Economic Benefits of the Duke Power-Operated Nuclear Power Plants. An Economic Impact Study by the Nuclear Energy Institute

Transcription

1 Economic Benefits of the Duke Power-Operated Nuclear Power Plants An Economic Impact Study by the Nuclear Energy Institute

2 Front cover cityscape photo by Peter Brentlinger, courtesy of Charlotte Chamber of Commerce.

3 Economic Benefits of the Duke Power-Operated Nuclear Power Plants An Economic Impact Study by the Nuclear Energy Institute December

4 Contents Executive Summary...3 Section 1: Introduction...5 Section 2: The Duke Power-Operated Nuclear Power Plants...7 Section 3: Economic and Fiscal Impacts Section 4: Other Benefits From Duke Power-Operated Nuclear Plants Section 5: Nuclear Industry Trends Section 6: Economic Impact Analysis Methodology

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6 Executive Summary Nuclear power plants operated by Duke Power in North and South Carolina are an integral part of their local economies. The plants provide jobs and make purchases that stimulate the local economies directly and indirectly. Besides their economic output, the plants provide jobs, labor income and tax revenues. And there are other intangible benefits to the region, such as clean air, environmental stewardship and low, stable electricity prices. The economic impact of the Duke Power-operated nuclear plants reaches beyond their local communities to their respective states and the nation, according to this study by the Nuclear Energy Institute. In 2002, operation of these nuclear power plants increased economic output by $218.9 million in the counties surrounding the McGuire and Catawba plants (Gaston, Lincoln and Mecklenburg counties in North Carolina and York County in South Carolina). Adding the direct value of the plants electricity generation brings the area economic output attributable to McGuire and Catawba to $1.5 billion. In the South Carolina counties surrounding Oconee (Anderson, Greenville, Oconee and Pickens), increased economic output was $67.3 million. Adding the direct value of the plant s electricity generation brings the area economic output attributable to Oconee to $791 million. The operation of the plants, and the increased electricity production associated with them, accounts for 4,692 jobs and $271 million in labor income in counties around McGuire and Catawba. The Oconee plant accounts for 2,280 jobs in the four-county region surrounding the facility and $135.6 million in labor income. At the state level, North Carolina s economic output increased by $255.9 million, while South Carolina s rose by $132 million. If the value of the plants electrical generation is included, they produce $886.4 million of output in North Carolina and $1.5 billion in South Carolina. The plants account for 5,317 jobs and $278 million in labor income in North Carolina and 4,013 jobs and $227.2 million in labor income in South Carolina. Additionally, the economic impact of the plants accounted for $18.4 million in state and local property taxes in North Carolina and $53.1 million in South Carolina. The Duke Power-operated nuclear plants employ 4,203 people (including nuclear staff at the corporate headquarters in Charlotte, N.C.). Almost all employees reside in areas surrounding the plants, including an estimated 709 employees in Oconee County, 700 in York County, 613 in Mecklenburg County, 460 in Pickens County, 435 in Gaston County and 329 in Lincoln County. Additionally, these jobs pay substantially higher salaries than average for the counties surrounding the plants. The economic activity generated by nuclear plants operated by Duke Power creates another 2,615 jobs in the counties around McGuire and Catawba and 952 in the counties near Oconee. Given the combination of employees at the plant and secondary jobs created by the plants economic activity, the plants are responsible for 4,692 jobs in Gaston, Lincoln, Mecklenburg and York counties and 2,280 jobs in Oconee, Pickens, Anderson and Greenville counties. The main expenditure of the Duke Power-operated nuclear plants in the local area is employee compensation. During the study period, Duke Power paid $180.3 million in compensation to employees living in the four counties surrounding McGuire and Catawba and $110.3 million in the counties around Oconee. The economic activity created by the plants also accounted for $90.8 million in employee compensation in the counties surrounding McGuire and Catawba and $25.3 million in the counties near Oconee. 3

7 Together, the direct and indirect compensation from the plants accounts for $271.1 million in labor income in the counties surrounding McGuire and Catawba and $135.6 million in the area around Oconee. Including labor compensation in the local areas, the direct and indirect expenditures from the plants accounted for $278 million in employee compensation in North Carolina and $227.2 million in employee compensation in South Carolina. Duke Energy, parent company of Duke Power, makes substantial purchases on behalf of its nuclear plants. In 2002, the company made $510.5 million in nuclear-related purchases, including $80.8 million in North Carolina, $11.8 million in South Carolina, $75.8 million in the counties surrounding McGuire and Catawba, and $5.4 million in the area around Oconee. Economic activity generated by the nuclear plants also led to $218.9 million in increased economic production in the area around McGuire and Catawba and $67.3 million in the area surrounding Oconee. At the state level, spending by the nuclear plants indirectly increased output in North Carolina by $255.9 million and in South Carolina by $132 million. In 2002, the plants operated by Duke Power paid $53.3 million in local property taxes. Duke Power paid $7.9 million to Mecklenburg County for the McGuire plant, 3.4 percent of total property tax collections; $35.6 million in property tax payments to York County for the Catawba plant, 4.7 percent of the county s total property tax collections; and $9.7 million to Oconee County for the Oconee plant, half of that district s total property tax collections. Further, the economic activity generated by Duke Power-operated nuclear plants contributed another $18.2 million in state and local taxes, through increased income, property and sales taxes in North and South Carolina. By combining direct and indirect taxes, these nuclear plants paid $71.5 million in state and local tax payments. Besides the economic benefits provided by the Catawba, McGuire and Oconee facilities, the plants generated 58.4 billion kilowatt-hours of electricity in 2002, approximately 20 percent of electricity generated in the Virginia/Carolinas region. This low-cost electricity helped keep energy prices in North and South Carolina affordable. If these nuclear power plants were replaced by natural gas plants, the average cost of generation would have increased by about 50 percent, from 1.98 to 2.93 cents per kilowatt-hour in The Duke Power-operated nuclear plants also play a vital role in maintaining regional air quality. Without the three plants, nitrogen oxide emissions in the Carolinas would increase by about 120,000 tons per year and sulfur dioxide emissions would increase by nearly 285,000 tons annually because fossil-fueled power plants would be used offset electricity production from nuclear energy. Additionally, carbon dioxide emissions, one of the main greenhouse gases, would increase by 15 million metric tons. The plants also are an integral part of their local communities, as seen in charitable giving by the company and its employees. In 2003, Duke and its employees made nearly $2 million in contributions to charitable organizations in the counties surrounding the three nuclear power plants. 4

