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13.

Power Plant
Economics
Engr. Jonathan S. Rodolfo
 Reference book: PPE by F.T. Morse
The source of power plant income
 What is/are the source?
 Tribunal discount?
The source of power plant income
 Source of electricity to ultimate customers
are divided as follows:
industrial 48.2%
residential 26.2%
commercial 17.6%
others 8%
The following elements enter into the
cost electrical energy to the consumer
 Fixed element
 Energy element
 Customer element
 Investor’s profit
Fixed element
 1. capital cost of the power plant
 A. real state
 B. building and equipment
 C. cost of installation
 D. engineering fees
Fixed element
 2.capital cost of primary distribution
system
 A. cost of right way
 B. cost of line
 C. cost of substations
Fixed element
 3. interest rate, taxation and insurance
rates
 4. Depreciation obsolescence. Salvage
values
 5. management cost
 6. general maintenance
Energy element (operating cost)
 1. cost of fuel
 2. cost of labor
 3. cost of water for boiler, condenser,
cooling and house service
 4. oil, waste and supplies
 5. maintenance
Customer element
1. cost of secondary distribution system
 A. depreciation, interest, taxes, and insurance, upon
the capital cost of the secondary distribution system
 B. line and transformer maintenance and inspection

2. Labor cost of collecting revenue


a. meter reading
b. office (clerical) – records, billing, collecting, and
accounting
3. Cost of franchise
4. Publicity – public relations, advertising, etc.
Investor’s profit
Review on Engineering Economy
Sample
A power plant cost 375,000 dollars to
build. It’s life is assumed 20 years; salvage
value is 15%. Find the sinking fund
payment. Interest compounded annually
at 5%.
 Find the production cost per 1000 kg of
steam in a steam power plant when the
evaporation rate is 7.2 kg steam per kg
coal; initial cost of plant, 150,000 dollars;
annual operation cost exclusive of coal,
15,000 dollars. Assume life of 20 years; no
final value; interest on capital, 4%; on
sinking fund, 3%. Average steam
production is 4,500 kg per hr; cost of coal,
8.00 dollars per tonne.
A 500 kw electric lighting plant cost 95
dollars per kw installed. Fixed charges,
14%; operating cost, 1.3 cents per kw-hr.
The plant averages 150 kw for 5000 hr of
the year, 420 kw for 1000 hr, and 20 kw for
the remainder. What is the unit cost of
production of electric energy.