In an effort to maximize reliability and minimize cost, the importance of prioritizing capital expenditures related to system improvements and additions has quickly become one of the most important challenges facing system planners. The Omaha Public Power District (OPPD; Omaha, Nebraska, U.S.) uses an asset management system in which various departments identify potential projects and submit business cases to gain approval for funding. During a recent OPPD business case review of distribution planning projects, the utility identified a few common ideals that were not always so common to the project review process, resulting in inconsistent project valuation.

In an environment where projects compete for the same pot of money, it is necessary for everyone to use the same set of financial guidelines and rules. The goal should be to present all projects in a manner that outlines their appropriate value and uses methods consistent to all other cases, rather than to get “my” project approved. It is actually counterproductive for project owners to develop a “creative” business case to gain project approval. For this reason, a successful asset management process requires well-documented financial values, probabilities and methods for evaluating project value. In essence, the project evaluation process is reduced to which project should be recommended and why should it be done.

Preferably, potential problems with respect to system configuration are most often identified prior to an event exposing them. Typically, these problems fall into one of three major categories: normal loading, contingency loading or voltage violations. Once the problem is identified, a course of action must be outlined with respect to a long-term objective. The long-term perspective allows for the weighing of anywhere from small fixes to major projects. In severely capital-constrained environments, it may be necessary to use a small fix and defer the costs associated with a major project.

Documenting a progression for the identification and evaluation of different project alternatives is the first step in developing consistent and creditable businesses cases. Using a documented and agreed-upon process allows easy comparisons of different projects and avoids per-case discussions related to alternatives. The different alternatives should be prioritized with respect to average costs by project type. Once a problem is identified, the engineer can move through a progression of project types, from low to high cost, based on estimated average project costs. For example, the cost of adding equipment (such as capacitor banks or regulators) should be less than adding a circuit.

Figure 1 presents a more detailed example of what a project review flowchart might look like for a specific project type. Using a documented method helps ensure that all options are reviewed, eliminating the need for a project review committee to ask what alternatives were evaluated. Once a project that corrects the problem or a potential problem is identified, the value of completing the project must be calculated.

When calculating the value of completing the project, considerations must be given to issues such as standards, probabilities and consequences. When evaluating contingency-related problems, a probability must be applied to each event to best represent the forecasted risk. There is a definite cause-and-effect relationship between what may happen and what should be done. Effects can occur with the system in normal or contingency configuration. Establishing a documented cause-and-effect diagram will help avoid confusing a “symptom” with an “illness.” Figure 2 is an example of a cause-and-effect diagram for distribution system analysis.

Once the causes and effects are identified, the development of value classes is the next area of consideration. Value classes are quantifiable categories related to a specific business driver. Examples of value classes are lost revenue, customer minutes of sustained outage, customer interruptions (momentary outages), energy value (per-unit cost to generate energy) and capacity value (per-unit cost to increase system capacity). Each of the different value classes should be identified and assigned a value relative to the business driver they represent. These values should be documented and used for all project business cases that are competing for the same funds.

The next phase of the process is project value mapping. During this phase, all applicable combinations of effects (occurrences), value classes and causes (events) are considered and documented graphically. Identifying all potential causes is particularly important when mutually exclusive events result in the same problem. When this occurs, all values must be included to obtain the appropriate project value.

The final project value map is created by reviewing the event, value class and occurrence with respect to a given project type. Beginning with the occurrence type, the following progression is completed: If occurrence took place, a project type would benefit the value class resulting from the cause. Figure 3 is a value map example for a capacitor project. Structuring the value map in this order allows for project evaluation using the aforementioned progression. For example, “If cable overloading took place, a capacitor could prove to be a benefit by preventing lost revenue from load growth.”

Creating value maps greatly simplifies the value table creation process. Once the value maps are created, tables can be used to compile associated information such as probabilities and formulas used in the total project value calculation. By reviewing the relationships shown graphically in the mapping process, the occurrence cause, value classification and occurrence type can be directly transferred to the value table for all applicable combinations. Probabilities can then be added based on corporate factors or a by-case basis for specific system components. Probabilities calculated on a by-case basis should follow documented and approved methodologies identified by business case developers and reviewers.

Statistical relationships are used to avoid taking double credit for occurrences, which are not mutually exclusive. For example, if one event must take place for another to occur, the value of the project must be adjusted accordingly.

Project value tables provide a simple and concise method of presenting the results of the value map process to end users. The value tables are meant to serve as a menu of potential project benefits for an engineer to select from, not a recipe to follow. Each project will have its own specific set of applicable benefits; however, by reviewing a table of values, consideration is given by each individual engineer in a more consistent manner. Additionally, should new benefits not identified in the initial mapping be discovered, the tables can be updated to maintain consistency.

As shown in the table, each combination of cause, value class and occurrence can be evaluated using a certain equation. Equations used for evaluating the various combinations should be documented to further increase the consistency of the business cases as a whole. Once the value tables are completed, engineers can select all applicable combinations for the specific project they are working on.

As an example of the complete process, let's consider a situation where load growth has caused low voltage on a distribution circuit. Through engineering analysis, the viable options identified to achieve acceptable line voltage are to reconductor a portion of the line, install voltage regulators or add capacitor banks. Since each of these options would resolve the low-voltage problem, the capacitors were selected due to their lower cost. Having answered “the what,” it is now time to justify the project, or “the why.” Given the fact the problem is low voltage; planning standards (which are internal guidelines and differ from ANSI standards) play a major role in why the project should be done. Referring back to Fig. 3, additional combinations of effects, value classes and causes may help add to the project justification. Equations documented in the value table or elsewhere could then be used to quantify the financial value.

Applicable combinations and related formulas include:

1. An increase in kilowatt (kW) losses resulting from load growth, which negatively impacts energy generation costs. Installing the capacitor will lead to fewer losses and reduce system demand. Therefore: Energy Value = (kW loss reduction) × (loss factor) × (hours in a year) × (kWh generation costs).

2. An increase in kW losses resulting from load growth, which negatively impacts circuit capacity. Installing the capacitor will allow more load to be served without upgrading the circuit conductors. Therefore: Capacity Value = (kVA load reduction) × (per kVA cost to install capacity).

3. Continued load growth will result in a line overload, an inability to serve new customers and lost revenue. The capacitor would allow additional customers to be served. Therefore: Lost Revenue Value = (number of minutes customers are unable to be served) × (estimated dollars per customer min).