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Cinergy Coal Procurement Problem

1. Determine how much coal to purchase from each of the mining companies and how it should be allocated to the generating units. What is the cost to purchase, deliver, and process the coal?
2. Compute the average cost of coal in cents per million BTUs for each generating unit (a measure of the cost of fuel for the generating units).
3. Compute the average number of BTUs per pound of coal received at each generating unit ( a measure of the energy efficiency of the coal received at each unit).
4. Suppose that Cinergy can purchase an additional 80,000 tons of coal from American Coal Sales as an "all or nothing deal", for $30 per ton. Should Cinergy purchase the additional 80,000 tons of coal?
5. Suppose that Cinergy learns that the energy content of the coal from Cyprus Amax is actually 13,000 BTUs per pound. Should Cinergy revise its procurement plan?
6. Cinergy has learned from its trading group that Cinergy can sell 50,000 megawatt hours of electricity over the grid (to other electricity suppliers) at a price of $30 per megawatt hour. Should Cinergy sell the electricity? If so, which generating units should produce the additional electricity?

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Solution Summary

A couple questions outlining the procurement challenges of coal for Cinergy.