Economic
Benefits
of Three Mile
Island Unit 1
An Economic Impact
Study by the
Nuclear Energy Institute
Economic Benefits
of Three Mile Island
Unit 1
An Economic Impact Study by
the Nuclear Energy Institute
November 2005
©2005
Economic Benefits of Three Mile Island Unit 1
2
Economic Benefits of Three Mile Island Unit 1
Contents
EXECUTIVE SUMMARY .......................................................................................................................... 1
SECTION 1: INTRODUCTION .................................................................................................................. 3
SECTION 2: THE THREE MILE ISLAND NUCLEAR STATION.......................................................... 5
SECTION 3: ECONOMIC AND FISCAL IMPACTS................................................................................ 11
SECTION 4: ADDITIONAL BENEFITS PROVIDED BY THREE MILE ISLAND ............................. 23
SECTION 5: NUCLEAR INDUSTRY TRENDS ..................................................................................... 25
SECTION 6: ECONOMIC IMPACT ANALYSIS METHODOLOGY.................................................... 31
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Economic Benefits of Three Mile Island Unit 1
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Economic Benefits of Three Mile Island Unit 1
Executive Summary
Three Mile Island 1 in Dauphin County, Pennsylvania, is an integral part of the local economy. Owned
and operated by AmerGen Energy Co. LLC, a wholly owned subsidiary of Exelon Corp., the plant
generates low-cost electricity and makes purchases that have stimulated the local economy since its
commercial operation began in 1974.
Besides its economic output, the plant provides jobs, labor income and tax revenue to the area.
Additionally, there are important intangible benefits, such as charitable giving, clean air, community
involvement, environmental stewardship and stable, affordable electricity prices. Three Mile Island’s
economic impact reaches beyond the local community to the state and nation, according to this study by
the Nuclear Energy Institute.
In 2004, operation of Three Mile Island 1 increased Pennsylvania’s economic output by $86.1 million,
including $5.8 million in Dauphin County.
Adding the direct value of the plant’s electricity generation brings the economic output attributable to
Three Mile Island 1 to $463.9 million in Pennsylvania and $383.6 million in Dauphin County.
The operation of Three Mile Island 1 and the secondary effects of the plant account for 275 jobs in
Dauphin County and 1,376 jobs in Pennsylvania. These jobs result in $24.8 million in earnings to
workers in Dauphin County and $91.2 million in Pennsylvania. Additionally, the plant and its related
economic activity resulted in $5.7 million in state and local tax revenue.
Three Mile Island 1 employs 532 people (not including security personnel), with 208 employees
(39 percent) living in Dauphin County, and 187 (35 percent) living in Lancaster County. An estimated
180 full-time employees live in the Dauphin County cities of Harrisburg, Hummelstown and Middletown,
while approximately 120 full-time employees live in the cities of Elizabethtown, Lancaster and Mount
Joy in Lancaster County. The plant employs 2 percent of Dauphin County’s working population and
1 percent of working people in Lancaster County. Additionally, these jobs pay substantially higher
salaries than the average salary in the two counties.
The plant’s principal expenditure in Dauphin County is employee compensation. In 2004, Three
Mile Island 1 paid $22.8 million in compensation to employees living in the county and an additional
$38.8 million to employees residing elsewhere in Pennsylvania. Further, economic activity created by
the plant accounted for $2 million in employee compensation in Dauphin County and an additional $27.6
million in other areas of the state. Together, the direct and indirect compensation from the plant resulted
in $24.8 million in labor income in the county and an additional $66.4 million in other Pennsylvania
counties.
Three Mile Island 1 makes substantial purchases in Dauphin County, where the plant spent $25.3 million
in 2004. Purchases totaled $87.8 million in Pennsylvania and $176.6 million in the United States.
Economic activity generated by Three Mile Island’s purchases and operation also led to $5.8 million in
increased output in the county and $86.1 million in the state.
The plant generates almost $1 million in state and local tax revenue each year. Adding the economic
activity generated by Three Mile Island through increased business, corporate, payroll and personal taxes
results in a total state and local tax impact of $5.7 million.
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Economic Benefits of Three Mile Island Unit 1
Besides its economic benefits, the plant generated about 7.3 million megawatt-hours of electricity in
2004. This low-cost electricity helped keep energy prices affordable in the Mid-Atlantic Area Council
Sub-Region, where the Three Mile Island plant resides. In 2004, Three Mile Island’s production cost was
1.76 cents per kilowatt-hour, compared with an average production cost of 2.84 cents per kilowatt-hour
for the rest of the regional market.
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Economic Benefits of Three Mile Island Unit 1
Section 1: Introduction
This economic impact study, conducted by the Nuclear Energy Institute1 (NEI) examines the economic,
fiscal and other benefits provided by the Three Mile Island 1 Nuclear Station, owned and operated by
AmerGen Energy Co. LLC, a subsidiary of Exelon Corp. 2
This study also analyzes the economic and other benefits that the plant provides to Dauphin County, the
state of Pennsylvania and the United States. The analysis uses detailed data from Three Mile Island 1 to
assess these benefits.
While this study focuses primarily on benefits to the local community, it also calculates state and national
benefits. These include direct impacts—such as people employed by the plant, expenditures within the
community and corporate tax payments—and indirect impacts, including jobs created indirectly by plant
expenditures in the local economy. The study also discusses other benefits provided by the plant, such as
reliable, low-cost electricity, the benefits of a clean-air source of electricity and land stewardship.
Exelon Corp. and NEI cooperated in developing this study. The company provided data on employment,
operating expenditures and tax payments, as well as guidance on particular details specific to Dauphin
County and the plant.
NEI coordinated the project and applied a nationally recognized model to estimate the direct and indirect
impacts of the plant on the local community. RTI International, a nonprofit research organization in
Research Triangle Park, N.C., developed the methodology employed in this analysis, the seventh such
study conducted by NEI.
The remainder of this report contains five sections:
•
•
•
•
•
Section 2 provides background on Three Mile Island 1, including costs, employment, plant
history and performance, taxes, and local area details, such as total employment and earnings, as
well as regional electricity prices.
Section 3 examines the economic and fiscal impacts of the plant at local, state and national levels.
Section 4 provides data on benefits not captured by the model, such as the plant’s contributions to
the community and the environment.
Section 5 outlines recent trends in the nuclear energy industry as a whole, including cost,
performance and safety.
Section 6 discusses the methodology used to complete the study and Impact Analysis for
Planning, the economic modeling software employed as part of this effort.
1
The Nuclear Energy Institute is the policy organization of the nuclear energy and technologies industry and
participates in both the national and global policymaking process.
2
This study includes only Three Mile Island 1. FirstEnergy owns the non-operating Unit 2 and maintains a small
personnel contingent on the site. This study excludes any economic impact of FirstEnergy’s activity at Three Mile
Island.
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Economic Benefits of Three Mile Island Unit 1
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Economic Benefits of Three Mile Island Unit 1
Section 2: The Three Mile Island Nuclear Station
This section provides background information on Three Mile Island 1 and Dauphin County to frame the
results of this report, including a brief history of the plant and data on its cost, employment, performance
and taxes. This analysis also provides details on Dauphin County, its major cities and the state of
Pennsylvania, including earnings, tax collections, electricity cost and total employment.
