Asset Management Toolkit Modules

Asset Management Toolkit Modules
An Approach for Risk-Informed Performance-Focused Asset

Management in the Power Delivery Industry
Technical Report
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Asset Management Toolkit Modules
An Approach for Risk-Informed, Performance-
Focused Asset Management in the Power
Delivery Industry
1011365
Final Report, July 2005
EPRI Project Manager

W. Parkinson
Electric Power Research Institute 3412 Hillview Avenue, Palo Alto, California 94304 PO Box 10412, Palo Alto, California 94303 USA
800.313.3774 650.855.2121 askepri@epri.com www.epri.com
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CITATIONS
This report was prepared by
EPRI
3412 Hillview Avenue
Palo Alto, CA 94304
Principal Investigator
W. Parkinson
This report describes research sponsored by the Electric Power Research Institute (EPRI).
The report is a corporate document that should be cited in the literature in the following manner:
Asset Management Toolkit Modules: An Approach for Risk-Informed, Performance-Focused

Asset Management in the Power Delivery Industry. EPRI, Palo Alto, CA: 2005. 1011365.
iii
REPORT SUMMARY
With the growing emphasis on risk management, decision makers need both quantified estimates
of the risk/uncertainty and actionable results for capital and operation and maintenance (O&M)
investments in power delivery projects. This report describes the concepts and modular
automation framework for an asset management toolkit that embodies the methods and processes
of risk-informed, performance-focused asset management in the power delivery industry.
Background
Power delivery equipment owners and operators are becoming aware of some of the limitations
of conventional business approaches. Depending on circumstance and degree, these limitations
often include preconceived budgets; emphasis on costs rather than stakeholder values; focus on
shorter-term equipment issues rather than long-term global issues; inconsistent business cases;
difficulty in compiling asset data from non-automated sources; inadequate horizons for long-
term planning; reliance on best-estimates of return on investments; and insufficient attention to
risk and vulnerabilities throughout the remaining asset operating term. In fact, a survey of EPRI
members identified a significant gap between fully quantitative risk analysis tools that are used
today and such tools that will be needed in the future. Risk-informed and performance-focused
asset management approaches have been successful when applied to financial investments and
are increasingly being applied to physical assets in other industries such as aerospace and
petrochemical and now to electric industry sectors such as generation.
Objectives
To describe the role of risk-informed, performance-focused asset management in power
delivery.
To establish a modular automation framework for this approach that integrates with and
incorporates the capabilities of enterprise systems in the power delivery industry.
To illustrate this methodology with examples.
To provide an inventory of existing tools that could be used in an asset management toolkit.
Approach
Project investigators developed an initial inventory of risk-informed, performance-based asset
management concepts by surveying existing EPRI reports representing over fifteen years of
research (building on an earlier technical update 1002132). This effort further built on EPRI
experience gained from using asset management tools in various sectors (for example, project
prioritization (1001877) and aging assets (1000422) methods from power delivery; quantitative
risk tools for major assets (1000820) from generation; and the risk-informed asset management
v
development plan (1006268) from nuclear). Investigators drew critical asset management issues
and needs for power delivery members directly from the Asset Management Toolkit
supplemental project sponsored by City Public Service San Antonio, Consolidated Edison of
New York, Kyushu Electric Company, and Long Island Power Authority as well as from EPRIs
Power Delivery Asset Management Conferences (1008552 and 1008965). Investigators further
enhanced the issues and needs with insights from actual applications of asset management
methods from member utilities in generation. Investigators tailored these risk-informed,
performance-based asset management methods to an overall approach for power delivery
applications that they call the asset management toolkit approach, a companion effort to the
power delivery asset management guidelines and model (1008550) and asset performance
database (1008553).
Results
This report describes an asset management toolkit (AMT) approach for power delivery that
supports strategic and long-term planning, life-cycle management, portfolio evaluation, and risk
management and assessment. These are areas identified by members as having the largest
technology gaps in power delivery asset management. The report discusses the role of the AMT
approach in the power delivery industry and its ability to address limitations with conventional
business approaches. A functional modular automation approach such as AMT allows users to
build elements from existing capabilities in their software and information technology portfolio.
Tight integration of asset management with enterprise systems enables efficient integration of
applications across business units that can greatly reduce information technology costs and yield
a range of business benefits. This report also provides examples of risk assessment and portfolio
evaluation processes; illustrates techniques for visualizing asset management results; and
summarizes next steps needed to more fully apply this technique in the power delivery industry.
EPRI Perspective
Asset management implementations in the electric utility sector are challenging. Organizational
boundaries, inadequate asset and cost data, a multiplicity of software decision tools and schedule
delays and overruns in enabling enterprise systems, and a changing business environment have
all inhibited asset management implementations. While filling gaps in decision support
capabilities and asset data, EPRI also has examined the problem of automating asset
management methods and processes. Rather then attempting to build a comprehensive stand-
alone software solution, EPRI research has focused on the concept of exploiting members
existing portfolios of information technology solutions. This concept, in turn, requires
framework- and gap-filling capabilities, an approach EPRI refers to as the asset management
toolkit. Related power delivery asset management reports include EPRI reports 1008550,
1008552, 1008553, and 1008565.
Keywords
Asset management
Asset manager
Capital project prioritization
Power delivery
Risk management
vi
ABSTRACT
Decision makers need quantified estimates of the risk/uncertainty involved in capital and
operation and maintenance (O&M) investments in power delivery projects. This report describes
the method and process of risk-informed, performance-focused asset management in the power
delivery industry. The report is intended for decision makers, financial planners, project
originators, and reliability/life-cycle management engineers at substations and other field
locations, maintenance facilities, and corporate offices.
The asset management toolkit (AMT) approach for power delivery described in this report
supports strategic and long-term planning, life-cycle management, portfolio evaluation, and risk
management and assessment. A functional modular approach using AMT is best suited to both
software development and the wide variety of asset applications because it allows users to build
elements from existing capabilities in their software and information technology portfolio. Tight
integration of asset management with enterprise systems also is crucial; enabling efficient
integration of applications across business units can greatly reduce information technology costs
and yield a range of business benefits.
The report describes the successful application in 2004 of this asset management approach to
three types of business applications in the power delivery industry: economic analyses of
proposed capital and O&M projects, optimized portfolios of these projects, and forecasted key
performance indicators. A longer list of power delivery applications is planned for 2005. The
AMT approach promises a range of benefits to power delivery asset owners/operators, including
improved internal rate of return, profitability, and reliability, as well as reduced loss probability.
vii
ACKNOWLEDGMENTS
EPRI wishes to thank members of the Asset Management Toolkit Tailored Collaboration project,
including City Public Service of San Antonio, Consolidated Edison of New York, Kyushu
Electric Company and Long Island Power Authority.
This report was prepared with important contributions from Jeremy Bloom and George Sliter of
EPRI, Serge Hugonnard-Bruyere of EDF, Steve Hall of Data Systems & Solutions, LLC, and
Ron King and Nikki Delse of EPRI Solutions.
EPRI also acknowledges Steve Hoffman of Hoffman Marketing Communications, Inc.,

who edited this report.
ix
CONTENTS
1 INTRODUCTION ....................................................................................................................1-1
1.1 Strategic Issues Facing the Electric Utility Industry.........................................................1-1
1.2 Goals of the Risk-Informed, Performance-Focused Asset Management Approach........1-3
1.3 General Requirements for an Asset Management Toolkit ..............................................1-5
1.4 Report Organization ........................................................................................................1-7
2 ASSET MANAGEMENT HIGH LEVEL BUSINESS OBJECTIVES .......................................2-1

