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Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015
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Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015

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Presentation by Rose Baker and David Passmore at Regional Economic Models, Inc. Seminar, "Modeling the Current Economic Crisis, in Harrisburg, Pennsylvania, 4 Nov 2008

Presentation by Rose Baker and David Passmore at Regional Economic Models, Inc. Seminar, "Modeling the Current Economic Crisis, in Harrisburg, Pennsylvania, 4 Nov 2008

Published in: Education, Technology

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  • Pennsylvania ranked third in electricity generation among the states in 2005 according to the U.S. Energy Information Administration. PJM Interconnection—an organization of electricity distributors, power generators, transmission owners, power marketers, and large consumers—forecasts a need for approximately 500 megawatts of new electricity generation annually to meet Pennsylvania’s growth requirements. A supply of reliable electrical power at competitive rates is a key factor in Pennsylvania’s industrial competitiveness and in maintaining the security and welfare of Pennsylvanians.
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    • 1. Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015 Rose M. Baker David L. Passmore
    • 2. Penn State Workforce Education & Development Initiative Rose Baker David Passmore Program Manager Workforce Assessment Center & Assistant Professor of Education Professor & Director Penn State Institute for Research in Training & Development
    • 3. Regulation, Deregulation, Caps…
      • Natural monopoly
        • Generation
        • Transmission
        • Distribution
      Regulation Deregulation Rate Caps
    • 4. Methods…
      • Baseline forecast of the Pennsylvania economy through 2015
      • Rate removal forecast conducted by simulating 10% increase in electricity rates through 2015
      • Benchmark of effects of rate removal =
        • Rate removal forecast minus
        • Baseline forecast
    • 5. Scenarios through 2015 for residential, commercial, & industrial Three megawatt forecasts: • Linear growth • Linear +10% • Linear – 10% Three sales forecasts for price – quantity pairs P Q x Sales = 10% Over 2006 price
    • 6. REMI policy variables…
      • Electricity Fuel Costs—Industrial
      • Electricity Fuel Costs—Commercial
      • Consumer price (equivalent amount) — Household operation
    • 7. Jobs —4,183 to 8,000 loss initially; 6,000 to 11,700 by 2015
    • 8. Gross state product —$365 million to $672 million loss initially; $718 million to $1.3 billion by 2015
    • 9. Real disposable income —$636 million to $1.3 billion loss initially; $720 million to $1.5 billion by 2015
    • 10. Population —3,624 to 4,851 to loss initially; 9,824 to 19,028 by 2015
    • 11. Implications  ? Depends on your perspective…
      • Impact on economy and demography depends on perspective
      • Impact on individual households could be substantial
    • 12. Impact on economy & demography…
      • Substantial, in terms of absolute numbers
      • Small, as a % of total economy and demography
      For every 10% price increase
    • 13. Impact on individual households…
      • Small, but real, risk of job and income loss
      • Risks and changes affect low income household more than high income households
    • 14. Two changes in lifestyle likely…
      • Conservation — Reduce electricity expenditures as part of household operations
      • Substitution — Shift expenditures to pay for higher electricity costs
    • 15. What will the rate cap removal mean for PA households & businesses? Your thoughts?
    • 16. Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015 Rose M. Baker David L. Passmore