The utility projects its annual electricity demand to grow by an additional 7 million Mwh to 19 Mwh per year. The utility anticipates that its peak load will grow by 1,000 Mw, so needs to add 1,000 Mw of new capacity. Utility managers considering whether to install a nuclear power plant or a set of gas-fired turbines. The table below summarizes the capital and operating costs of the two options.

Fuel source	Capacity (Mw)	Capital cost ($millions)	Operating cost ($/Mwh)
Nuclear	1,000	$5,000	$5.00
Natural gas	1,000	$500	$50.00

a. Assuming that the utility's rate base would be increased by the amount of the capital cost for whichever option the management selects, what would be the earnings and regulated price of electricity under each generation alternative? Assume that the old capacity continues to generate 12 million Mwh per year, and that the new plant, or plants, meet all the growth in demand. a. What is the levelized cost of each alternative, assuming that the new plants have a 30-year life and the discount rate is the allowed rate of return? Show how you derived the answer. b. What is the regulated price of electricity if the utility adopted each alternative? Show how you derived the answer.(Don't forget to include the existing $10 billion in the new rate base, and the $200 million existing operating costs in the new total operating costs.) c. What are the utility's annual profits under each altternative? Show how you derived the answer. is the alternative with the lowest levelized cost also the alternative that makes the most profit for the utility?