8 Section 1: Introduction This economic study, conducted by the Nuclear Energy Institute 1 (NEI), examines the economic, fiscal, community and other benefits provided by the McGuire, Catawba and Oconee nuclear power plants, which are operated by Duke Power. Benefits are analyzed for four counties surrounding McGuire and Catawba and four counties around Oconee. The McGuire and Catawba economic impact area includes the North Carolina counties of Gaston, Lincoln and Mecklenburg, as well as York County in South Carolina. The Oconee area encompasses Anderson, Greenville, Oconee and Pickens counties in South Carolina. Impacts throughout the Carolinas and the United States also are reviewed. The study uses detailed data from the plants to assess these benefits. Although this study focuses primarily on the benefits to the local communities, state and national benefits also are calculated. These Study Area Reference Guide Plant Location Study Area (Counties) McGuire Catawba Oconee North Carolina South Carolina South Carolina Mecklenburg, N.C.; York, S.C.; Gaston, N.C.; Lincoln N.C. Mecklenburg, N.C.; York, S.C.; Gaston, N.C.; Lincoln, N.C. Oconee, S.C.; Pickens, S.C.; Anderson, S.C.; Greenville, S.C. include direct impacts such as people employed by the plant, plant expenditures within the community and corporate tax payments and indirect impacts, such as 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, land stewardship and other contributions to the local community. Duke Power and NEI cooperated in developing this study. Duke Power provided data on employment, operating expenditures and tax payments, as well as guidance on particular details specific to the local areas and the plants. NEI coordinated the project and applied a nationally recognized model to estimate the direct and indirect impacts of the plant on the local community. The methodology employed in this study was developed by RTI International, a nonprofit research organization in Research Triangle Park, N.C. This is the fifth such study conducted by NEI. 1 The Nuclear Energy Institute is the policy organization of the nuclear energy and technology industries and participates in both the national and global policymaking process. 5

9 This report includes the following sections: Section 2 provides background on the nuclear plants operated by Duke Power, including cost, employment, performance, plant history, taxes and local area details, such as total employment and earnings. Section 3 examines the economic and fiscal impacts of the plants on the local, state and national levels. Section 4 provides data on benefits not captured by the model. Section 5 outlines recent trends in the nuclear industry as a whole, especially in cost, performance and safety. The final section discusses the methodology used in the study and Impact Analysis for Planning (IMPLAN), the economic modeling software employed as part of this effort. 6

10 Section 2: The Duke Power-Operated Nuclear Power Plants This section provides background information on the nuclear plants operated by Duke Power and their surrounding areas to frame the results, including a brief history of the Catawba, McGuire and Oconee plants, and data on their cost, employment, performance and taxes. Details on the surrounding regions, such as earnings, electricity costs, employment and taxes also are included. 2.1 History and Information Duke Power operates three nuclear plants in North and South Carolina. The Catawba plant is near York, S.C., a city of about 7,000. The city lies within York County, which has a population of 165,000. The plant is on a peninsula bounded by Beaver Dam Creek, Big Allison Creek and Lake Wylie. Catawba 1 and 2, both 1,129-megawatt reactors, began operating in 1985 and 1986, respectively. The Catawba reactors are operated by Duke Power, but are jointly owned by several cooperatives and municipal power agencies. Catawba 1 is owned by North Carolina Electric Membership Corp. (56 percent), Duke Power (25 percent) and Saluda River Study Area Reference Guide Plant Location Study Area (Counties) McGuire Catawba Oconee North Carolina South Carolina South Carolina Mecklenburg, N.C.; York, S.C.; Gaston, N.C.; Lincoln N.C. Mecklenburg, N.C.; York, S.C.; Gaston, N.C.; Lincoln, N.C. Oconee, S.C.; Pickens, S.C.; Anderson, S.C.; Greenville, S.C. Electric Cooperative (19 percent). Catawba 2 is owned by North Carolina Eastern Municipal Power Agency (75 percent) and Piedmont Municipal Power Agency (25 percent). The McGuire plant, which is owned and operated by Duke Power, is near Huntersville, N.C., a city of 25,000. Huntersville is in Mecklenburg County, which has a population of about 695,000. The plant is on Lake Norman. McGuire 1 began operation in 1981, followed by the second reactor three years later. Both are 1,100-megawatt pressurized water reactors. The Oconee plant, owned and operated by Duke Power, is near Seneca, S.C., a city of about 7,600. Seneca is in Oconee County, which has a population of 66,000. Oconee has three 846- megawatt reactors. Oconee 1 began operation in 1973, followed by Oconee 2 and 3 in Table 2-1. Duke Power-Operated Nuclear Power Plants: At a Glance Reactor Capacity Commercial Operation Year License Expiration Year Reactor Type Catawba 1 1,129 MW PWR Catawba 2 1,129 MW PWR McGuire 1 1,100 MW PWR McGuire 2 1,100 MW PWR Oconee MW PWR Oconee MW PWR Oconee MW PWR MW = megawatts; PWR = pressurized water reactor 7