2.1 The Power Delivery Asset Management Model ..............................................................2-1
2.2 Economic Elements of an Asset Management Decision.................................................2-3
2.3 Asset Management Business Applications .....................................................................2-5
2.3.1 Economic Analyses of Capital and O&M Projects...................................................2-5
2.3.2 Optimized Portfolios of Capital and O&M Projects ..................................................2-6
2.3.3 Forecasting Key Performance Indicators ................................................................2-6
2.3.4 Repair/Replace Decisions for Aging Equipment......................................................2-7
2.4 Asset Management Tiered Evaluation Approach ............................................................2-8
2.5 Modular Approach to Asset Management .....................................................................2-10
2.5.1 Additional Uses of the Modular Approach .............................................................2-11
2.5.2 Benefits of Modularization .....................................................................................2-12
2.6 Integration of Asset Management with Enterprise Systems..........................................2-13
3 ASSET MANAGEMENT FUNCTIONAL MODULES..............................................................3-1

3.1 Asset Improvement Optimizer (Portfolio) ........................................................................3-2
3.2 Externality Value Provider ...............................................................................................3-2
3.3 Economic Calculator .......................................................................................................3-2
3.4 Revenue Calculator.........................................................................................................3-2
3.5 Total Cost Calculator.......................................................................................................3-2
3.5.1 Preventive Maintenance Cost Calculator ................................................................3-3
3.5.2 Corrective Maintenance Cost Calculator .................................................................3-3
xi
3.5.3 Non-Maintenance Cost Calculator...........................................................................3-3
3.6 Power Price Forecaster...................................................................................................3-3
3.7 Delivered Power Calculator.............................................................................................3-3
3.8 Reliability Calculator........................................................................................................3-3
3.9 Power Quality Calculator.................................................................................................3-4
3.10 Component O&M Data Provider....................................................................................3-4
3.11 Failure and Maintainability Rate Provider......................................................................3-4
3.12 Recovery/Repair Time Data Provider............................................................................3-5
3.13 Sample Application of Asset Management Module Approach ......................................3-5
4 PORTFOLIO EVALUATION AND RISK ASSESSMENT EXAMPLE: TREE

TRIMMING.................................................................................................................................4-1
4.1 Influencing Factors and Risk Sources.............................................................................4-1
4.2 Sensitivity Analysis..........................................................................................................4-3
4.3 Judgment and Historical Data .........................................................................................4-4
4.4 Analysis ...........................................................................................................................4-5
4.5 Conclusion ......................................................................................................................4-6
5 VISUALIZATION OF RESULTS.............................................................................................5-1
5.1 Phase Plane Graph .........................................................................................................5-1
5.2 Plot of Cumulative Benefit versus Investment.................................................................5-1
5.3 Project Uncertainty Comparison......................................................................................5-3
5.4 Probability of Loss for Multiple Projects ..........................................................................5-3
5.5 Project Specific Uncertainty Histogram ...........................................................................5-4
6 NEXT STEPS..........................................................................................................................6-1
7 REFERENCES .......................................................................................................................7-1
A SURVEY OF EXISTING ASSET MANAGEMENT TOOLS .................................................. A-1

A.1 List of Asset Management Tools.................................................................................... A-1
A.1.1 Strategic and Long-Range Planning and Life Cycle Management ........................ A-1
A.1.2 Portfolio Evaluation ................................................................................................ A-2
A.1.3 Risk Assessment and Risk Management............................................................... A-2
A.2 Strategic and Long Range Planning and Life Cycle Management ................................ A-3
A.2.1 EPRI TR-101162: Long-Term Capital Planning Considering Nuclear Plant
Life-Cycle Management. September 1992 ...................................................................... A-3
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A.2.1.1 Goal ................................................................................................................ A-3
A.2.1.2 Results ........................................................................................................... A-3
A.2.1.3 Intended Sector .............................................................................................. A-3
A.2.2 EPRI TR-103054: A Resource Guide to Nuclear Plant Life-Cycle
Management. November 1993 ........................................................................................ A-4
A.2.2.1 Goal ................................................................................................................ A-4
A.2.2.2 Results ........................................................................................................... A-4
A.2.3 EPRI TR-104326: Nuclear Plant Life Cycle Management Economics. April
1995................................................................................................................................. A-4
A.2.3.1 Goals .............................................................................................................. A-4
A.2.3.2 Results ........................................................................................................... A-4
A.2.4 EPRI TR-104751: Utility Activities for Nuclear Power Plant Life Cycle
Management and License Renewal. May 1995 .............................................................. A-5
A.2.4.1 Goal ................................................................................................................ A-5
A.2.4.2 Results ........................................................................................................... A-5
A.2.5 EPRI TR-106109: Nuclear Plant Life Cycle Management Implementation
Guide. November 1998 ................................................................................................... A-5
A.2.5.1 Goals .............................................................................................................. A-5
A.2.5.2 Results ........................................................................................................... A-5
A.2.6 EPRI TR-108984: Product Life Cycle Management Adapting the Best
Practices of Other Industries. November 1997................................................................ A-6
A.2.6.1 Goal ................................................................................................................ A-6
A.2.6.2 Results ........................................................................................................... A-6
A.2.7 EPRI TR-110676-V1: Life-Cycle Decision Making Volume 1: Getting
Started. September 1998 ................................................................................................ A-6
A.2.7.1 Goal ................................................................................................................ A-6
A.2.7.2 Results ........................................................................................................... A-6
A.2.8 EPRI 1004479: Aggregated DR Generation Concepts Case Studies Using
the DR Economic Screening Tool. November 2002........................................................ A-7
A.2.8.1 Goal ................................................................................................................ A-7
A.2.8.2 Results ........................................................................................................... A-7
xiii
A.2.9 EPRI Area Investment Strategy Model: A Utility Perspective ................................ A-7
A.2.9.1 Goal ................................................................................................................ A-8
A.2.9.2 Results ........................................................................................................... A-8
A.2.10 EPRI TR-113988: Technology Risk Assessment in Combustion Turbine
Based Power Plants. December 1999............................................................................. A-8
A.2.10.1 Goal .............................................................................................................. A-8
A.2.10.2 Results ......................................................................................................... A-8
A.2.10.3 Intended Sector ............................................................................................ A-9
A.3 Portfolio Evaluation ........................................................................................................ A-9
A.3.1 EPRI TR-106216: From Regulation to Competition Managing the
Corporate Portfolio For Maximum Value. March 1996 .................................................... A-9
A.3.1.1 Goals .............................................................................................................. A-9
A.3.1.2 Results ........................................................................................................... A-9
A.3.2 EPRI TR-104917: Investing Resources to Create Value The Portfolio
Approach to Capital and O&M Budgeting. March 1996................................................. A-10
A.3.2.1 Goals ............................................................................................................ A-10
A.3.2.2 Results ......................................................................................................... A-10
A.3.3 EPRI TR-108106: Portfolio Management Finding Growth Opportunities in a
Restructured Electricity Marketplace, December 1997 ................................................. A-11
A.3.3.1 Goals ............................................................................................................ A-11
A.3.3.2 Results ......................................................................................................... A-11
A.3.4 EPRI 1000371: Understanding Energy Customers Profitability EPRIs
Customer Portfolio Management System. September 2000 ......................................... A-11
A.3.4.1 Goal .............................................................................................................. A-11
A.3.4.2 Results ......................................................................................................... A-11
A.3.5 EPRI TR-113606-V1: R&D/Technology Management Best Practices Study:
Volume 1 - Executive Summary Report. November 1999 ............................................. A-12
A.3.5.1 Goals ............................................................................................................ A-12
A.3.5.2 Results ......................................................................................................... A-12
xiv
A.3.6 EPRI TR-103883: Capital Expenditure Decisions: Obtaining Commitment to
Action. May 1994........................................................................................................... A-13
A.3.6.1 Goal .............................................................................................................. A-13
A.3.6.2 Results ......................................................................................................... A-13
A.4 Risk Assessment and Risk Management .................................................................... A-13
A.4.1 EPRI 1007969: A Dynamical Systems Model for Nuclear Power Plant Risk
Management. October 2003.......................................................................................... A-13
A.4.1.1 Goals ............................................................................................................ A-13
A.4.1.2 Results ......................................................................................................... A-14
A.4.2 EPRI 1000637: The Market Price of Risk Implication for Electricity Price
Forecasting, Asset Valuation and Portfolio Risk Management. December 2000 .......... A-14
A.4.2.1 Goals ............................................................................................................ A-14
A.4.2.2 Results ......................................................................................................... A-14
A.4.3 EPRI 1008242: Assessing Nuclear Power Plant Risk Management
Effectiveness. July 2004................................................................................................ A-15
A.4.3.1 Goals ............................................................................................................ A-15
A.4.3.2 Results ......................................................................................................... A-15
A.4.3.3 Intended Sector: Nuclear.............................................................................. A-15
A.4.4 EPRI TR-114185: The Role of Distributed Resources in Business Strategies
for Risk Management. January 2000............................................................................. A-15
A.4.4.1 Goal .............................................................................................................. A-15
A.4.4.2 Results ......................................................................................................... A-16
A.4.5 EPRI 1007972: Review of Current Practices for Establishing Configuration
Risk Management Thresholds for Nuclear Power Plants. November 2003 .................. A-16
A.4.5.1 Goals ............................................................................................................ A-16
A.4.5.2 Results ......................................................................................................... A-16
A.4.6 EPRI TR-110709: Watershed Analysis Risk Management Framework A
Decision Support System for Watershed Approach and Total Maximum Daily Load
Calculation. December 1998 ......................................................................................... A-17
A.4.6.1 Goal .............................................................................................................. A-17
A.4.6.2 Results ......................................................................................................... A-17
xv
A.4.7 EPRI 1005246: Incorporating Offset Projects into Corporate Greenhouse
Gas Strategies Risk Management Under Conditions of Policy and Market
Uncertainty. December 2003......................................................................................... A-17
A.4.7.1 Goal .............................................................................................................. A-17
A.4.7.2 Results ......................................................................................................... A-18