2.1 History and Information
Three Mile Island 1 is near Harrisburg, Pa., a city of about 49,000. The plant is on an island in the
Susquehanna River, about 10 miles southeast of Harrisburg. The plant lies in Dauphin County, which has
a population of about 252,000.
Table 2-1. Three Mile Island 1: At a Glance
Unit
Megawatts
Commercial Operation Year
License Expiration Year
1
856
1974
2014
Reactor Type
Pressurized
water reactor
Three Mile Island 1, an 856-megawatt pressurized water reactor, began commercial operation in 1974.
Throughout most of its operation, Three Mile Island 1 has been a competitive component of the U.S. nuclear
energy industry. Since 1987, the plant has maintained capacity factors above the industry average.
Capacity factor, a measure of efficiency, is the ratio of actual electricity generated, compared with the
maximum possible generation if the plant were to operate at full capacity for one year.
In 2002, Three Mile Island 1 had its best year, with a capacity factor of 100 percent.
Figure 2-1. Three-Year Average Capacity Factors
120%
100%
80%
60%
Three Mile Island
Industry
40%
20%
0%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
Sources: Energy Information Administration, Nuclear Regulatory Commission
5
1999
2001
2003
Economic Benefits of Three Mile Island Unit 1
Figure 2-2. Three Mile Island Nuclear Station and Surrounding Area
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Economic Benefits of Three Mile Island Unit 1
2.2 Generation
Three Mile Island 1 generated about 7.3 million megawatt-hours of electricity in 2004—about
4 percent of the electricity generated in Pennsylvania each year. The plant operated at a high capacity
factor, 98.9 percent, in 2004.
The plant provides power for the Mid-Atlantic Area Council Sub-Region. The council, one of 10
regional reliability councils of the North American Electric Reliability Council, ensures the reliability
of the interconnected bulk power system in the region. Its area of responsibility consists of all or parts
of the states of Delaware, Maryland, New Jersey, Pennsylvania, Virginia and the District of Columbia.
Efficient performance has made Three Mile Island extremely cost-competitive. In 2004, the plant had
an average production cost of 1.76 cents per kilowatt-hour, compared with an average production cost
of 2.84 cents per kilowatt-hour for other electricity generators in the region.
Production costs represent the operation, maintenance and fuel costs of the plant. They do not include
depreciation, interest or ongoing capital costs. Payments to the Nuclear Waste Fund, established to pay
for the disposal of used reactor fuel from commercial nuclear plants, are contained within fuel costs.
Customers of nuclear-generated electricity pay one-tenth of a cent for each kilowatt-hour of electricity
to the fund.
Table 2-2. Mid-Atlantic Area Council Sub-Region
Production Cost and Generation in 2004
Average Production Cost
Electricity Generation
(in cents per kilowatt-hour)
(in million megawatt-hours)
Three Mile Island
1.76
7.27
Nuclear
2.21
105.13
Coal
2.66
113.86
Natural Gas
5.80
23.17
Oil
6.37
4.50
Region Total
(Including Three Mile Island)
2.84
253.93
Generation Source
Three Mile Island 1’s low production costs keep wholesale electricity prices affordable in Pennsylvania.
Although Three Mile Island’s specific contribution is difficult to measure, it can be estimated by
determining how much average production costs in the region would increase if a combined-cycle
natural gas plant (the plant of choice for new generation during the past decade) replaced Three Mile
Island. Substituting a natural gas plant for Three Mile Island in 2004 would have resulted in a 4 percent
increase in average regional electric generation costs, from 2.84 cents per kilowatt-hour to 2.96 cents
per kilowatt-hour.
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Economic Benefits of Three Mile Island Unit 1
2.3 Employment
Three Mile Island provides affordable electricity to Pennsylvania and a large number of well-paying
jobs in Dauphin County and the surrounding area. The plant employs 532 full-time workers, not
including security personnel.3 A total of 208 plant workers reside within Dauphin County and an
additional 187 workers live in Lancaster County. Full-time employees include 95 people from
Middletown, 82 from Elizabethtown and 49 from Harrisburg. Another 36 employees reside in
Hummelstown and 23 in Lebanon. Three Mile Island employs 2 percent of working people in Dauphin
County and 1 percent of working people in Lancaster and Lebanon.
Jobs provided by Three Mile Island also are typically higher paying than most jobs in the area. Fulltime plant employees who live in Dauphin County earned, on average, about $67,300 in 2004. This
was approximately 26 percent higher than the average earnings of other workers in the county, which is
about $53,400 a year. In Lancaster County, salaries of full-time plant employees were approximately
44 percent higher than the average earnings of the county’s employed work force.
Table 2-3. Three Mile Island Study Region Employment
County
Three Mile Island 1
Percentage
Permanent
Average
of Employed
Employeesb
Work Force
Earningsc
City/County Totala
Employed
Average
Work
Force
Earningsc
Dauphin
208
0.17%
$67,300
122,800
$53,400
Lancaster
187
0.08%
$77,700
235,700
$53,600
Lebanon
52
0.09%
$65,500
59,800
$50,300
York
37
0.02%
$69,600
196,000
$53,100
Cumberland
21
0.02%
$71,500
106,700
$57,300
7
0.03%
$70,200
21,700
$48,400
Perry
a Census
2000
b
Not including security personnel
c
Earnings, defined as the sum of wage and salary income, represent the amount of income received regularly before deductions for
personal income taxes, Social Security, Medicare, etc.
3
These data do not include the direct or indirect economic effects of security forces permanently employed at
Three Mile Island. For security reasons, specific numbers of trained nuclear security officers stationed at Three
Miles Island are confidential.
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Economic Benefits of Three Mile Island Unit 1
Table 2-4. Top Ten Cities/Towns by Total Employees
City/County Totala
Three Mile Island 1
City/Town
County
Employeesb
Average
Earningsc
Employed
Work Force
Average
Earningsc
Middletown
Dauphin
95
$63,700
4,500
$40,400
Elizabethtown
Lancaster
82
$72,200
6,100
$48,500
Harrisburg
Dauphin
49
$71,700
21,000
$37,500
Hummelstown
Dauphin
36
$71,200
2,300
$50,400
Lebanon
Lebanon
23
$62,700
11,000
$35,600
Lancaster
Lancaster
20
$93,500
24,700
$37,000
Mount Joy
Lancaster
18
$70,500
3,900
$46,500
Hershey
Dauphin
14
$73,600
5,600
$67,300
Palmyra
Lebanon
12
$67,300
3,600
$45,500
Bainbridge
Lancaster
12
$72,800
NA
NA
a Census
b Not
c
2000
including security personnel
Earnings, defined as the sum of wage and salary income, represent the amount of income received regularly before deductions for
personal income taxes, Social Security, Medicare, etc.
Table 2-5. Top Ten Cities/Towns by Percent of Employed Work Force
City/County Totala
Three Mile Island 1
City/Town
County
Percentage
of Employed
Work Force
Employeesb
Average
Earningsc
Employed
Work
Force
Average
Earningsc
Middletown
Dauphin
2.1%
95
$63,700
4,500
$40,400
Hummelstown
Dauphin
1.6%
36
$71,200
2,300
$50,400
Elizabethtown
Lancaster
1.3%
82
$72,200
6,100
$48,500
Mount Joy
Lancaster
0.5%
18
$70,500
3,900
$46,500
Palmyra
Lebanon
0.3%
12
$67,300
3,600
$45,500
Hershey
Dauphin
0.2%
14
$73,600
5,600
$67,300
Harrisburg
Dauphin
0.2%
49
$71,700
21,000
$37,500
Lebanon
Lebanon
0.2%
23
$62,700
11,000
$35,600
Lancaster
Lancaster
0.1%
20
$93,500
24,700
$37,000
Bainbridge
Lancaster
NA
12
$72,800
NA
NA
a Census
b Not
2000
including security forces
c Earnings,
defined as the sum of wage and salary income, represent the amount of income received regularly before deductions for
personal income taxes, Social Security, Medicare, etc.
