Assignment
Town bought by power company In 2002 America's largest power generator found a unique way to avoid legal challenges from a town it has polluted - buy it, lock, stock and barrel, for $20m (£13.7m). American Electric Power (AEP), which also runs the UK's coal-fired Ferry bridge power station, is buying Cheshire, Ohio, which found itself under brown and blue clouds from AEP's coal-burning General James M. Gavin plant that looms over the town. All 221 residents will leave after accepting a deal that gives 90 homeowners cherubs for three times the assessed value of their homes, about $150,000 each, totaling $13.5m. Those renting homes in the town will each get $25,000. And in true American style the three lawyers hired by residents to negotiate the deal will share $5.6m between them. AEP gets 200 acres of property, several businesses and 90 homes to use as temporary housing for plant employees. More importantly, it gets non-disclosure agreements that prevent residents disclosing the terms of the deal and signed pledges that townsfolk will never sue the power company for property damage or health problems.
No one yet has sued AEP for the asthma attacks, grime, headaches, burning eyes, sore throats and lips, mouth blisters or white-colored burns on lips, tongues and insides of mouths caused by sulphur dioxide and sulphuric acid emissions. These emissions worsened in 2001 after the installation of a new $195m emissions control system meant to cut nitrogen oxide emissions. That is when the blue plumes arrived - because the new technology did not work very well and a blue acid haze fell on Cheshire, usually on hot, humid days when exhaust fumes from the 830 ft smokestacks fell down into the town rather than going up into the sky. The Environmental Protection Agency (EPA) of the US had accused AEP two years earlier of violating the Clean Air Act and threatened to force the plant to stop burning cheaper high-sulphuric coal.
The EPA and environmental groups ranging from the Sierra Club to the Edison Electric Institute all now seem happy with this new deal, which is thought to be the first takeover offer for a whole town. The EPA has even backed off from plans to force the burning of more expensive coal at the 2,600-megawatt General James M. Gavin plant by AEP, the nation's largest utility with annual revenues of $61bn. But some of the townsfolk seem to have regrets. Helen Preston, the town's oldest resident, who still lives in the house where she was born, reportedly thinks her fellow residents sold out too cheaply by accepting the first offer. Others acknowledged that legal action might have taken a decade and there might not have been another chance to get away from the health hazards falling from the skies from the Gavin plant.
Question
1 How does the idea of negative externalities apply to this case study?
2 Consider the advantages and disadvantages of this approach to solving the negative externality problem.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.