A.4.8 EPRI TR-111387: Using RAMAS Methods to Solve Ecological Problems
Facing Utilities. December 1998.................................................................................... A-18
A.4.8.1 Goal .............................................................................................................. A-18
A.4.8.2 Results ......................................................................................................... A-18
A.4.8.4 Related References:..................................................................................... A-19
A.4.9 EPRI 1000820: Turbine-Generator Maintenance Interval Optimization Using
a Financial Risk Assessment Technique. November 2000 ........................................... A-19
A.4.9.1 Goal .............................................................................................................. A-19
A.4.9.2 Results ......................................................................................................... A-19
A.4.10 EPRI TR-108261: Property Damage Risk Assessment Scoping Study. July
1997............................................................................................................................... A-20
A.4.10.1 Goal ............................................................................................................ A-20
A.4.10.2 Results ....................................................................................................... A-20
A.4.10.3 Intended Sector .......................................................................................... A-20
A.4.11 EPRI 1001684: Probabilistic Model of Risk Assessment of Offering
Premium Power Services. March 2003 ......................................................................... A-20
A.4.11.1 Goals .......................................................................................................... A-20
A.4.11.2 Results ....................................................................................................... A-21
A.4.12 EPRI 1004007: Technical Status, Operating Experience and Risk
Assessment of Clean Coal Technologies 2001. December 2001 .............................. A-21
A.4.12.1 Goals .......................................................................................................... A-21
A.4.12.2 Results ....................................................................................................... A-21
A.4.13 EPRI 1004382: Risk Based Maintenance Guideline. November 2002 .............. A-22
A.4.13.1 Goals .......................................................................................................... A-22
A.4.13.2 Results ....................................................................................................... A-22
xvi
A.4.14 EPRI 1005337: Evaluating the Effects of Power Plant Operations on
Aquatic Communities An Ecological Risk Assessment Framework for Clean
Water Act 316(b) Determinations. July 2002............................................................... A-23
A.4.14.1 Goal ............................................................................................................ A-23
A.4.14.2 Results ....................................................................................................... A-23
A.4.15 Utility Vegetation Management: Use of Reliability-Centered Maintenance
Concepts to Improve Performance................................................................................ A-24
A.4.15.1 Goal ............................................................................................................ A-24
A.4.15.2 Results ....................................................................................................... A-24
xvii
LIST OF FIGURES
Figure 1-1 A Survey of EPRI Members Revealed a Gap Between Fully-Quantitative Risk
Analysis Tools in Use Today and Those Needed in the Future [1] ....................................1-2
Figure 1-2 Asset Management Framework................................................................................1-4
Figure 2-1 The Power Delivery Asset Management Model [6] ..................................................2-2
Figure 2-2 Master Economic Map for Power Delivery Asset Management [2]...........................2-4
Figure 2-3 Example Calculation Chain Decomposition............................................................2-11
Figure 2-4 Three Layer Architecture [2] ...................................................................................2-14
Figure 2-5 EPRIs Integrated Delivery System (IDS) Consists of a Three-Tier
Architecture that Creates Knowledge to Guide Action [2] ................................................2-15
Figure 3-1 Asset Management Module Interaction ....................................................................3-1
Figure 4-1 Influence Diagram for Tree Trimming Example ........................................................4-2
Figure 4-2 Tornado Diagram Displaying the Sensitivity Analysis for Tree Trimming
Example .............................................................................................................................4-3
Figure 4-3 Ten-Year SAIDI Scatter Plot Illustrates Useful Historical Data for Risk
Assessment........................................................................................................................4-4
Figure 4-4 An Analytical Risk Model (Curves) Shows the Results of a Probabilistic
Analysis, Compared with the Deterministic Expected Values (Vertical Lines) ...................4-5
Figure 4-5 Portfolio Risk Trade-Off (Efficient Frontier). Each Data Point Reflects a
Different Portfolio of Projects. Managers Select a Portfolio on the Efficient Frontier
Based on Their Risk Tolerance..........................................................................................4-6
Figure 5-1 Example Reliability-Profitability Phase Plane Graph ................................................5-2
Figure 5-2 Example Cumulative Benefit NPV versus Cumulative Investment NPV Graph........5-2
Figure 5-3 Example Project Uncertainty Comparison Graph .....................................................5-3
Figure 5-4 Example IRR versus Risk of Loss Graph .................................................................5-4
Figure 5-5 Example IRR Uncertainty Histogram ........................................................................5-5
xix
LIST OF TABLES
Table 2-1 Comparative Characteristics of Asset Management Analysis Levels 1, 2, and 3 ......2-9
Table 3-1 Distribution Wood Pole Example: Asset Input Data from Asset Registry [5] .............3-6
Table 3-2 Distribution Wood Pole Example: O&M Input Data [5] ..............................................3-7
Table 3-3 Distribution Wood Pole Example: Capital Input Data [5]............................................3-7
xxi
1
INTRODUCTION
This report has been developed to provide utility business functional requirements for
automation of risk-informed, performance-focused asset management based on a modular
framework, known as the Asset Management Toolkit (AMT) concept. This report is intended for
use by decision-makers, financial planners, project originators, reliability/life cycle management
engineers and asset managers at substations and other field locations, maintenance facilities, and
corporate offices.
This section discusses the needs implied by the strategic issues facing the electric utility industry,
the goals of asset management, and the general requirements for an AMT to execute the asset
management process.
1.1 Strategic Issues Facing the Electric Utility Industry
Based on a 2004 survey, an EPRI report compared the present and future needs for risk analysis
on a map of risk resolution defined by categories of qualitative, semi-quantitative, and fully
quantitative risk analysis. The report observed that users are presently using qualitative and
semi-quantitative management tools. Figure 1-1 shows that respondents believe a gap exists
between fully quantitative risk analysis tools that are used today and such tools that will be
needed in the future. This illustration also shows that survey respondents project greater use of
all risk management tools in the future, in particular fully-quantitative tools [1].
This asset management project anticipates this emerging need with the development of
requirements for an AMT that exploits existing capabilities and fills critical gaps. The following
bulleted list identifies and describes the implications of the strategic issues in todays power
delivery industry.
Maximize return on investment in asset performance. Increased stakeholder scrutiny of
investments implies a need to better understand and improve return on investment, whether
the return is financial or non-financial (e.g., improved public and worker safety). Project
costs for improved operations, maintenance, and business loss control are investments.
Valuing innovative ways to enhance or protect power delivery asset value is the most
important element of asset management. Investment innovation often involves a better
understanding of uncertainties and their associated risks; increased specification and
quantification of benefits (returns), especially early in the project definition phase when
projects begin to build an often irreversible momentum; improved identification and
consideration of alternatives; and development of portfolios that maximize investment
returns, given the many practical and often conflicting constraints that electric utilities
face today.
1-1
Introduction
Figure 1-1
A Survey of EPRI Members Revealed a Gap Between Fully-Quantitative Risk Analysis
Tools in Use Today and Those Needed in the Future [1]
Balance long-term and quick-payback planning. Historically, long-term equipment

