Preventing Pollution and the Costs of Waste Disposal

Lake Weir Power Plant provides power to a metropolitan area of 4 million people. Sundeep Guliani, the plant’s controller, has just returned from a conference on the Environmental Protection Agency’s regulations concerning pollution prevention. She is meeting with Alton Guy, the president of the company, to discuss the impact of the EPA’s regulations on the plant.

“Alton, I’m really concerned. We haven’t been monitoring the disposal of the radioactive material we send to the Willis Disposal Plant. If Willis is disposing of our waste material improperly, we could be sued,” said Guliani. “We also haven’t been recording the costs of the waste as part of our product cost. Ignoring those costs will have a negative impact on our decision about the next rate hike.”

“Sundeep, don’t worry. I don’t think we need to concern ourselves with the waste we send to Willis. We pay the company to dispose of it. The company takes it off our hands, and it’s their responsibility to manage its disposal. As for the cost of waste disposal, I think we would have a hard time justifying a rate increase based on a requirement to record the full cost of waste as a cost of producing power. Let’s just forget about waste and its disposal as a component of our power cost. We can get our rate increase without mentioning waste disposal,” replied Guy.

What responsibility for monitoring the waste disposal practices at the Willis Disposal Plant does Lake Weir Power Plant have? Should Guliani take Guy’s advice to ignore waste disposal costs in calculating the cost of power? Be prepared to discuss your response.