On 29 February 2008, Rose Baker and David Passmore made a presentation, Your Electrifying Utility Bill: A Forecast of Pennsylvania Economic and Workforce Changes Resulting from Removal of Electrical Rate Caps, to the Society for Workforce Education & Development on University Park Campus of Penn State. Links to their slide show and briefing paper are available at http://PAElectricRateCaps.notlong.com/.
In a nutsehell, electrical rate caps imposed under deregulation of the Pennsylvania electricity industry will be eliminated completely for residential, commercial, and industrial electricity customers by 2010. Prices per kilowatt–hour consumed for residences and businesses are anticipated to rise remarkably (40% to 70% increases are possible). Baker, Passmore, and their research team (Matthew Loiacono, Laura Miller, and Shakoor Ward) benchmarked the impact of a 10% electricity price increase on many Pennsylvania economic indicators, including private nonfarm employment, total economic output, gross state product, real disposable income, and population. These benchmarks were created using the Pennsylvania REMI Policy Insight model, a 70–sector structural economic and demographic forecasting and policy analysis model. Their simulations using Policy Insight are built on the notion that an increase in the price of electricity will alter household spending and add to industry production costs, resulting in loss of Pennsylvania jobs, income, economic output, and population.
A taste of the preliminary findings of the study for one of our simulation scenarios that examines the impact of each 10% increase in the price of electricity to residential and business customers:
* 6,500 Pennsylvania jobs lost in 2010, rising to approximately 10,000 jobs in 2015.
* $840 million in Pennsylvania economic output foregone in 2010; almost $1.8 billion in 2015.
* Reduction of almost $1 billion in disposable personal income in 2010; over $1.1 billion in 2015.
* Loss of approximately 3,700 residents due to out-migration in 2010; 16,000 in 2015.
Also, the impact of rate increases is likely to vary by income class. Pennsylvanians in the lowest income level could bear roughly two times the burden of the effects of price increases as could people in the highest income level.
The research on the impact of anticipated electricity price changes discuss in the 29 February meeting was conducted through the Penn State Workforce Education and Development (WED) Initiative, an alliance between the College of Education and Penn State Outreach to support the development of the workforce in Pennsylvania primarily through the application of Penn State resources to conduct economic and workforce analyses for employers, industry partnerships, nonprofit organizations, and government entities. For a guide to information on the web about the WED Initiative, see http://PSU–WEDI–Guide.notlong.com.
The Penn State WED Initiative often conducts research analysis about topics and issues—such as the electricity rate issue—that, at times, are the focus of vigorous debate and public attention and that frequently are associated with diverse stakeholders who represent divergent opinions. The Initiative adds value to this debate, attention, and discussion by conducting and reporting research and analysis decisions affecting economic and workforce development using the most objective approaches possible. The research and analysis of the WED Initiative are pursued independent of the commercial or political interests of any actual or potential sponsor of WED Initiative work. All research meeting the Initiative’s standards of quality for conduct and reporting is available to the public via links through “publications” and “presentations” keywords at this web site.