planning has used a time horizon of only three to five years into the future. But power
delivery assets require increasingly longer planning horizons and greater pre-planning is
needed because environmental and other regulatory constraints have lengthened the time
from project initiation to completion. Surprises can be damaging for all stakeholders. Some
investments in asset improvement projects have led to dubious returns. Partly as a result of
managements concern over the benefit estimates of project sponsors and partly from market
pressures for increased earnings, projects with conservative quick payback periods have
sometimes been adopted, with the attendant consequences to long-term planning. Because
the value of an asset is the integral of cash flows over its remaining useful life, long-term
planning needs to take advantage of management options over that period.
Global versus local thinking. In evaluating and prioritizing projects, a more global decision-
making process is more likely to lead to favorable outcomes. One reason for this is that
synergies and overlaps between asset improvements in the same or different systems can
affect the value of portfolios. Often decisions are made by asset class, but sometimes
a more integrated view of all assets in an entire circuit or control area could be beneficial.
Technology replacement decisions need to consider workforce implications. Project
cost estimates need to include all associated direct and indirect costs. Hence, portfolios
increasingly need to be optimized at the control area, corporate, or even regional levels.
Risk-informed versus deterministic asset management approaches. Conventional
discounted cash flow models employ point-value estimates that are often no more than
educated guesses about future asset and financial performance. Conversely, risk management
techniques addressing uncertainties that are the basic norm of the financial investment
community will increasingly penetrate physical asset management decision making.
1-2
Introduction
Explicit treatment of equipment failure impact on power system reliability. Because of

the difficulty of making reasonably accurate estimates of changes to failure rates for both
proposed alternatives (e.g., to maintain, refurbish or replace an asset) and for future effects
of aging, asset management decisions are often based essentially on engineering judgment.
Without the ability to predict failure rate changes, forecasting asset performance is limited to
regression analysis of sparse data. Risk-informed, performance-focused asset management
offers the potential to more precisely calculate the benefits of asset improvements
(e.g., improved reliability), as well as forecast future asset performance under various
aging conditions.
Performance indicators with a well defined link to asset value. The number of
performance indicators that power delivery asset owners/operators use is often large and
sometimes conflicting. Experience in other industries indicates that companies with too many
performance indicators, and/or indicators that have not been validated by causal models,
experience lower performance than companies that use performance indicators that have a
well defined link to asset and stakeholder value. A robust quantitative business model would
provide the basis for focusing on a smaller set of performance indicators that are the most
important drivers of profitability. The associated forecasting capability provides the basis for
developing leading indicators.
1.2 Goals of the Risk-Informed, Performance-Focused Asset Management

Approach
The goal of the risk-informed, performance-focused asset management approach is to help

