An electric utility company is considering a re-engineering of amajor hydroelect

Question

An electric utility company is considering a re-engineering of amajor hydroelectric facility. The project would yield greatercapacity and lower cost per kilowatt-hour of power. As a result ofthe project, the price of power would be reduced. This is expectedto increase the quantity of power demanded. The following data areavailable:
Effect of Reduced Price of Power
Current price (S/kWh)    0.07
Current consumption (kWh/year)     9 000 000
New price($/kWh)                                    0.05
Expected consumption(kWh/vear)        12 250 000

VTiat is the annual benefit to consumers of power from thisproject?

Explanation / Answer

(9 000 000 * .07) -(12 250 000 * .05) = 17 500

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