Electrification ratio of Nias Island in 2019 is 51.38 %, while around 281 villages are not yet electrified. The island has many potential resources for new renewable power plants. The government policy about development of electricity in isolated and small islands electric power systems requires that the operation use N-2 criteria in the generation, and fossil-based generation is still considered necessary to ensure reliable operation. Meanwhile, electrification and energy management considering economic and environmental aspects becomes a big issue in the electricity sector. This paper aims to respond to a part of such challenges by introducing a study of generation planning and optimization, using a method suitable with PLN business plan and regulations. The potential of organic waste from plantations, river topography, and utilization of solar power is considered alternatives for renewable energy. Other possible solutions include the development of transmission grids. The N-2 criteria and the policy about reducing the consumption of fuel are taken into account. This study considers real data collected in January 2020 and uses AMPL. The methods and calculations used in this paper are taught in Power System and Control course, given for master level students at Institut Teknologi Bandung, Indonesia. As a number of students are employees of PT. PLN (Persero), the national electricity company of Indonesia, the course proves to be useful in practical settings. This paper aims to optimize generation operational cost and schedule. It has been shown that PLN is potentially able to secure cost efficiency of Rp 31,055,342,319 in one month and should maximize PLTG MPP Batam and other power plants according to the results of economic dispatch in order to obtain optimal economic operation.