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Acid Rain: the Southern Company (a) Case Analysis Essay example

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Acid Rain: The Southern Company (A) Case Analysis | Production Processes and Costs | | | |

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Executive Summary
In the year 1992, the Southern Company that held the Bowen plant, a coal-fired steam electric plant had to decide on the various options available to comply with the amendments in the Clean Air Act, effective 1995.
The Bowen plant was an unusually large plant with a capacity to serve the residential, commercial and industrial demands of 1 million people. The Bowen generators consumed 8.338 million tons of coal and generated 21,551 million kilowatt-hours of electricity. During 1990, Bowen plant emitted over 30 tons of sulfur dioxide per hour, an important precursor of acid rain. In 1990, Congress passes the
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In this, they will be generating excess of allowed emission level in Phase 1 (1995-1999) and would have to buy those allowances. Starting Phase 2 (year 2000), they would be in a state to sell the allowances. * Switch to low-sulfur coal from Kentucky or West Virginia. The emissions would be lower than the amount permitted in Phase One, but in Phase Two they would have to buy allowances.

To calculate the total costs involved for each of the three options, I have considered only those factors that are not common in all. I have calculated only the excess of cost that might be required to deploy an option.
The current operating costs and all costs that do not change amongst the options have been left out as these costs would remain same and will have no effect on the decision.

Data Requirement or Sources
The data used to perform analysis has been taken from the case study only. The factors available are: * Switching cost of coal: switching from high sulfur to low sulfur. * Costs or revenue involved with buying or selling, respectively, the sulfur dioxide emission allowances. * Depreciation on capital costs * Capital costs involved to upgrade the plant with scrubbers or existing machinery. * Additional operating costs * Energy consumptions (Revenue lost) when using scrubbers. * Federal and state taxes
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