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Economic Benefits of Three Mile Island Unit 1
2.4 Local Taxes
Three Mile Island 1 also generates substantial tax revenue in the local area. The plant contributes
almost $1 million to state and local tax revenues each year, and generated $3.6 million in total tax
revenue (local, state and federal) in 2004.
2.5 Summary
Three Mile Island provides reliable electricity and keeps power prices affordable in Pennsylvania. The
plant also offers well-paid employment and a large tax base to Dauphin County and the state. However,
these are only the direct economic benefits of the plant. As illustrated in the next section, the secondary
effects on the local and regional economies are as substantial as the direct benefits.
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Economic Benefits of Three Mile Island Unit 1
Section 3: Economic and Fiscal Impacts
The economic and fiscal impacts of Three Mile Island’s operations go well beyond plant spending on
employee benefits, purchases, salaries, taxes and wages. They also reflect the strong stimulus that plant
operations provide to key measures of economic activity—the value of electricity production, employment
and labor income—in the local and state economies.
Three Mile Island’s spending lifts economic activity locally and throughout the state. This effect is
experienced by the private sector through increased sales and employment and by the public sector
through increased tax revenues to support public services.
Estimates of these effects were developed by applying the Impact Analysis for Planning (IMPLAN)
model to expenditure data provided by Exelon Corp., parent company of AmerGen, the operator of the
Three Mile Island plant. (For more information on IMPLAN, see Section 6.)
3.1 Plant Expenditures in Dauphin County
Three Mile Island expenditures in Dauphin County totaled $25.3 million in 2004. Spending within the
county represented 14.3 percent of the plant’s total spending of $176.6 million and 28.8 percent
of the $87.8 million spent in Pennsylvania.
Exelon Corp. provided the expenditure totals for Dauphin County that appear in Table 3-1, which
includes the 10 sectors receiving the largest amount of Three Mile Island spending. The categories are
from among IMPLAN’s 509 sectors and listed largely according to the IMPLAN description. Total
compensation, which includes benefits, salaries and wages, is listed separately.
Tables 3-2 and 3-3 show similar expenditure totals for the state of Pennsylvania and the United States,
respectively.
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Economic Benefits of Three Mile Island Unit 1
Table 3-1. Three Mile Island 1 Expenditures in Dauphin County
Amount
(in thousands of dollars)
Description
Office Equipment and Supplies
$475
State and Local Government Enterprises
$472
Civic, Social and Professional Organizations
$178
Machinery and Equipment Rental and Leasing
$172
Commercial Printing
$131
Environmental and Other Technical Consulting Services
$116
Insurance Carriers
$113
Store Retailers
$110
Other Professional and Technical Consulting Services
$92
Heating Equipment
$65
Other
$543
Subtotal
$2,467
Total Compensationa
$22,815
Total
a
$25,282
Total compensation includes wages, salaries and fringe benefits based on data provided by Exelon Corp.
Labor accounted for the largest expenditure made in Dauphin County, with total compensation reaching
$22.8 million, approximately 90 percent of Three Mile Island 1’s expenditures in the county. A large
portion of the plant’s labor expenditures (employee benefits, salaries and wages) stay “home” in the
county. As expected, the county’s share is much larger than the share at the state and national levels.
The largest non-labor expenditure in the county totaled $475,000 for office equipment and supplies
stores. This represents payments to local retailers for office equipment, furniture and supplies for the
plant and its employees.
The next two largest non-labor expenditures, at $472,000 and $178,000 respectively, are for state and
local government enterprises and civic, social and professional organizations. These represent fees paid
to groups such as the Pennsylvania Emergency Management Agency, as well as payments and
charitable donations to groups such as the United Way and local fire companies.
Many of the top sectors in Table 3-1 involve service expenditures. The prevalence of service sectors
illustrates the plant’s heavy reliance on local labor and vendors to perform specialized work, including
printing services, equipment and machinery rental, insurance, and consulting services. Other top
spending categories include purchases of generic goods (such as furnishings), that are acquired from
local retailers and merchants, whenever possible.
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Economic Benefits of Three Mile Island Unit 1
3.2 Plant Expenditures in Pennsylvania
In 2004, Three Mile Island 1 spent $87.8 million for products and services (including labor) in
Pennsylvania. The total included $25.3 million dispersed in Dauphin County and $62.5 million spent in
other areas of Pennsylvania. Spending within the state represents approximately 50 percent of the
plant’s total expenditures of $176.6 million.
Table 3-2 provides details on the plant’s total spending within the state. Total compensation is the
largest category at $61.6 million and represents about 70 percent of the total. This is less than the share
of total compensation for Dauphin County spending. Instead, more money is spent on products and
non-labor services in the rest of Pennsylvania.
As in Table 3-1, large contracts are identified to show the most important expenditures at the state level.
The largest category, $4.7 million, is payments to monetary authorities and depository credit
intermediaries, including banks and other financial institutions, for items such as pension obligations.
Payments to insurance carriers, the second-largest non-labor expenditure category for Pennsylvania,
totaled $3.3 million. This category represents expenditures made to support employee health insurance
plans.
The professional and technical consulting services area is the next largest expenditure category,
reflecting the need for highly specialized skills and services at nuclear plants. In this case, the plant was
able to retain the services of specialists within the state of Pennsylvania for a large portion of this work.
Table 3-2. Three Mile Island 1 Expenditures in Pennsylvania
Amount
(in thousands of dollars)
Description
Monetary Authorities and Depository Credit Intermediaries
$4,719
Insurance Carriers
$3,266
Professional and Technical Consulting Services
$3,247
Employment Services
$1,727
Electrical Equipment Manufacturing
$1,553
Power Boiler and Heat Exchanger Manufacturing
$1,215
Search, Detection and Navigation Instruments
$833
Facilities Support Services
$807
Water and Sewage Systems
$632
Architectural and Engineering Services
$606
Other
$7,633
Subtotal
$26,238
Total Compensationa
$61,586
Total
a
$87,824
Total compensation includes wages, salaries and fringe benefits based on data provided by Exelon Corp.
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Economic Benefits of Three Mile Island Unit 1
Employment services is another large state-level expenditure, totaling $1.7 million. This sector
represents payments for specialized temporary labor during outages and major plant repairs. Other
important sectors include facilities support services (maintenance of plant grounds and buildings) and
purchases of plant equipment.
3.3 Plant Expenditures in the United States
Three Mile Island 1’s expenditures for products and services (including labor) purchased in the United
States totaled $176.6 million in 2004. Besides expenditures of $87.8 million in Dauphin County and
other areas of Pennsylvania, the plant spent $88.8 million elsewhere in the United States, largely for
specialized products and services unique to the nuclear industry.
