consequences of Consequences of
Eliminating Price Caps on Eliminating Price Caps on Electricity Rates in Electricity Rates in
PennsylvaniaPennsylvania
Economic & Demographic Economic & Demographic Consequences of Consequences of
Eliminating Price Caps on Eliminating Price Caps on Electricity Rates in Electricity Rates in
PennsylvaniaPennsylvania
Rose M. BakerRose M. Baker
David L. PassmoreDavid L. Passmore