From then below, how would you approach the decision making? The Hydro-Electric Company (HEC) has three sources of power. A small amount of hydroelectric power is generated by damming wild and scenic rivers; a second source of power comes from burning coal, with emission that creates acid rain and contributes to global warming; the third source of power comes from nuclear fission. HEC's coal-fired plants use obsolete pollution-control technology, and an investment of several hundred million dollars would be required to update it. Environmentalists urge HEC to promote conservation and purchase power from suppliers that use the cleanest fuels and technology. However, HEC is already suffering from declining sales, which have resulted in billions of dollars invested in idle equipment. Its large customers are taking advantage of laws that permit them to buy power from lower-cost suppliers. HEC must cover the fixed cost of idle capacity by raising rates charged to its remaining customer or face defaulting on bonds (bankruptcy). The increased rates motivate even more customers to seek low-cost suppliers, the start of a death spiral for HEC. To prevent additional rate increases HEC implements a cost-cutting program and put its plans to update pollution control on hold. From sides and discuss the ethical, environmental, and political issues and trad-offs associated with HEC's strategy.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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From then below, how would you approach the decision making?

The Hydro-Electric Company (HEC) has three sources of power. A small amount of hydroelectric power is generated by damming wild and scenic rivers; a second source of power comes from burning coal, with emission that creates acid rain and contributes to global warming; the third source of power comes from nuclear fission. HEC's coal-fired plants use obsolete pollution-control technology, and an investment of several hundred million dollars would be required to update it. Environmentalists urge HEC to promote conservation and purchase power from suppliers that use the cleanest fuels and technology.

However, HEC is already suffering from declining sales, which have resulted in billions of dollars invested in idle equipment. Its large customers are taking advantage of laws that permit them to buy power from lower-cost suppliers. HEC must cover the fixed cost of idle capacity by raising rates charged to its remaining customer or face defaulting on bonds (bankruptcy). The increased rates motivate even more customers to seek low-cost suppliers, the start of a death spiral for HEC. To prevent additional rate increases HEC implements a cost-cutting program and put its plans to update pollution control on hold.

From sides and discuss the ethical, environmental, and political issues and trad-offs associated with HEC's strategy.

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