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Title: Use Of Simulation For Utility Economics Decisions
Author: J. F. Pink J. F. Pink
Source: American Gas Association 1971
Year Published: 1971
Abstract: A simulation computer model is described for developing the economics of a new storage for a hypothetical gas utility--Coldsnap Natural. Such a simulation uses statistical weather data and dynamic programming for optimization. It is a useful tool for study of many utility decisions. One of the advantages of computer use during the last 10 years has been the facility it aifords for detailed simulation of the business environment. Management now can explore the consequences of alternative strategies and obtain an evaluation long before any commitments are made. This applies to gas utilities where each year a decision must be made concerning a contract demand level or the need for additional peak shaving or rate adjustment. A simulation that evaluates the potential storage field economics for Coldsnap Natural Gas is demonstrated herein. Simulation has many advantages over the conventional technique of case studies in that it can take account of many factors that the latter method must either ignore or assume fixed. The results from simulation are more complete and it will account tor many more variables accurately. In the case study, these oftentimes are lumped and may be unrealistic under other-than-normal supply conditions. A simulation is dynamic since with a computer program it is easy to repeat many solutions of a particular year, weather condition or a load pattern. In addition one can parametrize a variable so that an optimum of some sort is achieved, where the income reaches a maximum. Finally a simulation is essential if one must consider the statistical variability of weather conditions as well as the changes in each type customer use per time period in the year.

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