A Goal Programming Model For Determining The Optimal Production Schedule Considering Penalties Or Bonuses Dependent On Quality ? Introduction

In many parts of the country, electric utilities use spot market coal to make up the difference between the amount of contract coal and the total amount burned. The utilities involved will normally have a structured contract for those companies supplying that spot coal. These contracts will often involve a pricing schedule with bonuses or penalties for coal above or below the specified coal quality goals. Normally, penalties will be assessed on the sulfur, ash, and other coal quality variables. This paper deals with some aspects of the pricing schedule of one of the eastern utilities that buys coal on the spot market. This utility has a number of plants that a supplier can attempt to supply through bidding procedures. The existence of the pricing schedule gives the supplier a number of different options. To the single-mine producer, options are available to send the coal to any demand site and to clean all, part, or none of the coal. In other words, he can ship to a number of different sites and can send different coal qualities to each site depending upon the level of preparation. In addition, the options to deliver blended coal to any given site will provide an additional level of complexity to the problem.