11 Figure 2-1. Catawba Three-Year Average Capacity Factors Figure 2-2. McGuire Three-Year Average Capacity Factors 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 40% 30% 20% CATAWBA 1 CATAWBA 2 INDUSTRY AVERAGE 50% 40% 30% 20% MCGUIRE 1 MCGUIRE 2 INDUSTRY AVERAGE 10% 10% 0% 0% Source: UDI/NUOPR Database Source: UDI/NUOPR Database Figure 2-3. Oconee Three-Year Average Capacity Factors 100% 90% 80% 70% 60% 50% 40% 30% 20% OCONEE 1 OCONEE 2 OCONEE 3 INDUSTRY AVERAGE 10% 0% Source: UDI/NUOPR Database For most of their history, the Duke Power-operated plants have been leaders in the nuclear industry, maintaining capacity factors at or above the industry average. Capacity factor, a measure of efficiency, is the ratio of actual electricity generated to the maximum possible generation if a plant were to operate at full capacity for one year. Since 2000, all seven reactors have set records for capacity factor. Catawba 1 had its best year in 2001, with a capacity factor of 101 percent. Catawba 2 had its best year in 2002, with a capacity factor of 103 percent. McGuire 1 and 2 had their most successful years in 2000 and 2001, respectively, with capacity factors of 103 percent. Oconee 1 operated at a record-high 94 percent in 2001, while Oconee 2 had its best year in 2000, with a capacity factor of 101 percent. Oconee 3 reached its record performance of 101 percent in In May 2000, the Oconee plant became the second nuclear facility in the United States to obtain an operating license renewal, receiving a 20-year extension from the Nuclear Regulatory Commission. License renewals for the Catawba and McGuire stations were approved by the NRC in December

12 The Duke Power-Operated Nuclear Power Plants 9

13 2.2 Generation The Duke Power-operated nuclear power plants generated more than 58 million megawatt-hours in 2002 about 20 percent of the electricity generated in the Virginia/Carolinas Region (VACAR). Electricity production at the plants was driven by a high capacity factor for each reactor. In 2002, Catawba 1 and 2 had capacity factors of 96 percent and 103 percent, respectively, and McGuire 1 and 2 performed at 94 percent and 93 percent, respectively. Oconee Units 1 and 2 operated at 89 percent, and Unit 3 reached 101 percent in This outstanding performance has made the plants cost-competitive in the VACAR region. For 2002, the three plants had an average electricity production cost of 1.46 cents per kilowatt-hour. By comparison, production costs for electricity generators in the region averaged 1.98 cents per kilowatt-hour in The plants low production costs keep wholesale electricity prices affordable in VACAR. Although the specific contribution is difficult to measure, it can be estimated by determining how much average production costs in the region would increase if these plants were replaced by a combined-cycle natural gas plant (the plant of choice for new generation). In 2002, production costs for combined-cycle natural gas plants in the VACAR region averaged 4.55 cents per kilowatt-hour. Substituting natural gas plants for the Duke Power-operated nuclear plants that year would have resulted in a 50 percent increase in average electricity generation costs for the region, from 1.98 to 2.93 cents per kilowatt-hour. Table 2-2. Virginia/Carolinas Region Production Cost and Generation ( Average) Average Production Cost (Cents per kwh) Electricity Generation (Million MWh) Catawba McGuire Oconee Nuclear* Coal* Natural Gas* VACAR Total * = Regionwide; kwh = kilowatt-hour; MWh = megawatt-hours Source: Resource Data International 2.3 Employment Besides providing inexpensive electricity to the Carolinas, the Duke Power-operated plants also are major employers for local residents. Together, the three plants employ 4,203 residents of the region. The Catawba and McGuire plants employ more than 2,000 workers from the four surrounding counties of Gaston, Lincoln, Mecklenburg and York. In fact, one of every 100 employed people in the counties of Lincoln and York work at a plant operated by Duke Power. 10

14 Some small cities and towns in the region rely even more heavily on the plants as sources of employment. In these municipalities, anywhere between 1 percent and 5 percent of the work force is employed at a Duke Power-operated nuclear plant. For example, Catawba and McGuire employ three of every 100 working people in the town of Lincolnton, N.C., and 4.5 percent of the people living in the city of York, S.C. Five of 100 employed people in the town of Stanley, N.C., work at the Catawba and McGuire plants. Table 2-3. Catawba/McGuire Study Region: Employment by County Study Region County Total* County/State Employees Average Earnings Employed Work Force Average Earnings Gaston/N.C. 435 $82,726 91,354 $49,134 Lincoln/N.C. 329 $81,960 32,331 $50,648 Mecklenburg/N.C. 613 $94, ,275 $67,125 York/S.C. 700 $84,953 81,476 $53,734 Catawba/McGuire Region 2,077 $85, ,436 $55,160 *Census 2000 Table 2-4. Catawba/McGuire Region: Top 10 Cities and Towns by Employees City/Town County/State Employees Study Region % of Employed Work Force Average Earnings County Total* Employed Work Force Average Earnings Charlotte Mecklenburg/N.C % $75, ,601 $64,887 Rock Hill York/S.C % $68,793 23,764 $49,086 Gastonia Gaston/N.C % $66,266 30,154 $50,727 York York/S.C % $68,502 3,017 $39,040 Lincolnton Lincoln/N.C % $68,649 4,298 $45,811 Denver Lincoln/N.C. 126 NA $65,795 NA NA Huntersville Mecklenburg/N.C % $78,062 13,533 $79,118 Stanley Gaston/N.C % $68,022 1,519 $45,472 Clover York/S.C % $65,690 1,867 $44,247 Belmont Gaston/N.C % $68,339 4,290 $44,303 *Census 2000 Work force and earnings data is not available for Denver, N.C. 11