National expenditures are detailed in Table 3-3. Total compensation ($62.2 million) remains the largest
category, representing 35 percent of the total. Compensation as a share of the U.S. total is lower
because plant employees live almost entirely in Pennsylvania (especially in Dauphin County), while
spending on products and non-labor services is concentrated outside the state.
Among the largest national spending categories are professional and technical consulting services and
architectural and engineering services. Purchases in these sectors are not unique to Three Mile Island,
and reflect the need for highly specialized skills and services at nuclear plants. These expenditures
reflect the plant’s commitment to safe operations and improved performance through high production
rates and capacity factors.
Table 3-3. Three Mile Island 1 Expenditures in the United States
Amount
(in millions of dollars)
Description
Professional and Technical Consulting Services
$21
Power Generation and Supply
$16.4
Federal Government
$11.4
Insurance Carriers
$10.5
Investigation and Security Services
$8.9
Monetary Authorities and Depository Credit Intermediaries
$7
Architectural and Engineering Services
$3.9
Facilities Support Services
$3.8
Manufacturing and Industrial Buildings Construction
$3.7
Electrical Equipment Manufacturing
$3.2
Other
$24.6
Subtotal
$114.4
a
Total Compensation
$62.2
Total
a
$176.6
Total compensation includes wages, salaries and fringe benefits based on data provided by Exelon Corp.
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Economic Benefits of Three Mile Island Unit 1
The second largest spending category at the national level is for power generation and supply. This
category represents payments to other utilities and power producers for purchased power and some
contracted services.
Payments to insurance carriers constitute another large spending category at the national level. This
sector includes not only expenditures for employee insurance plans, but insurance for plant capital as
well. Because of the considerable employee liability associated with an entity of Three Mile Island’s
size, underwriting by large, national insurance companies is necessary. A nuclear plant also requires
specialized insurance against risks related to situations, such as long-term shutdowns, decontamination
and decommissioning.
Expenditures for security services, another large national spending category, represent spending on
increased security equipment, systems and training. Nuclear plants across the country have increased
security staffing and heightened measures in an effort to bolster already strong security at the nation’s
nuclear power plants.
3.4 Local, State and Federal Taxes
In 2004, Three Mile Island 1 generated nearly $1 million in state and local tax revenue. The plant also
contributed $2.6 million to federal tax revenues.
Table 3-4. Taxes Paid by Three Mile Island 1
Description
Amount
(in thousands of dollars)
Federal Government
$2,612
State and Local Government
$943
Total Taxes
$3,555
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Economic Benefits of Three Mile Island Unit 1
3.5 Economic Impacts on Geographic Area
Summary economic impacts for each of the three geographic areas—Dauphin County, Pennsylvania
and the United States—are presented in Table 3-5. The three economic impact variables are:
•
•
•
output—the value of production of goods and services
labor income—the earnings of labor
employment—measured in jobs provided.
These economic impacts encompass both direct and secondary effects. The direct effects reflect the
industry sector and geographical distribution of Three Mile Island’s spending without any subsequent
spending effects.
The secondary effects include subsequent spending effects and are divided into two types: indirect and
induced. Indirect effects reflect how the plant’s spending patterns alter subsequent spending patterns
among suppliers. Induced effects reflect how changes in labor income influence the final demand for
goods and services, which then has an impact on all sectors producing basic, intermediate and final
goods and services.
The direct effects are based on the estimated value of the power production from the Three Mile Island
plant of $377.8 million for 2004. This is based on wholesale market values for the electricity from
Three Mile Island in the Mid-Atlantic Area Council market. The wholesale rate used was $51.95 per
megawatt-hour.
Table 3-5. Impact of Three Mile Island 1 on Local, State and National Economies
Direct
(in millions of dollars)
Secondarya
(in millions of dollars)
Total
Dauphin County
Output
$377.8
$5.8
$383.6
Labor Income
$22.8
$2
$24.8
Employment
208
67
275
$377.8
$86.1
$463.9
Labor Income
$61.6
$29.6
$91.2
Employment
528
848
$377.8
$464.4
$846.2
Labor Income
$62.2
$170.7
$232.9
Employment
532
4,281
Pennsylvania
Output
1,376
United States
Output
a
4,813
Secondary effects include indirect and induced impacts. Indirect impacts measure the effect of input suppliers on
expenditures by Exelon Corp., while induced impacts measure the effects produced by the change in household income
resulting from Exelon expenditures.
16
Economic Benefits of Three Mile Island Unit 1
This value is divided among consumer benefits, investor returns, plant purchases, salaries and taxes,
which reflects the total output of products and services associated with Three Mile Island. This total
includes the expenditures for products and services, including labor, itemized in Tables 3-1, 3-2
and 3-3.
In 2004, the plant employed 532 workers. That figure does not include security personnel. Workers
from Dauphin County filled almost 40 percent of those jobs. The direct labor income entries in
Table 3-5 reflect the geographic distribution pattern of Three Mile Island employment.
As Table 3-5 indicates, direct effects are the largest contributors to the total economic impacts for
Dauphin County and Pennsylvania. Secondary effects are the largest contributor to the total economic
impact in the United States.
A helpful way of measuring these secondary effects is by using multipliers, which show the ratio of the
plant’s “total economic impact” to its “direct economic impact” and can be measured for each
geographic region. Multipliers essentially measure how many dollars are created in the economy for
every dollar spent by the plant.
Three Mile Island 1’s direct impact for the local area is $378 million, while its total impact is
$384 million. Thus, the total output multiplier for Dauphin County is 1.02 (or $383 million divided by
$378 million). This indicates that for every dollar of output from the Three Mile Island plant, the
Dauphin County economy produces $1.02.
Using the same formula, the output multiplier is 1.23 for Pennsylvania and 2.24 for the United States.
This means for every dollar of Three Mile Island output, the state economy produces $1.23 and the U.S.
economy produces $2.24.
3.6 Economic Impacts on Local Industry
The plant’s economic impacts spread over nearly every economic sector. Although the direct effects are
concentrated in a few sectors, the secondary effects—and especially the induced effects—increase the
dispersion of economic impacts across other sectors. The most-affected sectors vary by geographic area.
Table 3-6 presents the 10 sectors most affected by the plant in Dauphin County, based on total output.
Since local salaries dominate plant spending, the impacts in the local area are most notable in areas that
cater to plant employees.
The most-affected sector in terms of total output is power generation and supply, which includes the
electricity produced by the plant. Thus, all direct effects are included in this sector. It is also the largest
sector, based on total output, in the state and national economies, as shown in Tables 3-7 and 3-8,
respectively.
The next most-affected sector is housing values. This is not a traditional business/industry sector, so it
had no impact on labor income or employment. Instead, it is a special sector developed by the U.S.
Department of Commerce that estimates what homeowners would pay in rent if they rented, rather than
owned, their homes. In essence, it creates an industry from owning a home.
The sole product (or output) of this industry is home ownership, purchased entirely by personal
consumption expenditures from household income. In effect, this sector captures increases in housing
values caused by increased labor resulting from the plant.
17
Economic Benefits of Three Mile Island Unit 1
The other sectors most affected by Three Mile Island relate to goods and services required by the
plant’s large employment base, including wholesalers, hospitals, doctor and dentist practices, and
restaurants. Indirect spending by plant employees boosts the sales and work forces of these industries,
typically operated by local small-business owners.
