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Kendall Power Plant (A): Operational Options
Bodily, Samuel E.; Smith, Raiford; Palacios, Miguel Case QA-0597 / Published September 10, 2002 / 11 pages.
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Product Overview

This case series brings together the evaluation of operating options and financial hedging. An electric power plant has several hourly operating alternatives, and a decision model is used to evaluate profit opportunities and decide among those options for fuel and operating level given the available capacity, which is in itself uncertain. The decision tree for these operating decisions is embedded in a Monte Carlo simulation that evaluates hedges of electricity, natural gas, and fuel oil, given uncertain prices.

  • Overview

    This case series brings together the evaluation of operating options and financial hedging. An electric power plant has several hourly operating alternatives, and a decision model is used to evaluate profit opportunities and decide among those options for fuel and operating level given the available capacity, which is in itself uncertain. The decision tree for these operating decisions is embedded in a Monte Carlo simulation that evaluates hedges of electricity, natural gas, and fuel oil, given uncertain prices.

  • Learning Objectives