decision makers with the abovementioned strategic issues. This approach is a composite
financial/engineering method, automated by a set of software tools coming from commercial
vendors, EPRI and utilities themselves. Risk management technology gives decision makers
improved quantitative information regarding investments. The approach supports strategic
long-term planning and life cycle management, portfolio evaluation, and risk assessment and
management at the control area, corporate, or even regional levels.
A fundamental premise of this approach is that decisions affecting the design, operation, and
maintenance of components and systems will not only impact reliability and power quality from
an engineering perspective, but will also affect the economic performance of the asset through
their impact on expected revenues, costs, and profitability. Figure 1-2 illustrates the overall
interaction of these technical and economic aspects on asset performance.
Figure 1-2 also illustrates the most fundamental level of modularization of this approach.
Risk-informed, performance-focused asset management uses a calculation chain of technical
and financial modules to translate proposed changes in equipment, operation, maintenance, or
processes into their effects on key performance indicators or criteria. The corresponding goal is
to provide all employees a line of sight as to how their local decisions and actions impact global
value to all stakeholders.
1-3
Introduction
Figure 1-2
Asset Management Framework
This common representation can then be readily understood and shared among the different
functions, facilitating dialogue between parties responsible for these functions. The goal is to
facilitate optimized resource allocation.
The prediction of not only top-level performance indicators (e.g., revenue), but also intermediate
performance indicators (e.g., reliability of specific equipment or feeders) can be used to translate
corporate goals into specific goals for staff members throughout the company. Both top-level
and intermediate goals can be tracked to compare actual changes in asset performance with
predictions. Methodology results enable users to objectively measure and compare the different
contributors to value and risk, facilitating investment audits and other related applications.
Practical application requires that the benefit and timeliness of an asset management evaluation
compares favorably to the cost of traditional analysis processes. This practicality requires that
initial calculations in this approach are point-value in nature, but easily expanded to explicitly
address uncertainties. The goal of point values is to allow both quick, effective decisions at a
working level when needed, while uncertainties provide management decision-makers with the
range of possible outcomes and associated confidence levels needed to assess risk and make
judgments based on corporate and stakeholder views of risk tolerance. Uncertainty information
can also be used by asset managers to help identify studies that can reduce risk or identify project
alternatives which create option value.
1-4
Introduction
This approach systematizes the way these calculations are performed to assess the difference
in asset value with and without a project being implemented, addressing what if scenarios,
and taking into account the evolution of hardware and O&M activities. The specific goal of
systematization is to help provide 1) a consistent and robust method of assessment, 2) reduced
effort for each assessment, and 3) timely assessment completion before decisions are made,
which are all weaknesses in typical fully quantitative approaches. Weaknesses in fully
quantitative approaches can sometimes occur because these studies specialize by asset type, e.g.,
power transformer replacement, as opposed to being generally applicable to a wide range of
assets. Systemization and consistency puts long-term versus short-term issues as well as
low-consequence/high-frequency events and high-consequence/low-probability events on a
common playing field.
This approach performs economic evaluations of projects and portfolios at the control area,
corporate, or even regional levels. Application at an electricity enterprise level implies that the
other company business sectors use a similar risk-informed approach for economic evaluations
and that corporate project selection and budget setting use an across-the-board enterprise-level
planning and budgeting scheme. Project evaluation at all levels ultimately considers both
monetizable and non-monetizable value attributes for all stakeholders (i.e., owners, operators,
staff, safety regulators, environmental regulators, the public, etc.). Whether one is a project
manager seeking investment funds from the corporation, a corporate asset manager deciding
between investments in different business sectors, or a portfolio manager selecting the best
combination of alternatives, the goal is to operate at various levels where the full spectrum of
stakeholder values is needed.
The approach evaluates both material projects (i.e., physical improvement of systems, structures,
and components) and non-physical projects (e.g., information technology, administrative
processes, operational changes, or organizational changes). The material projects include large
O&M projects or capital improvements, and include active and passive components that are
important to either reliability or safety.
The strategic issues described above cannot be addressed by use of this asset management
process in isolation. Similarly, this technique enables evaluation of alternatives (e.g., preventive
maintenance, corrective maintenance, condition monitoring, replacement, or redesign) and
selection of the optimum strategic and long-term plan.
1.3 General Requirements for an Asset Management Toolkit
Having described the goals of a risk-informed asset management approach, we now turn to the
goals of the corresponding Asset Management Toolkit that is intended to automate that approach.
The complex, multi-disciplined and data-intensive nature of risk-informed, performance-focused
asset management necessitates automation.
1-5
Introduction
Currently, power delivery asset owner/operators can meet the goals discussed above to some
extent by using a combination of separate off-the-shelf or utility-specific software applications or
spreadsheets. However, the current lack of unified software tools can cause the analyses to be
labor intensive and time consuming. Further, certain gaps exist in the available tools (e.g., the
lack of screening analysis automation tools), even when they are combined. Complicating
matters further, much of the needed data and nearly all of the actions evaluated in this technique
are stored in and implemented by enterprise systems, respectively hence their enterprise asset
management system moniker.
The traditional software solution envisioned in the original asset management development plan
(the Integrated Asset Management System) would likely have resulted in a large, unwieldy and
expensive outcome. Further, because portions of the asset management process are already in
place and automated, a traditional solution would require replacement of those existing systems.
Replacement software in turn would require retraining and system setup that could discourage
the users that the approach is intended to support. Information technology departments,
cognizant of past difficulties in implementing and integrating comprehensive enterprise systems,
would also be resistant to such an approach.
EPRI and its funders anticipated this concern. In late 2003 and 2004, EPRI focused its research
on the feasibility of integrating with, and employing enterprise systems to accomplish portions
of, this asset management process [2]. EPRI limited software development in this project to a
known gap with substantial potential benefit (i.e., a level 1 screening analysis) and existing core
products such as Project Prioritization [3] and Aging Assets [4]. In parallel, EPRI developed the
concept of the modular approach described in this report. The modular approach is used for
developing an automation strategy for risk-informed, performance-based asset management
1
calculations, as an alternative to the traditional software solution approach. EPRI also developed
the concept of the Application Library for Asset and Risk Management [5]. This library compiles
existing applications done by our members in either EPRI or commercial tools and facilitates
their use in a variety of asset management related commercial software products.
The outcome of this research is the Asset Management Toolkit (AMT) concept. The toolkit,
described in more detail in sections 2 and 3, conceives of a chain of calculation modules each
with specified inputs, outputs, and a calculation. The calculations inputs specify data needs.
These inputs correspond to either output from another module or fundamental data from an
enterprise system or data repository. The calculation can have differing levels of sophistication,
with simpler versions often requiring less data and producing less output. A chain of calculation
modules thus produces a certain scope and quality of outputs, which in turn must satisfy the
decision makers needs for the particular asset management application. Therefore, the AMT
concept helps to identify how various calculation tools and software can meet asset management
application needs, and helps determine the types of decisions that can be supported with the
resulting outputs.
1
EDF staff on loan to EPRI principally developed the basic approach and details of the modular approach.
1-6
Introduction
1.4 Report Organization
This document is divided in to seven sections and an appendix. The purpose of the remaining
sections and appendix is as follows:
Section 2 Asset Management High Level Business Objectives describes the objective of
the asset management application, its general application process, its overall modular
architecture, and typical scenarios that this approach is intended to support.
Section 3 Asset Management Functional Modules describes the overall modular
architecture required to meet asset management business objectives and provides an example
application.
Section 4 Portfolio Evaluation and Risk Assessment Example (Tree Trimming) provides
an example that illustrates both the portfolio evaluation and risk assessment aspects of asset
management.
Section 5 Visualization of Results provides examples of how results of asset management
toolkit modules can be expressed.
Section 6 Next Steps outlines the recommended next steps to apply this asset
management approach in the power delivery industry.
Section 7 References.
Appendix A Survey of Existing Asset Management Tools provides summaries of EPRI
reports and software that are relevant for use as tools in the Asset Management Toolkit.
1-7
2
ASSET MANAGEMENT HIGH LEVEL BUSINESS
OBJECTIVES
This section describes the high level business objectives that form the foundation upon which
RIAM requirements are based. These business objectives include specification of the following:
The power delivery asset management model.
The economic elements of an asset management decision.
The range of possible business applications.
The process for executing the applications at one or more of the three levels of analysis
inherent in the quantitative approach.
The nature of an information technology solution that will meet the demands of the
marketplace, notably the modular calculation approach and the overall three-tiered software
architecture.
2.1 The Power Delivery Asset Management Model