Table 3-6. Three Mile Island 1 Impacts on the Most-Affected Industries in
Dauphin County
Labor Income
(in thousands
of dollars)
Employment
$377,949
$22,836
208
Owner-Occupied Dwellings
$569
$0
—
Furniture and Home Furnishings Stores
$509
$216
8
State and Local Government
$503
$85
2
Wholesale Trade
$266
$108
2
Real Estate
$225
$34
1
Food/Beverage Establishments
$210
$77
6
Hospitals
Offices of Physicians, Dentists and
Other Health Care Professionals
Insurance Carriers
$196
$97
2
$174
$117
3
$140
$37
1
Other
$2,815
$1,188
42
Total
$383,566
$24,795
275
Industry Description
Power Generation and Supply
Output
(in thousands
of dollars)
3.7 Economic Impacts on State Industry
Table 3-7 uses the same sectors applied in Table 3-6 to illustrate the plant’s economic impact on
the state of Pennsylvania. Again, the power generation and supply sector and housing values are the
most-affected categories.
The other entries in Table 3-7 are similar to those in Dauphin County, and include additional sectors,
such as banks.
18
Economic Benefits of Three Mile Island Unit 1
Table 3-7. Impact of Three Mile Island 1 on the Most-Affected Industries
in Pennsylvania
Industry Description
Power Generation and Supply
Output
(in millions
of dollars)
$379.5
Labor Income
(in millions
of dollars)
Employment
$61.9
531
Owner-Occupied Dwellings
$7.0
$0
—
State and Local Government
Monetary Authorities and
Depository Credit Intermediaries
Wholesale Trade
$5.0
$0.9
22
$5.0
$1.2
25
$3.7
$1.5
26
Real Estate
Offices of Physicians, Dentists and
Other Health Care Professionals
Food/Beverage Establishments
$3.3
$0.5
19
$3.4
$2.3
38
$3.1
$1.1
80
Hospitals
$3.0
$1.4
31
Insurance Carriers
$2.8
$0.8
14
Other
$48.1
$19.6
590
Total
$463.9
$91.2
1,376
3.8 Economic Impacts on U.S. Industry
Table 3-8 illustrates Three Mile Island 1’s economic impact on the United States. Again, power
generation and housing are among the most-affected sectors.
The 10 most-affected sectors in the United States are similar to those for Dauphin County and
Pennsylvania. The main difference is in the professional and technical consulting services sector.
Impacts for this category are derived from direct expenditures of the plant, rather than indirect or
induced effects.
19
Economic Benefits of Three Mile Island Unit 1
Table 3-8. Three Mile Island 1 Impacts on the Most-Affected Industries in the
United States
Industry Description
Output
(in millions
of dollars)
Power Generation and Supply
Labor Income
(in millions
of dollars)
Employment
$395.4
$65.9
561
Owner-Occupied Dwellings
$22.2
$0
—
Professional and Technical Consulting Services
$22.2
$5.8
140
Insurance Carriers
$21.0
$6.0
103
Real Estate
Monetary Authorities and Depository
Credit Intermediaries
Wholesale Trade
$19.3
$2.9
115
$17.4
$4.3
80
$16.8
$6.7
116
Federal Government
$11.6
$11.6
139
Food/Beverage Establishments
Offices of Physicians, Dentists and
Other Health Care Professionals
Other
$11.2
$4.3
283
$10.5
$7.1
113
$298.6
$118.3
3,163
Total
$846.2
$232.9
4,813
20
Economic Benefits of Three Mile Island Unit 1
3.9 Tax Impacts
Three Mile Island 1’s tax impacts extend beyond the tax revenue generated directly by the plant. Plant
spending has direct impacts on income and value creation, which in turn affects taxes paid on that
income and value. Similarly, the secondary effects of plant purchases on other products and services,
in addition to the increased economic activity itself, lead to additional income and value creation, as
well as additional tax revenues. These additional or “induced” effects on tax payments, presented in
Table 3-9, are much larger than the taxes generated directly.
Three Mile Island 1 is responsible for an estimated $5.7 million in state and local tax revenue, either
directly or indirectly. Much of the indirect expenditures result from additional property tax revenue
created by the large number of employees at the plant.
At the federal level, Three Mile Island’s operations resulted in $43.2 million in tax revenue, mostly from
income and Social Security taxes.
Table 3-9. Total Tax Impacts a of Economic Activity Induced by Three Mile Island 1
Amount
(in millions of dollars)
Description
Federal Government
Payroll Tax
$20.7
Corporate Tax
$4.6
Personal Tax
$15.1
Business Tax
$2.8
Total Federal Government
$43.2
State and Local Government
Payroll Tax
$0.3
Corporate Tax
$0.2
Personal Tax
$0.8
Business Tax
$4.4
Total State and Local Government
$5.7
Total Taxes
a
$48.9
The total tax impact includes taxes paid by Three Mile Island 1 and other entities as a result of the economic activity created
by expenditures made by the plant.
21
Economic Benefits of Three Mile Island Unit 1
3.10 Summary
Three Mile Island 1 has substantial economic impacts on Dauphin County and Pennsylvania. When
compared with their respective economies, those relative impacts are highest for Dauphin County, next
highest for Pennsylvania and lowest for the United States.
Like other nuclear plants, Three Mile Island buys many specialized products and services not available
in local and state economies. National and international markets typically provide these products and
services.
The state and local economic effects of the plant are substantial, largely because of the buying power
created by Three Mile Island’s high wages, salaries and benefits. In turn, plant employees buy goods
and services provided locally. This spending supports many small businesses in the area.
22
Economic Benefits of Three Mile Island Unit 1
Section 4: Additional Benefits Provided by Three Mile Island
Besides the economic benefits that Three Mile Island 1 contributes to central Pennsylvania in the form
of jobs, income and taxes, the plant also contributes to the local community in ways difficult to capture
with these measures. Although most businesses provide contributions to their communities, nuclear
power plants tend to be significant contributors to their surrounding community, because of the large
number of highly skilled and well-educated employees.
4.1 Introduction
Three Mile Island 1 has a long tradition of community involvement. Because of the plant’s size and the
breadth of its resources, Three Mile Island and its employees are able to provide additional benefits to
the nearby community beyond the economic impact of the plant. Community fire, ambulance and
emergency management services are the primary beneficiaries of the plant’s outreach efforts. Each
year, Three Mile Island 1 and its employees contribute more than $100,000 to area charities.
4.2 Community Involvement
Three Mile Island 1 takes pride in being an integral part of the central Pennsylvania community. Plant
employees are active in local organizations ranging from scout groups to volunteer firefighters. In
addition to the time its employees spend volunteering in the community, AmerGen, the plant’s owner,
contributes more than $20,000 each year to various local groups. Three Mile Island is the prime
sponsor of the Middletown Music Fest, a much-anticipated event held annually at Middletown High
School. The plant also sponsors two TMI science and technology scholarships for graduating
Middletown High School seniors with an interest in science and math.
The plant’s corporate giving philosophy is to donate to a broad range of interests in order to spread its
partnerships as broadly as possible. For that reason, the plant supports more than 25 different charitable
organizations each year—ranging from health-related causes to Little League baseball.
Three Mile Island 1 is one of the largest private contributors to the Greater Middletown Economic
Development Corp. Three Mile Island’s site vice president serves on the development group’s board.
