Optimization approach to electric utility corporate models

Thesis/Dissertation · Fri Jan 01 04:00:00 EST 1982

OSTI ID:5562961

Bose, R

This dissertation is a nonlinear programming approach to electric utility corporate models. The constraints of the model are of two types - plant sector (P) and financial (F). The model is driven via the P constraints by demand for electrical energy supplied as a load duration curve. The management decision is to configure new and existing plant so as to meet energy and power requirements for each period of a ten year planning horizon. There is a variable cost of operating the system and a capital cost for new plant. These costs as well as depreciation expenses link with the F constraints. These include equations that set the price of electricity using the cost-of-service method, limits on the interest coverage ratio on debt and bounds on the capital structure. The regulators' decision is endogenized by setting the allowed return on equity as a proportion of the market cost of equity capital. The model calculates the optimal issue of new securities, earned return on equity, market to book ratios of common stock, and optimal dividend payments. Two objective functions are examined - maximization of the total discounted consumers' and producers' surplus. The resulting nonlinear program is solved for parameter values typical of the investor-owned electric utility industry. The model provides insights into the effect of alternative regulatory policies on optimal investment and financing strategies for the firm. It is a useful supplement to the simulation results of the standard utility corporate model. The model, as formulated, is one of the largest problems solved by the nonlinear programming code GRG2, and is also a test of its capabilities.

• OSTI ID: 5562961
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
296000* -- Energy Planning & Policy-- Electric Power
COST
DEMAND
ECONOMIC ANALYSIS
ECONOMICS
ELECTRIC UTILITIES
ENERGY DEMAND
FINANCING
MATHEMATICAL MODELS
NONLINEAR PROGRAMMING
OPERATING COST
OPTIMIZATION
PLANNING
PROGRAMMING
PUBLIC UTILITIES