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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
4
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 Islands
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 Pennsylvanias economic output by $86.1 million,
including $5.8 million in Dauphin County.
Adding the direct value of the plants 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 Countys 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 plants 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 Islands 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 Islands 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 impactssuch as people employed by the plant, expenditures within the
community and corporate tax paymentsand 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.
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 plants 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 FirstEnergys activity at Three Mile
Island.
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Economic Benefits of Three Mile Island Unit 1
4
Economic Benefits of Three Mile Island Unit 1
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.
100%
80%
60%
20%
0%
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
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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 2004about
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.
Three Mile Island 1s low production costs keep wholesale electricity prices affordable in Pennsylvania.
Although Three Mile Islands 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. Full-
time 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 countys employed work force.
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
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Economic Benefits of Three Mile Island Unit 1
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
Three Mile Islands 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.)
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 IMPLANs 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
Labor accounted for the largest expenditure made in Dauphin County, with total compensation reaching
$22.8 million, approximately 90 percent of Three Mile Island 1s expenditures in the county. A large
portion of the plants labor expenditures (employee benefits, salaries and wages) stay home in the
county. As expected, the countys 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 plants 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
Table 3-2 provides details on the plants 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.
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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.
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 plants commitment to safe operations and improved performance through high production
rates and capacity factors.
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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 Islands
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 nations
nuclear power plants.
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Economic Benefits of Three Mile Island Unit 1
These economic impacts encompass both direct and secondary effects. The direct effects reflect the
industry sector and geographical distribution of Three Mile Islands 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 plants 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 Secondarya
(in millions of dollars) (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
Pennsylvania
Output $377.8 $86.1 $463.9
Labor Income $61.6 $29.6 $91.2
Employment 528 848 1,376
United States
Output $377.8 $464.4 $846.2
Labor Income $62.2 $170.7 $232.9
Employment 532 4,281 4,813
a
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.
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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
plants 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 1s 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.
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.
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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
plants 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.
The other entries in Table 3-7 are similar to those in Dauphin County, and include additional sectors,
such as banks.
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Economic Benefits of Three Mile Island Unit 1
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.
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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
Output Labor Income
(in millions (in millions
Industry Description of dollars) of dollars) Employment
Power Generation and Supply $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 $19.3 $2.9 115
Monetary Authorities and Depository
$17.4 $4.3 80
Credit Intermediaries
Wholesale Trade $16.8 $6.7 116
Federal Government $11.6 $11.6 139
Food/Beverage Establishments $11.2 $4.3 283
Offices of Physicians, Dentists and
$10.5 $7.1 113
Other Health Care Professionals
Other $298.6 $118.3 3,163
Total $846.2 $232.9 4,813
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Economic Benefits of Three Mile Island Unit 1
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 Islands 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
Description (in millions of dollars)
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 $48.9
a
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.
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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 Islands high wages, salaries and benefits. In turn, plant employees buy goods
and services provided locally. This spending supports many small businesses in the area.
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Economic Benefits of Three Mile Island Unit 1
4.1 Introduction
Three Mile Island 1 has a long tradition of community involvement. Because of the plants 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 plants outreach efforts. Each
year, Three Mile Island 1 and its employees contribute more than $100,000 to area charities.
The plants 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 yearranging 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 Islands site vice president serves on the development groups 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.
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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 Islands state-of-
the-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.
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.
American Foundation for Suicide Prevention High On Kids (Lower Dauphin School District)
Bainbridge Fire Co. Liberty Steam Fire Co.
Capital Region United Way Londonderry Ambulance Co.
Cedar Crest Soccer Club Londonderry Township Volunteer Fire Co.
Childrens Miracle Network Lower Swatara Fire Co.
Conoy Township Youth Athletic Association Lower Swatara Youth Athletic Association
Dillsburg Youth Baseball Middletown High School
Elizabethtown Fire Co. Middletown High School Science
Fairview Township Community Day and Technology Scholarship
Four Diamonds Fund Middletown Music Fest
Greater Middletown Economic Middletown Rescue Fire Co.
Development Corp. Northwest Emergency Management Services
Harrisburg Hospital Rheems Athletic Association
Harrisburg Parks Partnership South Central Emergency Management Services
Hershey Medical Center Union Hose Fire Co.
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Economic Benefits of Three Mile Island Unit 1
Total electricity production for U.S. nuclear power plants reached a record 788.6 billion kilowatt-hours
in 2004, or about 20 percent of Americas electricity production. In Pennsylvania, nuclear power
generates 36 percent of the states 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.
Figure 5-1.
U.S. Nuclear Industry Net Electricity Generation
(37% increase from 1990 to 2004)
800 788.6
750
700
Billion kilowatt-hours
650
600
550
500
450
400
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
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 industrys 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.
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Economic Benefits of Three Mile Island Unit 1
Figure 5-2.
Nuclear plants need to
shut down to refuel Nuclear Industry Average Capacity Factors
approximately every 18 to 100 (1990-2004)
24 months. Refueling 95
represents one of the major 90.5
90
determinants of nuclear
$8.00
$7.00
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 2001 2002 2003 2004
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Economic Benefits of Three Mile Island Unit 1
Because of low production costs and excellent safety performance, nuclear plants are highly
competitive in todays energy markets. Ultimately, the primary test of nuclear energys
competitiveness is how well it performs against market prices. In this respect, nuclear energy is highly
competitive. The average production cost at the nations 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
more stable than 12
that of fossil fuels,
particularly natural 10
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Economic Benefits of Three Mile Island Unit 1
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 plants 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.
0.2
0.10
0.1 0.08
0.05
0.04 0.04
0.1 0.03
0.02 0.02 0.02
0.0
93 94 95 96 97 98 99 00 01 02 03 04
Source:
Source:Nuclear
NuclearRegulatory Commission
Regulatory Information
Commission Digest
Information Digest
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Economic Benefits of Three Mile Island Unit 1
4.0 3.8
3.5
Industrial Accident Safety Rate*
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 plantsfar 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.
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 energys low production costs
and the return on investment provided by extending a plants operational life.
Besides relicensing current plants, interest recently has increased in building new nuclear plants. Three
companiesEntergy, Dominion Energy and Exelonhave submitted early site permit applications to
the NRC to test the agencys permitting process for new reactor sites.
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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 DOEs 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.
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Economic Benefits of Three Mile Island Unit 1
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 plants operation.
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.
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.
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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 componentsindirect and induced effectsmodeled 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 Islands wage
and salary expenditures at the plant create induced effects as well, and they occur primarily in each
plants 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.
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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 refinerys 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.
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 Agricultures Forest Service developed IMPLAN, in cooperation with the
Federal Emergency Management Agency and the U.S. Department of the Interiors 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 regions economic description, create impact scenarios and introduce
changes into the local model. A users 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 models data and account structure closely follow the accounting conventions used in the
input/output studies of the U.S. economy by the Department of Commerces 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 IMPLANs 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 plants total
impacts.
Once the data sets were complete, IMPLAN developed the economic impact estimates detailed in this
report.
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