Decision Analysis II
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Case #1: SS Kuniang
Case Study #1 – S.S. Kuniang
Due Thursday, January 29
Part I – The Decision Situation
On April 9, 1981 the S.S. Kuniang ran aground off of the Florida coast during unseasonably severe
weather conditions. Ed Brown, Chairman and CEO of the New England Electric System (NEES),
received a call from Captain McIver, the head of his shipping subsidiary. McIver suggested that they
turn this unfortunate accident to their advantage.
The British owners of the Kuniang intended to declare the vessel a total loss, so that NEES might
get the opportunity to acquire the ship, repair it, and then use it to haul coal.
The management of NEES had been wrestling for some time with how to transport coal to their
generating plants. NEES had recently arranged to have General Dynamics construct and operate a
self-unloading ship with a capacity of 36,250 tons, a vessel universally referred to as the GD-I.
New England Electric System
NEES was a public utility holding company which owned four electric operating subsidiaries:
Massachusetts Electric Company serving 750,000 customers in Massachusetts, Narragansett Electric
Company serving 265,000 customers in Rhode Island, Granite State Electric Company serving
25,000 customers in New Hampshire, and New England Power Company (the generating
subsidiary). In addition, NEES owned a service subsidiary, New England Power Service Company, a
fuel exploration company, New England Energy Incorporated, and a shipping subsidiary, New
As an aftermath of the energy price shocks of the early 1970's, NEES' long range plan incorporated
the goals of reducing dependence on foreign oil and diversifying the fuel mix for the system's
generating plants. NEES sought to achieve an energy mix of 39% coal, 25% nuclear, 18% domestic
oil, 10% imported oil, and 8% hydro, wind power, and other alternatives. This plan would call for the
conversion of more than half of the utility's oil-fired capacity to coal. After full conversion, NEES
plants would require 3.125 million tons of coal each year: 2.7 million tons at Brayton Point,
Massachusetts, 0.3 million tons at Salem Harbor, Massachusetts, and 0.125 million tons at the
Providence, Rhode Island generating plants.
An important part of NEES long range plan was the annual transportation of 3.125 million tons of
coal. To this end, NEES established a shipping subsidiary under the direction of Captain McIver, an
experienced commercial shipper.