Reference no: EM132488448

Question - The tri-county generation and Transmission Association is a nonprofit cooperation organization that provides logical service to rural customers. Based on faulty long-range demand forecast, tri-county overbuild is generation distribution system. Tri-county now has more capacity than it needs to serve its customers. Fixed costs, mostly debt service and investment in plant and equipment, are 82.5 million per year. Variable costs, mostly fossil fuel costs, are $25 per megawatt hour. The new person in charge of demand forecasting prepared a short-range forecast for use in next year's budgeting process. That forecast calls for Tri-County customers to consume 1,000,000 MWh of energy next year.

1. How much will Tri-County need to charge his customers per megawatt per hour to break even next year?

2. The Tri-County customers balk at that price and conserve political energy. Only 95% of the forecast demand materializes. What is the resulting surplus or loss for this nonprofit organization?