15 The Oconee nuclear plant employs 1,312 people from its surrounding counties of Anderson, Oconee and Pickens, and plant employees represent 2 percent of people working in Oconee County, and 1 percent of people employed in Pickens. Many of the small towns and cities surrounding Oconee also rely on Duke Power as a source of employment. As much as 60 percent of the work force in the cities and towns surrounding Oconee is employed at the plant. In Seneca, S.C., 10 percent of working people in the town are employed at the plant; in Six Mile, S.C., more than 20 percent of employed people in the town work at Oconee; and in West Union, S.C., Oconee employees comprise more than half of the town s employed work force. Jobs provided by the Duke Power-operated plants also are typically higher paying than most jobs in the region. Employees at Catawba and McGuire earned, on average, about $86,000 in 2002, including salary and overtime. This is more than 50 percent higher than the average salary in the four counties of Gaston, Lincoln, Mecklenburg and York, which is about $55,000 a year. Average salaries of plant employees from these four counties ranged from 41 percent to 68 percent higher than their respective county s average earnings. Plant employees residing in York had average earnings of $85,000, 75 percent higher than average earnings in the town. Table 2-5. Oconee Study Region: Employment by County Study Region County Total* County/State Employees Average Earnings Employed Work Force Average Earnings Anderson/S.C. 143 $83,901 77,732 $46,766 Oconee/S.C. 709 $82,445 30,147 $43,733 Pickens/S.C. 460 $83,913 53,229 $45,112 Oconee Region 1,312 $83, ,108 $45,204 *Census

16 Similar patterns are apparent at the Oconee plant, where employees earned, on average, about $83,000 in This is almost 85 percent higher than the average salary in the three counties of Anderson, Oconee and Pickens, which is about $45,000 a year. Average salaries of plant employees from these three counties ranged from 80 percent to 90 percent higher than their respective county s average earnings. Plant employees residing in Seneca, S.C., received salaries 65 percent higher than the average earnings in the town, while employees living in Central and West Union, S.C., were paid more than twice the average earnings in those towns. Table 2-6. Oconee Study Region: Top Ten Cities and Towns by Employees Study Region County Total* City/Town County/State Employees % of Employed Work Force Average Earnings Employed Work Force Average Earnings Seneca Oconee/S.C % $70,228 3,764 $42,671 Easley Pickens/S.C % $69,033 8,854 $52,008 Walhalla Oconee/S.C % $62,602 1,502 $41,474 Central Pickens/S.C % $68,737 1,830 $29,995 Anderson Anderson/S.C % $67,391 10,109 $42,219 Pickens Pickens/S.C % $63,749 1,282 $36,914 Westminster Oconee/S.C % $63,135 1,269 $37,494 Liberty Pickens/S.C % $62,847 1,324 $35,308 West Union Oconee/S.C % $66, $33,072 Six Mile Pickens/S.C % $65, $59,565 *Census

17 2.4 Plant Purchases in Local Communities Besides providing high-paying jobs, Duke Power also makes substantial purchases in the plant communities. In the one-year period of this study, the three plants made $81 million worth of purchases in the combined study regions. In the Catawba/McGuire region, spending by the plants amounted to $76 million. In the Oconee region, purchases totaled more than $5 million. As Table 2-7 reveals, Duke Power spends significantly greater amounts in Mecklenburg County than in all other counties within the two study regions. The principal reasons are the location of Duke headquarters in Charlotte, which is in Mecklenburg County, and the strong manufacturing and technological sectors found in the county. Table 2-7. Catawba/McGuire Study Region Spending Table 2-8. Oconee Study Region Spending County/State Spending County/State Spending Gaston/N.C. $509,734 Anderson/S.C. $230,562 Lincoln/N.C. $182,622 Greenville/S.C. $2,390,017 Mecklenburg/N.C. $73,972,686 Oconee/S.C. $1,347,016 York/S.C. $1,157,670 Pickens/S.C. $1,483,237 Catawba/McGuire Region $75,822,712 Oconee Region $5,450, Plant and Local Area Taxes The Duke Power-operated plants also make substantial tax payments to the local area. In 2002, the plants paid a total of about $53.3 million in local property tax payments. McGuire made payments of $7.9 million to Mecklenburg County, equal to 3.4 percent of the $230 million in property taxes collected by the county in Oconee made property tax payments of $9.7 million to Oconee County, about half of the county s total property tax levy of $19.3 million. Duke and other Catawba plant co-owners made property tax payments of $35.6 million to York County, amounting to 4.7 percent of York County s 2002 property tax levy of $752 million. Two factors affected Catawba s significantly higher payments: the newer plant has a higher property valuation, and York County s property tax rate is higher than other counties included in this study. 2.6 Summary The Duke Power-operated plants provide reliable electricity generation and keep power prices affordable in North and South Carolina. The plants also offer well-paid employment and a large tax base to their surrounding counties. However, these are only the direct economic benefits of the plant. As illustrated in the next section, the secondary effects on the regional economies are as substantial as the direct benefits. 14

