Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015
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This document analyzes the potential economic and demographic impacts of eliminating electricity rate caps in Pennsylvania from 2011 to 2015. It models several scenarios of electricity rate increases and their effects. Key findings include job losses of 4,183 to 11,700 and disposable income losses of $720 million to $1.5 billion by 2015 under a 10% annual rate increase. Individual households would face risks of job or income loss, with low-income households more affected. Households and businesses would likely respond through conservation efforts and shifting expenditures to pay for higher electricity costs.
Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015
- 1. Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015 Rose M. Baker David L. Passmore
- 2. Regulation, Deregulation, Caps… Natural monopoly Generation Transmission Distribution Regulation Deregulation Rate Caps
- 3. 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
- 4. Scenarios through 2015 for residential, commercial, & industrial Four megawatt forecasts: • Linear growth • Linear +10% • Linear – 10% • Flat from 2006 Four sales forecasts for price – quantity pairs P Q x Sales = 10% Over 2006 price
- 5. Policy variables… Electricity Fuel Costs—Industrial Electricity Fuel Costs—Commercial Consumer price (equivalent amount)— Household operation
- 6. Some findings… Impact on economy and demography depends on perspective Impact on individual households could be substantial
- 7. Impact on economy & demography… Substantial, in terms of absolute numbers Small, as a % of total economy and demography For every 10% price increase
- 8. Impact on economy & demography… Jobs —4,183 to 8,000 loss initially; 6,000 to 11,700 by 2015 Disposable income —$636 million to $1.3 billion loss initially; $720 million to $1.5 billion by 2015 For every 10% price increase
- 9. Impact on economy & demography… GSP —$365 million to $672 million loss initially; $718 million to $1.3 billion by 2015 Population —3,624 to 4,851 to loss initially; 9,824 to 19,028 by 2015 For every 10% price increase
- 10. 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
- 11. Two changes in lifestyle likely… Conservation — Reduce electricity expenditures as part of household operations Substitution — Shift expenditures to pay for higher electricity costs
- 12. What will the rate cap removal mean for households & businesses? Your thoughts?
- 13. Elimination of Electricity Rate Caps in Pennsylvania, 2011-2015 Rose M. Baker David L. Passmore
Editor's Notes
- #2: 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.