Case | HBS Case Collection | 1993 (Revised from original 1992 version)

Acid Rain: The Southern Co. (A)

by Forest L. Reinhardt
 

Abstract

The Southern Co., an electric utility, is planning its compliance with the 1990 amendments to the Clean Air Act. The Act established a system of tradeable permits for sulfur dioxide emissions. The company must decide whether to install pollution control equipment and generate excess permits for sale to other firms, or to emit larger quantities of sulfur dioxide, save capital costs, and purchase pollution permits. Can be used to teach discounted cash flow analysis of a make versus buy decision. Also raises issues of expected cost minimization, questions of economic and political uncertainty, and the value of flexibility.

Keywords: Energy Generation; Business Strategy; Environmental Sustainability; Cost vs Benefits; Financial Management; Strategic Planning; Investment Return; Government Legislation; Wastes and Waste Processing; Utilities Industry; Energy Industry; United States;

Language: English Format: Print 7 pages Purchase

Citation:

Reinhardt, Forest L. "Acid Rain: The Southern Co. (A)." Harvard Business School Case 792-060, April 1993. (Revised from original February 1992 version.)

Related Work

  1. Case | HBS Case Collection | 1992 (Revised from original 1992 version)

    Acid Rain: The Southern Co. (B)

    Forest L. Reinhardt

    In addition to the issues of expected cost minimization elucidated in Acid Rain: The Southern Co. (A), problems involving regulatory uncertainty are critical to the firm's Clean Air Act compliance strategy. The regulatory uncertainty affects, and is affected by, the uncertainties about the price of allowances to emit sulfur dioxide. Provides additional information on the regulatory risks and uncertainties confronting the Southern Co.; permits exploration of the relations between federal environmental regulation and state-level regulation of rates of return.

    Keywords: Energy Generation; Business Strategy; Environmental Sustainability; Cost vs Benefits; Risk and Uncertainty; Strategic Planning; Investment Return; Government Legislation; Wastes and Waste Processing; Business and Government Relations; Utilities Industry; Energy Industry; United States;

    Citation:

    Reinhardt, Forest L. "Acid Rain: The Southern Co. (B)." Harvard Business School Case 793-040, October 1992. (Revised from original September 1992 version.)
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  2. Teaching Note | HBS Case Collection | 1993 (Revised from original 1993 version)

    Acid Rain: The Southern Company (A) and (B) TN

    Forest L. Reinhardt

    Teaching Note for (9-792-060) and (9-793-040).

    Keywords: Pollution and Pollutants; Utilities Industry;

    Citation:

    Reinhardt, Forest L. "Acid Rain: The Southern Company (A) and (B) TN." Harvard Business School Teaching Note 794-043, October 1993. (Revised from original September 1993 version.)
    CiteView DetailsPurchase Related

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Forest L. Reinhardt
John D. Black Professor
Business, Government and the International Economy

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