18 Section 3: Economic and Fiscal Impacts Spending by the Duke Power-operated nuclear plants lifts economic activity throughout the local and state economies. This effect is felt 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 Duke Power. (For more information on IMPLAN, see Section 6.) 3.1 Expenditures in Areas Surrounding McGuire, Catawba and Oconee Plants This study examines the impact of Duke Power-operated nuclear plants on two local areas. The first area comprises the counties surrounding the McGuire and Catawba plants: Gaston, Lincoln and Mecklenburg counties in North Carolina and York County in South Carolina. The second area comprises the counties surrounding the Oconee plant: Anderson, Greenville, Oconee and Pickens counties in South Carolina. In the McGuire and Catawba area, the nuclear plants made purchases of $256 million. In the area surrounding Oconee, Duke Study Area Reference Guide Plant Location Study Area (Counties) McGuire Catawba Oconee North Carolina South Carolina South Carolina Mecklenburg, N.C.; York, S.C.; Gaston, N.C.; Lincoln N.C. Mecklenburg, N.C.; York, S.C.; Gaston, N.C.; Lincoln, N.C. Oconee, S.C.; Pickens, S.C.; Anderson, S.C.; Greenville, S.C. Power s expenditures totaled $115.8 million. Spending within these areas represents more than 80 percent of the $447.5 million Duke Power spent in North and South Carolina. The amounts are approximately 43 percent of Duke Power s total spending of $867.1 million in the United States. The expenditure totals for the local areas were provided by Duke Power and are shown in Tables 3-1 and 3-2. The 10 sectors receiving the largest amount of spending from the nuclear plants are listed in these tables. The categories, chosen from among a total of 528 IMPLAN sectors, are listed largely according to each sector s IMPLAN description. Total compensation, including benefits, salaries and wages, is listed separately. Similar expenditure totals for North Carolina, South Carolina and the United States are presented in Tables 3-3, 3-4, and 3-5, respectively. By far, labor accounted for the largest expenditures made by Duke Power-operated nuclear power plants in the area surrounding McGuire and Catawba. Total compensation for labor services reached $180.3 million about 70 percent of expenditures. This reflects the large portion of McGuire and Catawba expenditures for labor services (wages, salaries and employee benefits) that are made to local employees. As expected, the shares for the four counties surrounding McGuire and Catawba are much larger than the share at the state or national level. Engineering services represented the largest non-labor expenditure in the local area at $56.8 million. This sector includes payments to specialized engineering firms primarily located in Mecklenburg 15

19 County. Duke Power-operated nuclear plants are undergoing a large capital improvement program, and this activity requires the resources of specialized engineering firms. The next largest non-labor expenditure is for transformers. The operation of a nuclear power plant requires the use of many types of industrial electrical equipment, including transformers. The nuclear plants buy a substantial portion of this equipment from local suppliers. Payments for transformers totaled $4.8 million in expenditures during the study period. The remaining local expenditures in Table 3-1 show an even mix between manufacturing and service industries, reflecting the diverse manufacturing and service base in the areas surrounding McGuire and Catawba. Typically nuclear plants make significant purchases from service industries. Wholesale trade refers to general purchases of goods from area wholesalers. Table 3-1. Duke Power-Operated Nuclear Plant Expenditures in Gaston, Lincoln, Mecklenburg and York Counties Description Amount Engineering-Architectural Services $56,824,509 Transformers $4,778,809 Personnel Supply Services $3,436,867 Maintenance and Repair Services $2,366,284 Wholesale Trade $2,155,995 Computer and Data Processing Services $1,122,896 Automatic Temperature Controls $526,874 Typewriters and Office Machines NEC a $448,731 Non-Clay Refractories $423,966 Blowers and Fans $399,331 Other $3,338,451 Subtotal $75,822,713 Total Compensation b $180,253,330 TOTAL $256,076,043 a NEC = Not elsewhere classified b Total compensation includes wages, salaries and employee benefits provided by Duke Power. 16

20 Labor is also the largest expenditure in the Oconee study area. In fact, it is much larger than any other category. Total compensation for labor services in the region is $110.3 million approximately 95 percent of expenditures in the study area. Maintenance and repair of facilities, at $1.4 million, represented the largest non-labor expenditure in the local area. This sector represents work performed by local contractors for the maintenance and upkeep of the plant. The next-largest non-labor expenditure is for wholesale trade. Duke Power-operated nuclear plants made purchases of nearly $1 million in the area surrounding Oconee. Other large purchase categories include non-clay refractories, which are components that can resist extremely high heat; personnel supply services, including temporary or contract plant employees; and engineering services that are necessary for plant capital improvements. Table 3-2. Duke Power-Operated Nuclear Plant Expenditures In Anderson, Greenville, Oconee and Pickens Counties Description Amount Maintenance and Repair Other Facilities $1,431,413 Wholesale Trade $908,737 Non-Clay Refractories $907,007 Personnel Supply Services $844,227 Engineering-Architectural Services $406,242 Motor Freight Transport and Warehousing $197,510 State and Local Government-Education $120,055 Hotels and Lodging Places $98,963 Eating and Drinking $87,560 Industrial Machines NEC a $76,300 Other $372,817 Subtotal $5,450,831 Total Compensation b $110,308,511 TOTAL $115,759,342 a NEC = Not elsewhere classified b Total compensation includes wages, salaries and employee benefits provided by Duke Power. 17

