Integration of Financial Constraints into Optimal Generation Planning

This paper describes the development and application of a methodology for electric utility generation planning which calculates the optimal strategy to satisfy both standard and financial constraints in a single program. The current model has been developed on the basis of OPPLAN, an optimal generation planning methodology based on linear programming techniques. One of the financial constraints imposed on the linear program in the OPPLAN specifies that the interest coverage ratio must be greater than a user-specified minimum coverage ratio. Three nonlinear relationships were encountered during formulating the coverage ratio. The following statements express the nonlinear relationships. 1) When retained earnings are greater than new equity, all retained earnings must be used for construction. 2) The federal income tax (FIT) must be included only if it is positive. 3) The AFUDC portion allowed in the coverage ratio calculations must be equal to the lesser of the total amount of AFUDC and a certain percentage (usually 10%) of operating income. These are linearized by use of 0, 1 variables. To accelerate the computing speed, two provisions are made: 1) a user specifies whether there will be any equity issuance annually, and he then runs OPPLAN, and compares the selection with RPIFSM (a financial simulation programs) results. If the results are different, he corrects the selection according to RPIFSM. 2) FIT is positive by default. These two options provide rapid convergence to a solution. The new methodology is applied to several case studies.