Abstract:
The City of Austin's public power authority has invested in the South Texas Nuclear Project in anticipation of growth in electricity demand. The nuclear project has fallen on hard times and city officials must decide whether to default on payment obligations, pursue legal actions, raise rates, or issue bonds. A brief sequel recounts the city's decision to proceed with a bond issue and the subsequent outcry from opponents of the move.
Learning Objective:
The case allows students of energy policy and capacity management to consider the ways in which uncertain demand and political realities influenced the scale, timing, and technology of capacity expansion decisions. It complements The Future of the Los Alamos Counter Electric Utility System (C15-84-561.0), a case which addresses similar issues, but with more economic and political sophistication. The case also complements a Harvard Business Review article (Nov.-Dec. 1980) by Robert Leone and John Meyer entitled, "Capacity Strategies for the 1980s." The case has been used effectively in executive education programs, with utility industry professionals, and in energy policy courses. It is also a candidate for use in the capacity management segment of an operations management curriculum.