21 3.2 Plant Expenditures in North and South Carolina In 2002, Duke Power spent $447.5 million for products and services (including labor) related to its nuclear plants in North and South Carolina. This total included $371.8 million spent in areas surrounding the plants and $75.6 million spent in other parts of North and South Carolina. Spending within these states represented approximately 50 percent of Duke Power s total spending of $447.4 million related to its nuclear plants. Duke Power spent $257 million in North Carolina and $190.4 million in South Carolina. The South Carolina total includes spending in York County for the McGuire and Catawba plants. Duke Power s total spending in North Carolina is presented in Table 3-3. Spending at the state level largely mirrors spending at the local level. Total compensation is the largest category at $176.3 million and represents about 70 percent of the total. This is approximately the same percentage as in the McGuire/Catawba area. The largest non-labor expenditure, at $57.7 million, is for engineering services. Again, these purchases are related to a capital improvement program being undertaken by Duke Power that requires specialized engineering services. The other categories in the top 10 also remained virtually the same. Transformers, personnel supply services and maintenance services continued to be important elements of plant spending at the state level. Table 3-3. Duke Power-Operated Nuclear Plant Expenditures in North Carolina Description Amount Engineering-Architectural Services $57,745,869 Transformers $4,778,809 Personnel Supply Services $4,053,722 Maintenance and Repair Other Facilities $3,427,921 Wholesale Trade $1,491,621 Computer and Data Processing Services $1,123,206 Non-Clay Refractories $962,271 State and Local Government-Education $870,417 Sanitary Services and Steam Supply $722,845 Photofinishing-Commercial Photography $574,209 Other $5,026,020 Subtotal $80,776,910 Total Compensation a $176,258,012 TOTAL $257,034,922 a Total compensation includes wages, salaries and fringe benefits based on data provided by Duke Power. 18

22 Duke Power s total spending in South Carolina is presented in Table 3-4. Purchases at the state level largely mirrored spending at the local level for South Carolina as well. Total compensation is the largest category at $178.6 million, about 94 percent of the total. The largest non-labor expenditure is maintenance and repair services at $2.8 million. These expenditures relate to contractors hired for maintenance and upkeep of the plants grounds and equipment. The other categories in the top 10 also remained relatively constant with wholesale trade, engineering services, personnel supply services and non-clay refractories as key spending categories at the state level. Electric services also appeared as an important spending component at the state level. This category represents spending for transmission and distribution of electricity or electricity purchased from off-site sources. Table 3-4. Duke Power-Operated Nuclear Plant Expenditures in South Carolina Description Amount Maintenance and Repair Other Facilities $2,750,219 Wholesale Trade $2,072,823 Engineering-Architectural Services $1,221,811 Non-Clay Refractories $1,207,065 Electric Services $1,030,197 Personnel Supply Services $844,227 State and Local Government-Education $600,065 Furniture & Home Furnishings Stores $533,726 Service Industry Machines-NEC a $204,743 Motor Freight Transport and Warehousing $202,849 Other $1,111,354 Subtotal $11,779,078 Total Compensation b $178,649,608 TOTAL $190,428,687 a NEC = Not elsewhere classified b Total compensation includes wages, salaries and employee benefits provided by Duke Power. 19

23 3.3 Plant Expenditures in the United States In 2002, Duke Power s nuclear plant expenditures for products and services (including labor) purchased in the United States totaled $867.1 million. Apart from expenditures of $447.5 million in North and South Carolina, $419.6 million were spent elsewhere in the United States. Much of that amount is for specialized products and services unique to the nuclear industry. These national expenditures are detailed in Table 3-5. Total compensation ($356.6 million) is the largest category, representing more than a third of the total. Compensation as a share of the U.S. total is much lower because plant employees live mostly in North and South Carolina (especially in the local area), while spending on products and non-labor services is focused outside the area. The largest spending for products and non-labor services is for inorganic chemicals NEC (not elsewhere classified) at $241.5 million. This category represents expenses for the plants fuel, which is typically purchased outside the state or region in which the plant is located. The second-largest non-labor spending category is engineering services. Like its nuclear industry counterparts, Duke Power-operated plants rely on specialized contractors to analyze the plant and its operations to ensure consistent performance. This category includes these contractors. The third-largest sector is personnel supply services. As is typical of the nuclear industry, Duke Power relies on many long-term contract employees to do particular jobs at its plants. Also, temporary employees are required during peak periods of activity at the plant, such as outages. These expenditures are captured in the personnel supply services category. Table 3-5. Duke Power-Operated Nuclear Plant Spending in the United States Description Amount Inorganic Chemicals NEC a $241,522,000 Engineering-Architectural Services $88,399,623 Personnel Supply Services $59,531,376 Transformers $41,688,037 Wholesale Trade $15,869,791 Maintenance and Repair Other Facilities $8,367,751 Non-Clay Refractories $6,724,169 Federal Government (Non-Military) $5,723,536 Business Associations $4,846,737 Insurance Carriers $2,914,933 Other $34,888,142 Subtotal $510,476,093 Total Compensation b $356,627,991 TOTAL $867,104,084 a NEC = Not elsewhere classified b Total compensation includes wages, salaries and fringe benefits based on data provided by Duke Power. 20

