Economic Benefits of Three Mile Island Unit 1. An Economic Impact Study by the Nuclear Energy Institute

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1 Economic Benefits of Three Mile Island Unit 1 An Economic Impact Study by the Nuclear Energy Institute

2 Economic Benefits of Three Mile Island Unit 1 An Economic Impact Study by the Nuclear Energy Institute November

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4 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

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6 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 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 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. 1

7 Besides its economic benefits, the plant generated about 7.3 million megawatt-hours of electricity in 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. 2

8 Section 1: Introduction This economic impact study, conducted by the Nuclear Energy Institute 1 (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. 3

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10 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 Reactor Type Pressurized water reactor Three Mile Island 1, an 856-megawatt pressurized water reactor, began commercial operation in 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. 120% Figure 2-1. Three-Year Average Capacity Factors 100% 80% 60% 40% Three Mile Island Industry 20% 0% Sources: Energy Information Administration, Nuclear Regulatory Commission 5

11 Figure 2-2. Three Mile Island Nuclear Station and Surrounding Area 6

12 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 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 Generation Source (in cents per kilowatt-hour) (in million megawatt-hours) Three Mile Island Nuclear Coal Natural Gas Oil Region Total (Including Three Mile Island) 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. 7

13 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 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 Three Mile Island 1 Percentage of Employed Work Force City/County Total a Employed Work Force Permanent Average Average County Employees b Earnings c Earnings c Dauphin % $67, ,800 $53,400 Lancaster % $77, ,700 $53,600 Lebanon % $65,500 59,800 $50,300 York % $69, ,000 $53,100 Cumberland % $71, ,700 $57,300 Perry % $70,200 21,700 $48,400 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. 8

14 Table 2-4. Top Ten Cities/Towns by Total Employees Three Mile Island 1 City/County Total a City/Town County Employees b Earnings c Work Force Earnings c Average Employed Average 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 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. Table 2-5. Top Ten Cities/Towns by Percent of Employed Work Force Three Mile Island 1 City/County Total a City/Town County Percentage of Employed Work Force Employees b Average Earnings c Employed Work Force Average Earnings c 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 2000 b Not 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. 9

15 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 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. 10

16 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 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. 11

17 Table 3-1. Three Mile Island 1 Expenditures in Dauphin County Description Amount (in thousands of dollars) 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 Compensation a $22,815 Total $25,282 a 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. 12

18 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 Description Amount (in thousands of dollars) 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 Compensation a $61,586 Total $87,824 a Total compensation includes wages, salaries and fringe benefits based on data provided by Exelon Corp. 13

19 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 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 Description Amount (in millions of dollars) 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 Total Compensation a $62.2 Total $176.6 a Total compensation includes wages, salaries and fringe benefits based on data provided by Exelon Corp. 14

20 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 Amount Description (in thousands of dollars) Federal Government $2,612 State and Local Government $943 Total Taxes $3,555 15

21 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 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 Dauphin County Direct (in millions of dollars) Secondary a (in millions of dollars) Total Output $377.8 $5.8 $383.6 Labor Income $22.8 $2 $24.8 Employment Pennsylvania Output $377.8 $86.1 $463.9 Labor Income $61.6 $29.6 $91.2 Employment ,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. 16

22 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 $ 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

23 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 Industry Description Output (in thousands of dollars) Labor Income (in thousands of dollars) Employment Power Generation and Supply $377,949 $22, 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 $196 $97 2 Offices of Physicians, Dentists and Other Health Care Professionals $174 $117 3 Insurance Carriers $140 $37 1 Other $2,815 $1, Total $383,566 $24, 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

24 Table 3-7. Impact of Three Mile Island 1 on the Most-Affected Industries in Pennsylvania Industry Description Output (in millions of dollars) Labor Income (in millions of dollars) Employment Power Generation and Supply $379.5 $ Owner-Occupied Dwellings $7.0 $0 State and Local Government $5.0 $ Monetary Authorities and Depository Credit Intermediaries $5.0 $ Wholesale Trade $3.7 $ Real Estate $3.3 $ Offices of Physicians, Dentists and Other Health Care Professionals $3.4 $ Food/Beverage Establishments $3.1 $ Hospitals $3.0 $ Insurance Carriers $2.8 $ Other $48.1 $ Total $463.9 $91.2 1, 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

25 Table 3-8. Three Mile Island 1 Impacts on the Most-Affected Industries in the United States Industry Description Output (in millions of dollars) Labor Income (in millions of dollars) Employment Power Generation and Supply $395.4 $ Owner-Occupied Dwellings $22.2 $0 Professional and Technical Consulting Services $22.2 $ Insurance Carriers $21.0 $ Real Estate $19.3 $ Monetary Authorities and Depository Credit Intermediaries $17.4 $ Wholesale Trade $16.8 $ Federal Government $11.6 $ Food/Beverage Establishments $11.2 $ Offices of Physicians, Dentists and Other Health Care Professionals $10.5 $ Other $298.6 $ ,163 Total $846.2 $ ,813 20

26 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 Description Federal Government Amount (in millions of dollars) 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. 21

27 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

28 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

29 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: 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 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. 24

30 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 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 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) Billion kilowatt-hours 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 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

31 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. In the past 10 years, the durations of refueling outages have been declining. In 1990, the average refueling outage took 105 days to complete. Capacity Factor (%) Figure 5-2. Nuclear Industry Average Capacity Factors ( ) 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 days for a boiling water reactor and days for a pressurized water reactor 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 ( in constant 2004 cents per kilowatt-hour) $8.00 $7.00 $6.00 $5.00 Gas 5.87 Oil 5.39 $4.00 $3.00 $2.00 $1.00 $ Coal 1.92 Nuclear 1.68 Source: Energy Velocity, Electric Utility Cost Group 26

32 Table 5-1. Wholesale Electricity Prices by Region Region 2004 Average 24/7 Power Prices (in cents per kilowatt-hour) 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 petroleumfired generation. (in 2004 cents per kilowatt-hour from 1995 to 2004) Second, nuclear fuel 14 prices are much more stable than 12 that of fossil fuels, particularly natural 10 gas and petroleum. 8 Because of its stable, low 6 production cost, nuclear energy can 4 help mitigate large electricity price 2 swings Source: Energy Velocity GAS 6.0 OIL-H 4.8 COAL 1.5 URANIUM.5 27

33 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 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 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 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 ) Source: Nuclear Regulatory Commission Information Digest Source: Nuclear Regulatory Commission Information Digest 28

34 Figure 5-6. Nuclear's Superior Safety Record (2003) Nuclear Industry's Industrial Safety Accident Safety Rates Compared to Other Industries Industrial Accident Safety Rate* 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 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 By comparison, the U.S. manufacturing industry had an industrial accident safety rate of 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 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