The demand for electric energy increases every year. However, due to recent changes in the U.S. energy supplies, a growing gas shortage forced suppliers to curtail deliveries of natural gas for power generation. Many utilities anticipating supply problems switched to burning more costly light distillate oil. Unfortunately the Arab boycott of 1973 and the following price increases for oil forced again utilities to seek a cheaper source of fuel, namely coal, as a substitute for oil. Even though the U.S. has abundant supply in coal, the use of coal in power generation was limited in the past because of a higher capital cost associated with installing air pollution control devices. Therefore, current utilities primary concerns are "does the lower fuel price of the coal power plant really outweigh its disadvantage of higher construction costs as compared to the oil-burning power plant?". Thus, the purpose of this paper is to evaluate the economic preference of the coal burning power plant compared to the oil-burning power plant in suppling base load power. An extensive analytical model accounting for the effects of escalating fuel prices was examined and a computer simulation model was developed to handle risk associated with various input parameters using the SLAM as a simulation language.