One of the goals of the AMT work is to develop a visual representation of the functional
elements of a complete power delivery asset management (PDAM) implementation and its
interrelationships. Modeling the PDAM concept illustrates the interfaces among the various
components and shows the required inputs and expected outputs. As described in EPRI report
1008550, the model helps to better define the important PDAM processes and will be used in
subsequent work to identify data and analytical tool requirements for individual elements and
processes [6].
For the broadest possible application, this model has been designed to be equally useful for many
different forms of power delivery organizations (e.g., various different sizes of public power and
investor-owned utilities). They are independent of the organizations management structure or
functional boundaries. A broad approach was used in model development. Wherever possible,
organizationally neutral terms and process identifiers were used. The model is intended to be
truly generic (e.g., no blocks are labeled Engineering or System Planning). Recognizing the
likelihood of a phased implementation, the models can be as easily applied at the utility
department level as at a section, facility, or even asset level, with only modifications to the
meaning of asset owner and other stakeholders. In each case, the functional representations for
asset management concepts remain the same.
The power delivery asset management model in Figure 2-1 is neither a process nor data flow
diagram, but instead includes elements of both. The objective of Figure 2-1 is to illustrate a
conceptual representation of best practice PDAM. Equally important, the objective of the figure
is to describe PDAM at a level of detail that allows specifications of data and decision support
tools to be developed.
2-1
Asset Management High Level Business Objectives
Asset Owner D2 D3
Customers and
Financial Markets
Regulators
D1
D5 D7
Capital Asset
O&M Owner Asset/Service
Budgets P1 Performance
Monitor
Assets and
Performance
P2 D6
Establish Assets
D4
Review
Performance Goals and
Requirements Policies
Evaluate D8
Asset P3 Asset Information
D9 Condition and Inventory
Risk
System
Definitions
Performance
Performance
Criteria
D20
New Business
P4
Asset Analysis
Information Performance D10
P5 Modeling and Standards
Develop O&M Prediction Regulations
Strategies
Q1 Q2
P7 D11
Meets Future Meets Current
No
P6 Requirements Q3 Requirements Cost
Develop Develop Options
No Accept Data
Capital
Strategies R1
Risk
No
Defer
D12
Yes
Yes Proposed
Actions
P8
Yes
Evaluate
Alternatives
D13 D19
In Progress Continue
R2 Mandates
Projects Current
P9
Practices
Optimize
Program D15D15
D14
Unfunded
Emergent
P11
Work Tactical D17
P10
O&M Implementation
Develop Projects
Action Plan Service
Strategic D18 Provider
Budget D16
Capital P12
Requirements Projects
Monitor
Implementation
Figure 2-1
The Power Delivery Asset Management Model [6]
2-2
Some liberties were taken in the level of detail shown, and purposes of simplicity, Figure 2-1
is not consistent among the various processes depicted. For example, the Analysis Performance
Modeling and Prediction process combines together in one block many more sub-processes
than the Develop Action Plan process. The purpose here is to show all the key concepts and
interactions in order to provide a complete visualization for a PDAM implementation. Other
authors may combine and arrange the PDAM model elements differently but the functions
should agree.
One purpose of constructing this conceptual model is to illustrate the functional boundaries and
data exchanges among the various processes. In future work, the elements and processes will be
explored in more detail, and functional specifications and key performance indicators for the
interactions among them will be developed.
A brief explanation of each included element is included in EPRI report 1008550, November
2004 [6].
2.2 Economic Elements of an Asset Management Decision
Since the economics of power delivery involves many elements, it is important to take a broad
inventory of the economic factors that could impact the value of an asset or an investment to
improve asset value. The master economic map in Figure 2-2 attempts to capture all components
of costs that role up to give asset or project value. The map is intended to be used as a
comprehensive check-list to ensure that no significant cost component is overlooked in an asset
management application such as project or portfolio evaluation. Although all applications may
not require all the elements in Figure 2-2, it is important to be aware of them all to ensure
appropriate decision-making [2].
The underling data (e.g., inventory management and purchase order information, scheduling
details, economic and risk information) may exist in several enterprise systems, such as work
management system, financial accounting systems, inventory management and procurement
systems, or may be based upon interim calculations that must be performed to facilitate the
complete analysis (e.g., risk calculations, spares analyses, etc.). In addition, several data
elements might require manual input.
2-3
Costs
(Expenses, Capital and Uninsured
Losses)
Power Sale Capital

Regulatory Maintenance Operations A&G Fuel Facilities Other Accidental Losses
Costs Modifications
Transmission FERC, PUC, Preventive Lost Time

Training Insurance
Charges OSHA, EPA Maintenance Accidents
Sale Contract Corrective

Fees Waste Disposal Decommision Legal Liabilities
Penalties Maintenance
Bad Debt Inspections Refurbishment Depreciation Fires
Research and Environmental

Shutdowns Outage
Development Releases
Interest On
Spares
Loans
Contribution to
Procurement contingency
reserve
Figure 2-2
Master Economic Map for Power Delivery Asset Management [2]
2-4
2.3 Asset Management Business Applications

The requirements in subsequent sections of this document are based on the following primary
business applications that the asset management approach has initially supported in 2004:
Performing economic analyses of proposed capital and O&M projects (elements D17 and
D18 in Figure 2-1)
Developing optimized portfolios of proposed capital and O&M projects (elements D17 and
D18 in Figure 2-1)
Forecasting key performance indicators (KPIs, element P4 in Figure 2-1)
EPRI members have requested evaluation of the role that AMT modules can play in a broader
range of applications. Hence, EPRI plans to evaluate and prioritize the following list of asset
management business applications:
Strategic and long-range planning and life cycle management
Enterprise valuation for buy/sell decisions
System planning
Major equipment refurbishment/replacement studies
Component aging studies
Portfolio evaluation
Budgeting (capital, major, routine and non-routine O&M)
Resource allocation to organizational units
Prioritization of maintenance and inspection
Risk assessment and management
Insurance policy selection and rates
Planned outage schedules and duration trade-off studies
Spares inventory management
The next four subsections elaborate on the four primary business applications addressed in 2004.
2.3.1 Economic Analyses of Capital and O&M Projects

Risk-informed, performance-focused asset management should provide users with the ability to
undertake the analyses of planned or proposed changes to the design, operation, or maintenance
of equipment, systems and circuits to determine their impact on profitability. This function
should allow users to evaluate the effect of proposed changes on reliability, power quality,
revenue and costs on profitability using a consistent methodology, accepted and approved
data, with a minimum expenditure of resources.
A robust project prioritization method and tool for capital and major O&M expenditures is often
the entry point for a company into the domain of both risk-informed performance-focused asset
management and the asset management toolkit. Many asset management applications employ the
value model produced for these tools, use the results of the project evaluations or provide input
to the project evaluations.
2-5
This function is intended to provide the user with the ability to address one or more proposed
alternatives to address a single issue. For example, if there is evidence that certain equipment in
the circuit is causing a significant reduction in availability, changes either in the design, or
maintenance, or a combination of both might result in an improvement. This function would be
used to evaluate these three alternatives to determine which provides the best return on
investment, taking into account the cost to implement and the expected return from its
implementation.
Risk-informed, performance-focused asset management should provide the capability to the user
to select one or more components and retrieve the baseline reliability, maintainability, and/or
performance data (e.g., power quality) for the components as well as cost data associated with
the components. The user would then modify engineering models to produce new data (e.g., a
new failure rate) and/or logic that in turn reflect the how the change would affect the various
value attributes (reliability, power quality, etc.). Risk-informed, performance-focused asset
management would provide the user with the means to compare it with the baseline results. The
change determined by the engineering models will then used in conjunction with the cost and
revenue models to address the change in profitability.
2.3.2 Optimized Portfolios of Capital and O&M Projects
As a result of performing an asset Economic analysis, a given improvement option may deserve
to be implemented based on its own merits, namely the project exceeds the hurdle rate or other
minimum measure of profitability. However the ability to implement all improvements meriting
implementation will, in general, be reduced because of constrained budgets and/or other resource
constraints, e.g., labor, available circuit planned outage time, etc. to implement the full
complement of proposed improvements.
Risk-informed, performance-focused asset management should provide management with the
ability to define the optimal portfolio of improvement actions among the many proposed based
on appropriate criteria (e.g., applicable budget, outage time constraints, risk, profitability
objectives, etc.). The asset improvement prioritization will provide analysts with the capability to
address the potential risk arising from the delay of a proposed action as well as the impact on
profitability. This information can then be presented to management to support scheduling
decisions for the improvement.
An effective portfolio is only as good as the resolution of the system/circuit models and the
variety of the alternatives for each planned improvement. The resolution of the models allows
synergies and overlaps in projects to be accurately measured. The variety of alternatives provides
for a greater ability to create the greatest benefit given the various constraints.
2.3.3 Forecasting Key Performance Indicators