The organization is dedicated to the economic vitality of the Middletown area.
In addition to the $20,000 contributed to various community groups, the plant and its employees
contribute about $60,000 each year to the Capital Region United Way.
While providing monetary donations is important, Three Mile Island 1 gives back to the community in
other ways. For example, each year plant employees donate more than 200 pints of blood to the Central
Pennsylvania Blood Bank.
4.3 Fire, Ambulance and Emergency Services
Three Mile Island 1 has created a special relationship with the many local fire, ambulance and
emergency management organizations. During the past five years, the plant has contributed $100,000
to about a dozen local fire and ambulance companies. The station also made in-kind donations in the
form of self-contained breathing equipment, vehicles and other fire and emergency equipment. Other
23
Economic Benefits of Three Mile Island Unit 1
in-kind donations include Three Mile Island 1 engineers working with Londonderry Township Fire Co.
officials in designing and drafting blueprints for a new fire station.
More than a dozen local fire companies undergo free training each year at Three Mile Island’s state-ofthe-art burn facility. This much-needed resource provides firefighting personnel with realistic training
in extinguishing fires and supports the need for firefighters to remain qualified for their duties.
Three Mile Island 1 provides specialized emergency management training to the 36 municipalities
located within a 10-mile radius of the plant. The station employs a full-time professional to work with
community emergency management personnel in the development of all-hazard emergency plans.
These plans help protect public health and safety in the event of an emergency and were used during
hazardous weather and chemical spills not associated with the power plant.
4.4 Environmental Protection
Three Mile Island 1’s principal contribution to improving the environment in Pennsylvania is through
the generation of electricity without emitting any air pollution. Nuclear plants do not emit air pollution
or greenhouse gases as part of their operations, and all of a plant’s solid wastes are contained and
constantly monitored. If a comparable coal- or oil-fired plant had been built at the Three Mile Island
site instead of a nuclear plant, more than 200 metric tons of carbon dioxide would have been emitted to
the air each year. A natural gas plant would have emitted about 150 metric tons of carbon dioxide.
Three Mile Island 1 operates in harmony with the environment. Many species of animals and rare birds
find the island to be an attractive place to live. A pair of Peregrine falcons has even made the Three
Mile Island reactor building a home for the past three years, successfully bearing new chicks each
spring. Additionally, waterways around the island serve as popular recreational and fishing areas.
4.5 Organizations Supported by Three Mile Island 1
The plant supports nearly 30 organizations that provide a wide range of services to central
Pennsylvanians. These groups include:
High On Kids (Lower Dauphin School District)
Liberty Steam Fire Co.
Londonderry Ambulance Co.
Londonderry Township Volunteer Fire Co.
Lower Swatara Fire Co.
Lower Swatara Youth Athletic Association
Middletown High School
Middletown High School Science
and Technology Scholarship
Middletown Music Fest
Middletown Rescue Fire Co.
Northwest Emergency Management Services
Rheems Athletic Association
South Central Emergency Management Services
Union Hose Fire Co.
American Foundation for Suicide Prevention
Bainbridge Fire Co.
Capital Region United Way
Cedar Crest Soccer Club
Children’s Miracle Network
Conoy Township Youth Athletic Association
Dillsburg Youth Baseball
Elizabethtown Fire Co.
Fairview Township Community Day
Four Diamonds Fund
Greater Middletown Economic
Development Corp.
Harrisburg Hospital
Harrisburg Parks Partnership
Hershey Medical Center
24
Economic Benefits of Three Mile Island Unit 1
Section 5: Nuclear Industry Trends
The U.S. nuclear energy industry has steadily improved performance and cost, while also becoming a
model of industrial safety.
Total electricity production for U.S. nuclear power plants reached a record 788.6 billion kilowatt-hours
in 2004, or about 20 percent of America’s electricity production. In Pennsylvania, nuclear power
generates 36 percent of the state’s electricity.
Power plant performance is measured by capacity factor, which compares the amount of electricity
actually produced by a plant with the maximum production achievable. U.S. nuclear power plants
achieved an average capacity factor of 90.5 percent in 2004. At the same time, production costs for
those plants have been among the lowest of any baseload fuel source.
5.1 Nuclear Industry Performance
U.S. nuclear power plants have increased their output and improved their performance significantly
over the past 10 years. Since 1990, the industry has increased total output equivalent to that of 26 new,
large nuclear plants. This increase in output occurred without building any new nuclear plants.
Figure 5-1.
U.S. Nuclear Industry Net Electricity Generation
(37% increase from 1990 to 2004)
800
788.6
Billion kilowatt-hours
750
700
650
600
550
500
450
400
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
Source: Energy Information Administration
Meanwhile, overall capacity factors for U.S. nuclear power plants increased dramatically over the past
decade, reaching about 90.5 percent in 2004. By contrast, the industry’s average capacity factor was
60 percent in the late 1980s. One of the key reasons for the increased capacity factor has been the
shortening of refueling outage times.
25
Economic Benefits of Three Mile Island Unit 1
In the past 10 years, the
durations of refueling
outages have been
declining. In 1990, the
average refueling outage
took 105 days to complete.
Figure 5-2.
Nuclear Industry Average Capacity Factors
(1990-2004)
100
95
Capacity Factor (%)
Nuclear plants need to
shut down to refuel
approximately every 18 to
24 months. Refueling
represents one of the major
determinants of nuclear
plant availability.
90.5
90
85
80
75
70
65
60
55
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
By 2004, this number
Source: Energy Information Administration
declined to an average of
44 days, and companies continue to apply best practices to reduce further this average length of
refueling. The record for the shortest outage is 14.67 days for a boiling water reactor and 15.67 days
for a pressurized water reactor.
5.2 Cost Competitiveness
Along with increasing output, the U.S. nuclear industry has continued to decrease the cost of its
operations. In 2004, nuclear power had a production cost of 1.68 cents per kilowatt-hour. In the past
decade, nuclear production costs have dropped by about one-third because of the increased capacity
factor of U.S. plants. Since most nuclear plant costs are fixed, greater electricity production lowers
costs. However, nuclear plants also have taken steps to reduce their total cost through improved work
processes.
Figure 5-3. U.S. Electricity Production Costs
(1995-2004 in constant 2004 cents per kilowatt-hour)
$8.00
$7.00
Gas 5.87
$6.00
Oil 5.39
$5.00
$4.00
$3.00
Coal 1.92
$2.00
Nuclear 1.68
$1.00
$0.00
1995
1996
1997
1998
1999
2000
Source: Energy Velocity, Electric Utility Cost Group
26
2001
2002
2003
2004
Economic Benefits of Three Mile Island Unit 1
Table 5-1. Wholesale Electricity Prices by Region
2004 Average 24/7 Power Prices
(in cents per kilowatt-hour)
Region
Northeast/Mid-Atlantic
5.31
Southeast
4.62
Midwest
4.22
South Central
4.88
Northwest
4.62
Southwest
4.92
Because of low production costs and excellent safety performance, nuclear plants are highly
competitive in today’s energy markets. Ultimately, the primary test of nuclear energy’s
competitiveness is how well it performs against market prices. In this respect, nuclear energy is highly
competitive. The average production cost at the nation’s 103 reactors was 1.68 cents per kilowatt-hour
in 2004, lower than the average price in all regional markets. Nuclear energy also is competitive with
futures market prices, one of the best ways to judge what prices will be in the year ahead.
