Reference no: EM131686118
Jane is a member of the board of directors of Power Company Z which is Considering the construction of a new power plant.
Coal-fired power plants emit sulfur dioxide into the atmosphere. Ambient air containing a high concentration of sulfur dioxide is known to create acid rain, which damages crops and erodes some metals (e.g., nickel and copper). If number 2 oil is used as fuel instead, the sulfur dioxide emission of the power plant could be significantly reduced. However, replacing coal With oil will raise the fuel cost by about 20%.
Some directors believe that any increased costs would have to be reflected in higher prices. An increase in electricity price would create problems for the company. For example, the Public Utilities Commission may delay approving the proposed rate increase. Consumers may react negatively to the price increase. which could hurt the company's public image.
Other directors are convinced that the company should not use methods that would increase expenses. They point out that diverse industries and motor vehicles are far more guilty of causing air pollution than the power industry. As one director put it, "Why should we be leaders in this area when it is going to cost either stockholders or consumers a great deal of money?"
Jane knows that fuel represents only one-seventh of the total cost of generating and distributing electricity. She feels that the company has an obligation to protect public health as long as it can stay reasonably profitable. She believes, further, that the company should not allow purely business considerations to dominate its decisions in an area of such critical importance.
What do you think Jane should do?