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Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania

Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania. Rose M. Baker David L. Passmore. Penn State Workforce Education & Development Initiative. Director Center for Regional Economic & Workforce Analysis. Rose Baker. Professor & Director

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Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania

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  1. Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania Rose M. Baker David L. Passmore

  2. Penn State Workforce Education & Development Initiative Director Center for Regional Economic & Workforce Analysis Rose Baker Professor & Director Penn State Institute for Research in Training & Development David Passmore

  3. Natural monopoly Generation Transmission Distribution Regulation, Deregulation, Caps… 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 P x Q = Sales 10% Over 2006 price Three megawatt forecasts: • Linear growth • Linear +10% • Linear – 10% Three sales forecasts for price – quantity pairs

  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 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 households & businesses? Your thoughts?

  16. Economic & Demographic Consequences of Eliminating Price Caps on Electricity Rates in Pennsylvania Rose M. Baker David L. Passmore

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