Nuclear plants provide a unique degree of price stability for two reasons. First, production costs for
nuclear plants are composed of costs not associated with fuel. Fuel markets tend to be volatile, so the
production costs of generation sources tied to fuel expenses are highly volatile, as they swing with
variations in the market. Uranium fuel represents only 25 percent of the production cost of nuclear
energy, but it makes up 75 percent to
90 percent of the
cost of natural gas-,
Figure 5-4. Monthly Fuel Cost to Electric Generators
coal- and petroleum(in 2004 cents per kilowatt-hour from 1995 to 2004)
fired generation.
Second, nuclear fuel
14
prices are much
12
more stable than
that of fossil fuels,
10
particularly natural
gas and petroleum.
8
Because of its
stable, low
6
GAS 6.0
production cost,
OIL-H 4.8
nuclear energy can
4
help mitigate large
electricity price
2
COAL 1.5
swings.
URANIUM .5
0
1995
1996
1997
1998
Source: Energy Velocity
27
1999
2000
2001
2002
2003
2004
Economic Benefits of Three Mile Island Unit 1
5.3 Industry Safety
The nuclear industry’s recent performance and cost achievements occurred in an era of outstanding
safety at U.S. nuclear plants. In 2004, the nuclear energy industry was close to meeting all 2005 safety
goals set by the Institute of Nuclear Power Operations (INPO) and the World Association of Nuclear
Operators (WANO). These entities track safety and performance data in 10 important areas.
One key indicator tracked by INPO and WANO is the number of unplanned automatic plant shutdowns.
The U.S. industry has made dramatic improvements in the number of unplanned automatic shutdowns,
dropping from a median of 7.3 shutdowns per reactor in 1980 to 0 in 2004.
Other safety and performance indicators tracked by the Nuclear Regulatory Commission confirm
the excellent safety performance of U.S. nuclear plants. The NRC tracks data on the number of
“significant events” at each nuclear plant. (A significant event is any occurrence that challenges
a plant’s safety system.) The average number of significant events per reactor has declined from
0.77 per year in 1988 to 0.02 in 2004.
In addition to safe operations, U.S. nuclear plants continue to improve their already high levels of
worker safety. According to NRC data, radiation exposure to workers (measured in rems) decreased
from an average of about 1 rem per year in 1973 to 0.16 rem per year in 2003. Both the historical and
current doses per employee are far below the regulatory limit of 5 rem per year.
Figure 5-5. Significant Events: Annual Industry Average
(Number of events per reactor 1990-2004)
0.3
0.26
0.3
0.21
0.2
0.17
0.2
0.10
0.08
0.1
0.04
0.1
0.05
0.03
0.04
0.02
0.02
0.02
03
04
0.0
93
94
95
96
97
Source:
Regulatory
Commission
Information
Digest
Source:Nuclear
Nuclear
Regulatory
Commission
Information
98
99
Digest
28
00
01
02
Economic Benefits of Three Mile Island Unit 1
Figure 5-6. Nuclear's Superior Safety Record (2003)
Nuclear Industry's Industrial Safety Accident Safety Rates Compared to Other Industries
3.8
Industrial Accident Safety Rate*
4.0
3.5
3.0
2.5
2.0
2.0
1.5
1.0
0.5
0.25
0.0
Nuclear
Electric Utilities
Manufacturing
* Number of accidents resulting in lost work, restricted work or job transfer per 200,000 worker-hours
Sources: Nuclear (World Association of Nuclear Operators); others (U.S. Bureau of Labor Statistics). Data updated April 2005.
General worker safety also is excellent at U.S. nuclear power plants—far safer than in the U.S.
manufacturing sector. WANO and the U.S. Bureau of Labor Statistics provide information on the
industrial accident safety rate. This statistic measures the lost workday accidents or fatalities per
200,000 worker-hours. The nuclear industry has improved its industrial accident safety rate from
0.46 in 1996 to 0.25 in 2003. By comparison, the U.S. manufacturing industry had an industrial
accident safety rate of 3.8.
5.4 Current Industry Events
The excellent economic and safety performance of U.S. nuclear plants has increased interest in nuclear
energy by the electric utility industry, the financial community and policymakers. This is evidenced by
the increasing number of plants seeking license renewals from the NRC.
Originally licensed to operate for 40 years, nuclear plants can safely operate for longer periods. The
NRC granted the first 20-year license renewal to the Calvert Cliffs plant in Maryland in 2000. As
of September 2005, 35 plants have received license extensions, and 40 reactors have either submitted
applications or formally announced that they will seek to renew their licenses. License renewal is an
attractive alternative to building new electric capacity because of nuclear energy’s low production costs
and the return on investment provided by extending a plant’s operational life.
Besides relicensing current plants, interest recently has increased in building new nuclear plants. Three
companies—Entergy, Dominion Energy and Exelon—have submitted early site permit applications to
the NRC to test the agency’s permitting process for new reactor sites.
29
Economic Benefits of Three Mile Island Unit 1
Three groups of energy companies are collaborating with the U.S. Department of Energy to test a new
licensing process for building and operating an advanced nuclear reactor called a combined
construction and operating license. The effort is part of DOE’s Nuclear Power 2010 program,
established to foster the development of next-generation nuclear power plants. Additionally, several
individual companies have announced intentions to file combined construction and operating license
applications with the NRC in the next several years.
30
Economic Benefits of Three Mile Island Unit 1
Section 6: Economic Impact Analysis Methodology
The methodology used to estimate the economic impacts of the Three Mile Island Nuclear Station
is called input/output analysis. Several operational input/output models are available in the
marketplace. The market leaders are Impact Analysis for Planning (IMPLAN), Regional Economic
Models Inc. and Regional Input-Output Modeling System II. The study’s authors selected the IMPLAN
model primarily because of the availability of the model and data sets. Other important factors were its
relevance to the particular application, as well as its transparency and ease of use.
This section presents typical applications of input/output analysis and explains the methodology and its
underpinnings. It also describes how Three Mile Island data and the IMPLAN model estimate the local,
state and national economic impacts of the plant’s operation.
6.1 Use of Input/Output Models
Input/output models capture input, or demand, and output, or supply, interrelationships for detailed
business, industry and government sectors in a geographic region. They also capture the consumption
of goods and services for final demand by these sectors and by the household sector.
The basic geographic region is a county, but model results can be developed at the multi-county, state,
multi-state and national levels. These results are particularly useful in examining the total effects of an
economic activity or a change in the level of that activity.
These models typically are used when the following key questions need to be addressed:
• How much spending does an economic activity (such as a power plant) bring to a region
or local area?
• How much of this spending results in sales growth by local businesses?
• How much income do local businesses and households generate?
• How many jobs does this activity support?
• How much tax revenue does this activity generate?
These models also are useful in addressing related questions, such as the geographic and industry
distribution of economic impacts. Typical applications of these models include facility or military base
openings and closings, transportation or other public infrastructure investments, industrial recruitment
and relocation, and tourism.
6.2 Overview of the Input/Output Methodology
Input/output models link various sectors of the economy—e.g., agriculture, construction, government,
households, manufacturing, services and trade—through their respective spending flows in a reference
year. These linkages include geographic linkages, primarily at national, state and county levels.
