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The optimal cooling water discharge policy from a power plant to a stream has been studied for the purpose of preventing thermal pollution. The control policy has been obtained by means of the maximum principle and also by means of a direct search technique. The optimal policy permits a power plant to operate at the highest possible capacity and at the same time to maintain a high water quality. The policy depends on the relative weight between water quality represented by the dissolved oxygen (DO) distribution and power generation represented by the cooling water discharge rate. The transient temperature, DO, and biological oxygen demand (BOD) profiles corresponding to the optimal policy have also been determined.