As indicated above, risk-informed, performance-focused asset management will be forecasting
different measures of performance using various engineering and financial models. A by-product
of those analyses is time-based forecasts of many key performance indicators (KPIs). These KPIs
are trended by management to meet internal and corporate management requirements as well as
regulatory or industry association goals.
2-6
These forecasts are important for a few important reasons. First, it has routinely been difficult to
determine whether investments actually deliver their promised results. A forecast of the results of
a project, a set of projects or even a portfolio of projects, especially when done in the form of
KPIs, provides a basis for auditing. Second, forecasts often provide the basis for leading
indicators which in turn provide warning of problems and associated time to act in the most
flexible manner.
Example key performance indicators that could be forecasted by the economic and technical
models include:
Economic
Net Present Value
Projected Earnings
Production Cost
System level KPIs (see also 1008459 [7])
SAIFI: System Average Interruption Frequency Index
SAIDI: System Average Interruption Duration Index
CAIDI: Customer Average Interruption Duration Index
ASAI: Average Service Availability Index
MAIFI: Momentary Average Interruption Frequency Index
Process KPIs
Parts and labor cost
Maintenance cost
Preventative maintenance to corrective maintenance costs (PM/CM ratio)
Preventative maintenance age
Risk-informed, performance-focused asset management should provide the capability to retrieve
historical and current data from appropriate sources to generate reports or graphs of current
KPI trends. In addition, risk-informed, performance-focused asset management should also
be capable of forecasting KPIs through perturbation of baseline economic, power quality,
reliability, and cost models, which will reflect planned changes in design, component reliability,
operation, and maintenance practices.
2.3.4 Repair/Replace Decisions for Aging Equipment
Increasing pressure from both customers and regulators to maintain and enhance service
reliability, while at the same time controlling costs, has put many utilities power delivery
businesses in a classic dilemma of conflicting objectives. Risk-informed performance-focused
asset management should develop a rational basis for selecting repair or replacement options for
specific classes of equipment by balancing the risks of equipment failure against the costs of
continued maintenance or capital replacement.
The objective of risk-informed performance-focused asset management is to minimize the
lifecycle cost of maintaining the inventory of assets, subject to their serviceability requirements.
The lifecycle cost comprises the total of the installation, inspection, maintenance and
replacement costs throughout a multi-year time horizon, all taken on a present value basis.
2-7
The serviceability requirement means that assets that do not meet the minimum performance
requirements must be replaced or refurbished.
The corresponding analytical tools for decision-making should specify the evolution of asset
condition over time, the various decision alternatives that are available, and the basic data needed
to support the decision model. (EPRI report 1008562 discusses such a methodology in more
detail.)
Risk-informed performance-focused asset management should deal with these complexities by
meeting the following business requirements:
Systematically and logically capture the interrelationships among those factors that influence
the cost effectiveness of repair/replace policies for both individual asset types and groups of
assets, e.g., circuits.
Identify the key information needed for making good repair/replace decisions.
Provide an objective way to choose among decision alternatives.
Calculate the cost and performance consequences of repair/replace policies.
2.4 Asset Management Tiered Evaluation Approach
To conserve resources devoted to analysis, the asset management process can be applied with
three levels of increasing complexity. Basically, the three levels use the same calculation chain
of modules but with increases degrees of sophistication for inputs or for the calculation approach
within modules (see Table 2-1). If a project fails either of the first two levels, it is screened
out. (Of course, the proposed project might also be revamped to enhance its potential for being
profitable.) If level 2 shows that the project is a clear winner, no further analysis is needed. Only
projects that pass through the first two screening levels warrant a level 3 analysis, which
addresses uncertainty explicitly.
The level 1 analysis bounds benefits and operating costs, determining whether a proposed
change is profitable under the most optimistic conditions. The method/tool determines the most
optimistic effect of the proposed investment on reducing the present value of operating costs
and increasing the present value of revenues. Optimism in performance is usually reflected by
assuming a components reliability can be improved to perfection. The resulting benefit is then
divided by an optimistically low estimate of project cost (i.e., the investment). The project is
screened out (or revamped) if this benefit-to-cost ratio is not significantly greater than one. If the
project is not screened out by this criterion, a level 2 analysis is performed.
2-8
Table 2-1
Comparative Characteristics of Asset Management Analysis Levels 1, 2, and 3
Level 1 Level 2 Level 3
Main feature An optimistic A realistic point value An uncertainty analysis

assessment to rapidly assessment to reject to quantify up- and
reject clear losers clear losers and accept down-side risks for
clear winners decision makers
Inputs Optimistic Realistic Expert judgment
[Failure rates, Point Values Point Values probability distributions
costs, ] for parameters that drive
the decision
Modules Simple +/- sophisticated +/- sophisticated
Main Outputs Optimistic Point Value Best-estimate Point Risk profiles

[Financial/reliability Value = uncertainty
indicators] (sensitivity studies can distributions and risk
provide point estimates measures (such as
of high/low what-ifs) confidence intervals,
probability of regret)
Decision Reject if BOI<1 Accept project if very Decision based on

Reject if reliability beneficial (e.g. BOI>2) quantitative estimates of
decreases significantly Reject project if very risk
Results can help bad (e.g. BOI<0.8) Results can help
revamp proposed Otherwise, perform level revamp proposed
project 3 analysis project
Results can help
revamp proposed
project
Level 2 analysis employs deterministic, best estimate assumptions of expected improvement

effects for the investment. This provides a realistic forecast of profitability, operating cost, and
project cost, recognizing that either an optimistic or pessimistic forecast can lead to a wrong
decision. If the point-value benefit-to-cost ratio is significantly less than one, the project is
rejected (or revamped). If the benefit-to-cost ratio is significantly greater than one, the project is
selected if a decision is to be made only at the system component level in this case, further
probabilistic analysis in level 3 would not be warranted. However, if a portfolio evaluation at a
higher level is to be performed, a level 3 analysis may be warranted. A level 3 analysis should be
performed if the level 2 point value analysis predicted a benefit-to-cost ratio near or somewhat
greater than one; in this case, the decision maker would be interested in knowing the risk of a
failed project (i.e., the probability of regret if the project is implemented).
A level 3 analysis is a detailed analysis of distributions of benefit, costs, and profitability and
assists in facilitating risk management. The first step in a level 3 uncertainty analysis might be to
perform a sensitivity analysis using the deterministic level 2 model to examine the effect on
project profitability of varying one parameter at a time to its high and low values (or by plus and
minus ten percent of its best estimate). Results may be displayed in a conventional tornado
diagram (see Figure 4-2). The two or more parameters that produce the widest range of
2-9
variation in profitability (NPV change or benefit-to-investment ratio) are identified as decision