Because of these linkages, the impact of an economic activity in any sector or geographic area on other
sectors and areas can be modeled. These impacts can extend well beyond the sector and area in which
the original economic activity is located. They include not only the direct, or initial, effects of the
economic activity, but also the secondary, or “ripple,” effects that flow from this activity.
31
Economic Benefits of Three Mile Island Unit 1
Direct effects are analogous to the initial “splash” made by the economic activity, and ripple effects are
the subsequent “waves” of economic activity (new employment, income, production and spending)
triggered by the splash. A full accounting of the splash must include the waves, as well as the splash
itself.
The sum of the direct and ripple effects is the total effect, and the ratio of the total effect to the direct
effect is the “total effect multiplier,” or simply the multiplier effect. IMPLAN can develop multipliers
for any of the model outputs, such as earned income, employment, industry output and total income
(which includes the effect of transfers between institutions).
Multipliers also can be developed for any industry/business sector or geographic area in the model.
Multipliers for a county are smaller than for a larger area, such as the state in which the county is
located, because some spending associated with an economic activity migrates from the small area into
the larger area. At the local area level, multipliers are larger if the local area produces the types of
goods and services required by the plant.
Secondary effects include two components—indirect and induced effects—modeled separately within
input/output models. Indirect effects are those influencing the supply chain that feeds into the
business/industry sector in which the economic activity is located. For example, when Three Mile
Island buys a hammer for $5, it contributes directly to the economy.
Consequently, the company that makes the hammer has to increase its purchases of steel and wood to
maintain its inventory, thus increasing output in the steel and wood industries. These industries will
then have to purchase more inputs for their production processes, and so on. The result will be an
economic impact that is greater than the $5 initially spent for the hammer.
The increased income of plant employees and other regional workers leads to higher spending at the
household level. That increased spending is the induced effect. To illustrate, when Three Mile Island
pays $5 for a hammer, a portion of the $5 pays the wages of employees at the company that makes the
hammer. This portion contributes to labor income, which provides an additional contribution to the
economy through its effects on household spending for goods and services.
There also will be a contribution from the effect of this purchase on labor income in the wood and steel
industries, and on the resulting household spending on goods and services. Three Mile Island’s wage
and salary expenditures at the plant create induced effects as well, and they occur primarily in each
plant’s host and surrounding counties.
As with any model, input/output models incorporate some simplifying assumptions to make them
tractable. There are several key simplifying assumptions in input/output models.
Input/output models assume a fixed commodity input structure. In essence, the “recipe” for producing
a product or service is fixed, and there is no substitution of inputs, either of new inputs (which were not
in the mix previously) for old inputs, or among inputs within the mix.
Input substitution does not occur if technical improvements in some inputs make them relatively more
productive. Nor does input substitution occur if there are relative price changes among inputs. Use of
any of these types of substitutions might dampen the multiplier effects, especially for larger geographic
areas.
32
Economic Benefits of Three Mile Island Unit 1
Another key simplifying assumption is constant returns to scale. A doubling of commodity or service
output requires a doubling of inputs, and a halving of commodity or service output requires a halving of
inputs. There is no opportunity for input use relative to commodity or service production levels to
change, as those levels expand or contract, so there are no opportunities for either economies or
diseconomies of scale. This will not dramatically alter the overall results as long as the economic
activity whose effects are being modeled is not large relative to the rest of the sectors.
In other words, the models assume that for every dollar of output, the same dollar amount is required
for the various input categories. Returning to the hammer example, if a $5 hammer requires $3 of steel,
then two hammers would require $6 of steel.
Although that works for steel and hammers, some inputs do not vary directly with output. For instance,
if an oil refinery’s efficiency and output increases, a corresponding increase in personnel operating the
plant is unlikely. The constant-return-to-scale assumption considers such differences and is necessary
for accurate modeling.
Input/output models assume no input supply or commodity/service production capability constraints.
This simplifying assumption relates in part to the constant-return-to-scale assumption, for if there were
supply constraints, diseconomies of scale likely would result. As in the case of the constant returns to
scale assumption, this “no supply constraints” assumption is not a major concern as long as the
economic activity of interest is not large relative to the rest of the sectors.
To illustrate, this assumption presupposes that a hammer manufacturer would purchase all the steel for
the same price. If not, doubling the number of hammers sold could mean that the dollar value of the
steel might more than double if the manufacturer had to buy more steel at a higher price. This would
violate the constant-return-to-scale assumption, which simplifies modeling.
Homogeneity, another key simplifying assumption, characterizes firms and technologies within sectors
as very similar. Although the model allows some editing of its sector files to characterize specialized
firms, there is no ability to reflect full diversity of firms within sectors.
6.3 The IMPLAN Model and Its Application to Three Mile Island
The U.S. Department of Agriculture’s Forest Service developed IMPLAN, in cooperation with the
Federal Emergency Management Agency and the U.S. Department of the Interior’s Bureau of Land
Management, to assist in land and resource management planning. In use since 1979, the Minnesota
IMPLAN Group Inc. supports the model.
The IMPLAN system consists of two components: the software and the database. The software
performs the necessary calculations, using the study area data, to create the models. It also provides an
interface for the user to change a region’s economic description, create impact scenarios and introduce
changes into the local model. A user’s guide provided by the Minnesota IMPLAN Group describes the
software.
The IMPLAN software serves three functions: data retrieval, data reduction and model development,
and impact analyses.
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Economic Benefits of Three Mile Island Unit 1
The IMPLAN database consists of two major parts:
•
•
national technology matrices
estimates of regional data for institutional demand and transfers, value added, industry output,
and employment for each county in the United States, as well as state and national totals.
The model’s data and account structure closely follow the accounting conventions used in the
input/output studies of the U.S. economy by the Department of Commerce’s Bureau of Economic
Analysis. The comprehensive and detailed data coverage of the entire United States by county, along
with the ability to incorporate user-supplied data at each stage of the model-building process, provides a
high degree of flexibility in terms of both geographic coverage and model formulation.
In applying the IMPLAN model to the plant, Exelon Corp. provided three basic types of data: purchase
order expenditures by purchase order code, employee compensation expenditures and tax payment data
for 2004.
The purchase order data were mapped to IMPLAN’s 528 sector codes in two ways. First, by
identifying the largest contracts at each geographic level and assigning them an industrial classification
code within IMPLAN sector codes. For the remaining expenditures, the data were mapped into
IMPLAN codes based on average distributions obtained through detailed studies of six nuclear reactors.
These purchase order data also were mapped into IMPLAN based on the areas where these purchases
were made.
Then an estimate of revenues from electricity sales into the wholesale market in 2003 was used to
augment the purchase order and compensation data. This augmentation was necessary because
purchase orders and compensation do not reflect all the economic value of Three Mile Island, while
total output (approximated by total revenues) better reflects the full economic impacts of the plant.
Revenue estimates were based on kilowatt-hours sold and the average wholesale price for electricity
sold by Three Mile Island during 2004. The estimated revenues were above the expenditure data
provided by Three Mile Island, indicating a nuclear generation profit margin that was incorporated into
IMPLAN as profits associated with the operation of the plant.
These data were then incorporated into the IMPLAN model, which combined specifics of the local
economy with data on economic activity of Three Mile Island to provide estimates of the plant’s total
impacts.
Once the data sets were complete, IMPLAN developed the economic impact estimates detailed in this
report.
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