The New Manager of the Electric Utility Notes That Recent

Essay

The new manager of the electric utility notes that recent summers have been warmer than average.Consequently,for next year she revises upward the probability that actual demand will exceed average demand;this is estimated to occur 8 percent of the year or 29.2 summer days.She estimates that each power incident can cost far less than her predecessor had spent.Using different management techniques to deal with brownouts,she hopes to reduce the cost per incident to $10,000.Because the previous manager had not invested in additional capacity to cover maximum peak-load requirements,that option is still available.She faces the prospect that it will cost an extra $3,000,000 to increase capacity from average to peak.This amount is spread out over 10 years,or $300,000 per year.Should peak-load capacity be installed?