24 3.4 Taxes Paid and Accrued A summary of taxes paid by Duke Energy on behalf of its nuclear plants in 2002 is presented in Table 3-6. Income taxes are not included in the data because those taxes are paid at the corporate level and not by the nuclear power plants. Local taxes in this table refer to counties in the study area. Property taxes paid in the local areas ($53.3 million) represent almost 70 percent of the taxes paid by the plant. These taxes are primarily paid in York County on behalf of the Catawba plant and its joint owners. However, property tax payments in the counties surrounding the other plants are significant as well. Besides property taxes, Duke Energy also paid payroll taxes to the federal government totaling nearly $20 million. The plants also contribute to the profits of Duke Energy, which pays state and national corporate income taxes. However, these taxes are not quantified in this section. An estimate of these property taxes is included in the total tax impact figures shown in Table Table 3-6. Taxes Paid by Duke Power-Operated Plants Description Amount Federal Payroll Tax a $20,217,858 State and Local Taxes (Property Tax) $53,289,431 Total Taxes Paid $73,507,289 a The division of payroll taxes between federal and state is based on the average distribution from IMPLAN data. 21

25 Table 3-7. Impact of Duke Power-Operated Nuclear Plants on Local, State and National Economies McGuire/Catawba Area Direct Secondary a Total Output $1,318,389,065 $218,908,484 $1,537,297,549 Labor Income $180,253,330 $90,839,527 $271,092,857 Employment 2,077 2,615 4,692 Oconee Area Output $723,943,220 $67,337,931 $791,281,151 Labor Income $110,308,511 $25,311,134 $135,619,645 Employment 1, ,280 North Carolina Output $630,502,180 $255,862,358 $886,364,538 Labor Income $176,258,012 $101,817,443 $278,075,455 Employment 2,032 3,285 5,317 South Carolina Output $1,411,830,105 $131,994,640 $1,543,824,745 Labor Income $178,649,608 $48,571,682 $227,221,290 Employment 2,149 1,864 4,013 United States Output $2,042,332,285 $2,462,257,449 $4,504,589,734 Labor Income $124,671,000 $870,025,247 $994,696,247 Employment 4,203 23,925 28,128 a Secondary effects include indirect impacts that measure the effect on input suppliers of expenditures by Duke Power and induced impacts that measure the effects produced by the change in household income that results from plant expenditures. 3.5 Economic Impacts by Geographic Area Summary economic impacts for each of five geographic areas the two local areas surrounding the plants, North Carolina, South Carolina and the United States are presented in Table 3-7. 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. 22

26 These economic impacts are divided into their direct and secondary effects. The direct effects reflect the industry sector and geographical distribution of Duke Power s spending without any subsequent spending effects. The secondary, or ripple, effects include subsequent spending effects, which can be further divided into indirect and induced. Indirect effects reflect how the nuclear 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 Catawba, McGuire and Oconee revenues of $1.3 billion for These revenues which are spent, distributed, invested or paid as taxes reflect the total output of products and services associated directly with the three nuclear plants. This total includes expenditures for products and services (including labor) itemized in Tables 3-1 through 3-6. Nationwide, the direct employment (4,203 jobs) is the average employment level for the Duke Power-operated nuclear plants over this period. Eighty-one percent of these jobs are filled by workers residing in the areas surrounding the plants. Of the remainder, 776 are filled by residents of North and South Carolina outside the local area, and 22 are filled by residents of other states. As Table 3-7 indicates, direct effects are typically the largest contributor to total effects for each of the measures of economic impact and for local areas, as well as North and South Carolina. Secondary effects are the largest contributor to total economic impact in the United States. Induced effects are larger than indirect effects for the state and local economies because there is more spending on labor income, which causes induced effects, than on goods and services, which lead to indirect effects. Indirect effects are more important as a share of the total at the national level. The Duke Power-operated nuclear plants were responsible for $1.5 billion in economic output in the area surrounding the McGuire and Catawba plants and 4,692 jobs, including the direct impact of the plants and their secondary effects on the local economy. In the area around the Oconee plant, the nuclear plants were responsible for $791.3 million in economic output and 2,280 jobs, including direct, indirect and induced effects. For the North Carolina economy, the total impact (direct and secondary) of the plants was $866 million and 5,317 jobs. For South Carolina, those figures totaled $1.5 billion in economic output and 4,013 jobs. At the state level, total economic impact was largely driven by the output of the plants. The secondary impacts of the plants on the local economy were $218.9 million in the area surrounding McGuire and Catawba, $67.3 million in the area around Oconee, $255.9 million in North Carolina, and $132 million for South Carolina. The employment effects were equally distributed between the direct employment of the plant and jobs created by economic activity generated by the three nuclear plants. In general, for every worker employed by the nuclear plants, another job is created in the local and state economies. 23

27 Table 3-8. Duke Power-Operated Nuclear Plants Impact on the Most-Affected Industries in Area Surrounding McGuire and Catawba Industry Description Output Labor Income Employment Electric Services (Duke Power- Operated Nuclear Plants) $1,318,389,065 $180,253,330 2,077 Engineering-Architectural Services $55,452,124 $24,636, Owner-Occupied Dwellings $13,327,016 $0 Wholesale Trade $9,567,621 $4,016, Doctors and Dentists $8,535,624 $5,203, Real Estate $8,136,819 $1,103, Restaurants $7,584,954 $3,001, Banking $5,826,347 $1,124, Miscellaneous Retail $4,802,309 $2,300, Personnel Supply Services $4,575,907 $4,296, Other $101,099,763 $45,156,095 1,298 TOTAL $1,537,297,549 $271,092,857 4, Economic Impacts on Local Area Industry Nearly every sector of the local economy is affected by the Catawba, McGuire and Oconee plants. Although the direct effects are concentrated in a few sectors, the secondary effects especially the induced effects increase the dispersion of the economic impacts across other sectors. The largest secondary effects in the region are in service industries used by plant employees. The sectors most affected vary by geographic area. Tables 3-8 and 3-9 present the 10 sectors most affected by the Duke Power-operated nuclear plants in their local areas, based on total output. The sector with the greatest total output in the area surrounding the McGuire and Catawba plants is the electric services category, which includes electricity produced by the plant. Thus, all direct effects are included in this sector. The electric services sector also has the greatest output among those in the state and U.S. economies, as shown in Tables 3-10 and 3-11, respectively. The next most-affected sector in the area is engineering and architectural services. The most-affected sectors based on total output are not always the most-affected sectors based on other impact measures (i.e., labor income and employment). A striking example of this is the third most-affected sector, owner-occupied dwellings, also known as the real-estate sector. This is not a traditional business sector, and so it has no impact on labor income or employment. Instead, it is a special sector developed by the U.S. Department of Commerce s Bureau of Economic Analysis that estimates what homeowners would pay in rent if they rented rather than owned their homes. In essence, it creates an industry for home ownership. The sole product (or output) of this industry is home ownership, purchased entirely by personal consumption 24

