A CASE STUDY

ON

CINERGY COAL ALLOCATION

FACULTY GUIDE: SUBMITTED BY:
Group - 6
PROF. MADHUMITA G.M VINAY KUMAR
REDDY K
VINEET SHASHIDHARAN
SIZZIL ISLAM CHOUDHURY
NARESH KUMAR N
ABHISHEK KUMAR

ABSTRACT

Cinergy Corporation is a U.S. producer oI electricity Ior customers in Indiana,
Kentucky and Ohio. This project is based on Iive oI Cinergy`s coal-Iired power plants
and the seven coal suppliers Irom which Cinergy purchases coal to Iuel those Iive
plants.
The Iive plants vary in required electricity production output and also in plant
eIIiciency. Initial purchase cost, BTU content, transportation cost, and processing
costs also vary between the seven coal suppliers and with the delivery and use oI those
seven sources oI coal at each oI the Iive power plants. Additionally, coal is purchased
through a mix oI Iixed-tonnage and variable-tonnage contracts.
Cinergy signed three Iixed-tonnage contracts and Iour variable-tonnage
contracts. The company would like to determine the least cost way to allocate the coal
available through these contracts to Iive generating units.

TRANSPORTATION MODELS
The transportation problem is one oI the subclasses oI linear programming problem
where the objective is to transport various quantities oI a single homogeneous product

that are initially stored at various

origins, to diIIerent destinations in such a way that the total transportation is
minimum.
Transportation models or problems are primarily concerned with the optimal (best
possible) way in which a product produced at diIIerent Iactories or plants (called
supply origins) can be transported to a number oI warehouses (called demand
destinations). The objective in a transportation problem is to Iully satisIy the
destination requirements within the operating production capacity constraints at the
minimum possible cost. Whenever there is a physical movement oI goods Irom the
point oI manuIacture to the Iinal consumers through a variety oI channels oI
distribution (wholesalers, retailers, distributors etc.), there is a need to minimize the
cost oI transportation so as to increase the proIit on sales.
Transportation problems arise in all such cases. It aims at providing assistance to the
top management in ascertaining how many units oI a particular product should be
transported Irom each supply origin to each demand destinations to that the total
prevailing demand Ior the company`s product is satisIied, while at the same time the
total transportation costs are minimized.
A transportation network is a type oI directed, weighted graph or network.
Transportation networks are used to model the Ilow oI commodity, inIormation, or
traIIic.

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Aetwork Representation

The Total Cost to purchase & use the coal is obtained by adding three inputs: the
purchase cost oI the coal, the transportation cost to the generating unit, and the cost oI
processing the coal at the generating unit.
Tuble: The Totul Cost (S/ton) to purchuse & use the coul
Miami 5 Miami 7 Beckjord East Bend Zimmer

RAG 37.00 37.00 36.75 32.00 32.75

Peabody 39.75 39.75 40.50 35.75 36.50

American 38.00 38.00 39.75 34.00 33.75

Consol 45.25 45.25 45.85 42.25 41.85

Cyprus 50.00 50.00 49.75 45.00 45.75

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Addington 38.25 38.25 39.00 37.25 37.00

Waterloo 46.00 46.00 45.60 42.00 43.60


We need to convert Cost ($/ton) into Cost ($/BTU), by dividing $/ton by BTU/ton
C
$/BTU
C
$/ton
/ BTU/ton

Tuble: The Totul Cost (S/BTU) to purchuse & use the coul
Miami 5 Miami 7 Beckjord East Bend Zimmer

RAG 6.325 6.325 6.282 5.470 5.598

Peabody 6.642 6.642 6.767 5.973 6.098

American 6.702 6.702 7.010 5.996 5.952

Consol 8.208 8.208 8.317 7.664 7.592

Cyprus 9.07 9.07 9.025 8.163 8.299

Addington 6.938 6.938 7.045 6.757 6.712

Waterloo 8.345 8.345 8.272 7.619 7.909


Conversion oI Supply & Demand into BTUs
Demand
1. Miami
5
550,000 x 10,500 x 1000 57.75x10
11
BTU

2. Miami
7
500,000 x 10,200 x 1000 51x10
11
BTU
3. Beckjord 650,000 x 10,100 x 1000 65.65x10
11
BTU
4. East Bend 750,000 x 10,000 x 1000 75x10
11
BTU
5. Zimmer 1,100,000 x 10,000 x 1000 110x10
11
BTU
Supply
1. RAG 350,000 x 13,000/ 0.00045 101.1x10
11
BTU
2. PCS 300,000 x 13,330/ 0.00045 88.86x10
11
BTU
3. ACS 275,000 x 12,600/ 0.00045 77x10
11
BTU
4. Consol 200,000 x 12,250/ 0.00045 54.4x10
11
BTU
5. Cyprus 175,000 x 12,000/ 0.00045 46.6x10
11
BTU
6. Addington 200,000 x 12,000/ 0.00045 53.3x10
11
BTU
7. Waterloo 180,000 x 11,300/ 0.00045 45.2x10
11
BTU
Tuble: Totul umount of coul supplled to euch power plunt (Thousund tons)
Miami 5 Miami 7 Beckjord East Bend Zimmer
Dummy

RAG 0 0 0 75 26
0

Peabody 38 51 0 0 0 0

American 0 0 0 0 77
0

Consol 0 0 0 0 07
47

Cyprus 0 0 0 0 0
47

Addington 20 0 33 0 0
0

Waterloo 0 0 33 0 0
12

Minimum Cost (75x5.470) (26x5.598) (38x6.642) (51x6.642)
(77x5.973) (7x7.664) (20x6.938) (33x7.045)
(33x8.272) 2304.726 ($/BTU)
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Aew Aetwork Representation