How much of this additional consumption will be satisfied by currently installed capacity is unknown. Current capacity underutilization is 52 percent, but this primarily occurs off peak. How much efficiency can be obtained from the current capacity over the entire cycle depends on reliability factors and system control. At all events, power increases above the short-run forecast of 25 percent will come at higher costs because the fuel, operation, and maintenance cost of the marginally employed, peak load capacity in the current system is higher than the operating cost of the base load capacity. In this case, the existing capital will experience a decline in average revenue that is not offset by an increase in output.
Lower prices mean lower net income to sellers.
This includes the extra production costs they incur as they expand production by employing existing capacity during its idle time and the revenue declines that they experience on all output because of the lower, competitive price. Of course, the long run comes after the short run. Electric energy comprised 36.3 percent of total energy use in 1995 in the United States. Hence our long-run estimate of usage translates to an increase in total energy use of 15.4 percent. Using the midpoint of Moroney's elasticities, our estimates of increased electricity use translate to GDP increases of 0.8 and 2.6 percent, respectively.