28 expenditures out of household income. In effect, this sector captures increases in housing values caused by increased labor resulting from the plant. The real-estate values sector is influenced by the large number of employees at the plant who require housing. This additional demand leads to increased output from the housing sector. As a result, local tax revenues increase, since rises in housing increase local property tax revenues. The fourth most-affected sector is wholesale trade, which represents the intermediate buying and selling of goods purchased by the plant and its employees. This section is large because purchased goods are typically distributed through a wholesaler. As a result, this category is involved in most of the expenditures by Duke Power, its employees and its suppliers. As Table 3-8 indicates, many of the most-affected local industries are related to services required by the plants workers, such as doctors and dentists, real estate, hospitals, banking, restaurants, and retail establishments, in addition to the owner-occupied dwellings category. Further, personnel supply services, a large direct expenditure of the plant, remains an important component of the plant s local impacts. Overall, the IMPLAN model estimates that 4,692 individuals are employed in the local area because of spending by Duke Power on behalf of its nuclear operations and its employees. 25

29 Table 3-9. Impact of Duke Power-Operated Nuclear Plant on the Most-Affected Industries in Area Surrounding the Oconee Plant Industry Description Output Labor Income Employment Electric Services (Duke Power-Operated Nuclear Plants) $723,943,220 $110,308,511 1,328 Owner-Occupied Dwellings $6,819,116 $0 Doctors and Dentists $4,514,606 $2,686, Eating and Drinking $3,977,960 $1,481, Real Estate $3,851,480 $522, Wholesale Trade $3,481,656 $1,456, Banking $2,346,657 $453, Maintenance and Repair Other Facilities $2,154,122 $1,357, Automotive Dealers and Service Stations $2,150,646 $959, Miscellaneous Retail $2,123,050 $1,017, Other $35,918,638 $15,377, TOTAL $791,281,151 $135,619,645 2,280 The sector most affected in terms of total output in the area surrounding the Oconee plant is the electric services sector, which captures the value of the electricity generated by the Oconee plant. The next most-affected sector in the Oconee area is owner-occupied dwellings, or real-estate values. As described earlier, this category represents the increase in the output of the housing sector measured in rents or rents avoided. This sector is significant because of the large number of workers at the Oconee plant who require housing in the local area. As Table 3-9 indicates, the remaining impacts in the local area are concentrated in sectors related to services required by the plants workers, such as doctors and dentists, real estate, banking, restaurants, automotive repair centers, and retail establishments. Without the employment generated by the Oconee plant, demand for these types of services in the local area would be less than their current level. Maintenance and repair of facilities also is an important component at the local level. These types of services are typically filled by local contractors and local employees who do periodic maintenance at the plant. Overall, the IMPLAN model estimates that 2,280 individuals are employed in the local area as a result of spending by Duke Power on behalf of its nuclear operations and its nuclear plant employees. 26

30 3.7 Economic Impacts on State Industry Tables 3-10 and 3-11 use the same sectors as Table 3-8 and 3-9 to illustrate the economic impacts of the plants on North and South Carolina. Again, electric services, engineering and architectural services, and owner-occupied dwellings are the most-affected sectors in terms of total output. The entries in Table 3-10 and 3-11 for the most-affected industries in the two states are similar to those in the counties surrounding the plants. As with local impacts, the most-affected state categories are primarily related to purchases by plant employees for services. Many of these services, such as restaurants, doctors and dentists, and real estate, are owned and operated by local small business owners. The IMPLAN model estimates that 5,317 jobs are created in the state of North Carolina and 4,013 jobs are created in the state of South Carolina. In other words, for every person employed by the three nuclear plants, another person is employed in the North and South Carolina. Table Impact of Duke Power-Operated Nuclear Plants on the Most-Affected Industries in North Carolina Industry Description Output Labor Income Employment Electric Services (Duke Power-Operated Nuclear Plants) $630,502,180 $176,258,012 2,032 Engineering-Architectural Services $54,658,568 $2,694, Owner-Occupied Dwellings $15,029,445 $0 0 Wholesale Trade $10,773,158 $3,464, Doctors and Dentists $10,025,472 $2,794, Real Estate $9,856,576 $353, Eating and Drinking $8,637,094 $1,950, Banking $6,990,607 $2,125, Hospitals $6,253,700 $870, Maintenance and Repair Other Facilities $5,387,222 $2,237, Other $128,250,516 $85,325,537 2,729 TOTAL $886,364,538 $278,075,455 5,317 27