drivers. In the level 3 analysis, these are treated as uncertain parameters with estimated
probability distributions used as inputs to a random sampling stochastic analysis of profitability,
keeping non-driver parameters at their best-estimate values. Examination of the resulting
probability or cumulative probability distributions of profitability allows the owner/investor to
select projects that either minimize the risk of a loss or maximize the chances of high returns.
This allows application of the risk principles used in the investment industry for financial
instruments to be available for investments in power delivery physical assets (e.g., transformers,
towers, etc.).
This three-level approach ensures that the cost of more sophisticated and accurate risk-informed
project evaluation is incurred only when there is a potential for significant payoff. The factor that
often determines the level of overall sophistication that is cost effective is project size, which can
be characterized by investment cost. In general, only large projects that cost at least millions of
dollars warrant a probabilistic level 3 analysis. For intermediate-sized projects costing tens or
hundreds of thousand dollars, a level 2 point-value analysis will likely suffice. It is reasonable to
assume that only large and intermediate-sized projects would be evaluated via the companys
AMT process. Although the asset management approach would not be necessary to evaluate
small projects, it could of course be used for this purpose, using realistic estimates for inputs to
the level 1 analysis level. Table 2-1 summarizes the characteristics of the three analysis levels.
2.5 Modular Approach to Asset Management
Meeting the information requirements of asset management business objectives and processes
can involve a complex series of economic calculations, as indicated in Figures 2-2 in this section
and Figure 3-1 in the next section. These calculations involve many elementary functions that are
similar or identical. However, the overlaps or gaps between them are not readily apparent and
can cause redundancy and inconsistency from one evaluation to another. The AMT process and
economic map lead to the need for calculations that can be performed by combining a set of
basic functions.
A modular approach and framework of these economic calculations promotes understanding of

the many functions involved in performing asset management, regardless of the tools employed.
The approach allows a prospective asset management user to build elements from existing
capabilities in their software and information technology portfolio. Eventually this dissection
of functionality can lead to the specification of a toolkit of methods and tools (i.e., the Asset
Management Toolkit) for improved and consistent asset management for all types of power
industry facilities.
The goal of functional modules as applied to asset management is to benefit from the
commonality of functional modules and their combinations to address a wide range of asset
management applications. These can include component reliability diagnostics, performance
reports, probabilistic risk assessments, net present value evaluation of projects, specific
component repair/replacement strategy, reliability trend impact analysis, economic asset
durability assessments, project evaluation and ranking, etc.
2-10
Modularization clearly establishes functions that can reside in differing areas of expertise,
ranging from economics/finance to reliability to structural/fracture mechanics. The modules
clearly define the role, inputs, and outputs for which each area is responsible. The same
functionality can provide input data for several applications, and the same functionality
can provide intermediate results used in several processes.
In a calculation chain, the input data for downstream modules are provided by outputs from
upstream modules, such as the failure rate of a component, the replacement cost of a component,
or corrective maintenance direct costs (see Figure 2-3). At the module boundaries, the data
exchanged are either inputs or outputs. Of course, some of these data can differ for different
issues, and they can be obtained from different modules. Any of these values can also have
uncertainty distributions, which are propagated through the calculation chain.
Reliability Calculator
Inputs Output
Failure rate Unplanned
Repair rate outages
System logic Economic Calculator
Recovery times
Inputs Outputs
Discount rate Change in
Inflation rate NPV
Failure Rate Updater Tax rules BOI
from experience data CM Cost Calculator End of operation IRR
date Cash flow
Inputs Output Inputs Output Power price Discounted
Initial failure rate New Time to failure CM direct Reliability cash flow
New failure date failure Material & labor cost Fuel costs
New exposure rate cost of failure Direct CM costs
time Direct PM costs
Other costs
(insurance,
safety-related
costs, etc.)
PM Cost Calculator
Inputs Output
Implementation
PM direct
dates
cost
Material & labor
cost of PM task
Figure 2-3
Example Calculation Chain Decomposition
2.5.1 Additional Uses of the Modular Approach
Once a first set of modules (functionalities) and their combinations for a few approaches/tools
are described, this modular approach can be used for the following additional objectives:
2-11
It can be used to compare the solutions used or the thought process for a given functionality,
even among tools that approach different scopes. For instance, the net present value
calculation (taking into account the discount rate and summing over the future time horizon)
can be used in a preventive maintenance optimization approach, in asset valuation, and in
project profitability assessment. The potentially different coding could be compared.
It can be used to compare proposed tools, including the ones a utility already uses, to assess
the capabilities and completeness of existing tools for desired applications (or to assess the
worth of proposed new tools).
It can be used to explain the function in a larger context. It can help explain and more
quickly specify a new approach or the benefit of a given element by illuminating the path to
the results of the assessment and the corresponding data flow. This can be done in two ways:
1) by using analogies with the already applied approaches having functionalities in
common, and 2) by showing the specific functionalities that are added to the already applied
approaches. For instance, assessment of the maintenance effect on reliability can be added
to an asset valuation tool, while keeping the other elements in the calculation chain. A
presentation in module form also helps to better show the path from the asset-specific
experience data and their usages (such as for updating reliability data in a PRA approach
or for assessment of contributions in unavailability studies).
It can support creation of the functional specification of the tool, by using the existing
specifications for the re-used functionalities, by splitting the functionalities that need
different expertise, and by assuring better and easier updating for future improvements.
2.5.2 Benefits of Modularization
The modularization and its associated description provide the following benefits:
Modularization clearly differentiates the functionalities that use given data from those that
create these data. The data flow can then be more easily understood and shown, including the
global inputs and outputs of the approach.
Development of new modules benefit from the past developments, avoiding the rebuilding of
existing functionalities, especially when a new tool is under investigation. The efforts can be
focused on the specific part of the new approach, or on the assembling of the different
elements to answer the new issue. For the modules that are implemented as software, the
computer connection can be envisaged.
When a new approach is proposed, modularization can show the elements that are already
mastered and the difficult issues that will need to be addressed. The R&D effort can then be
focused on the new elements.
Modularization can improve information exchange between experts of the different
functionalities, especially in the step addressing validation of the consistency of exchanged
data in the process or the calculation chain.
Modularization can open other perspectives on the use of a module, either downstream
(using its outputs) or upstream (seeking better assessments of its input data). This shows
more clearly to other experts the potential interfaces, providing access to the objective of the
functionality.
2-12
Modularization can help to clarify the black boxes of tools or processes by revealing their
component parts.
Modularization can enable more robust tool evolutions and improve tool compatibility.
2.6 Integration of Asset Management with Enterprise Systems

Utility benchmarking studies and internal evaluations routinely uncover the substantial
expenditures associated with delivering technology as stand-alone applications. At a typical
electrical utility, for example, thousands of software applications require information technology
group support. Similar studies point to the need to focus not only on points of integration
between different processes within a business unit such as maintenance, but also between
multiple business units. In response, many utilities have placed greater importance on integrating
business applications. Reducing the number of applications and enabling efficient integration of
applications across business units can greatly reduce information technology costs and yield a
range of business benefits.
As described in EPRI report 1008233, EPRI is sponsoring efforts to advance such integration
and has established an Integrated Delivery System (IDS) program to ensure that EPRI products
will be compatible with such integration [2]. The EPRI IDS is intended to enable the various
types of utility industry applications and to do so in a way that is fully cognizant of the current
challenges that IT staff and application users face. The IDS program will lay a foundation that
utilities can use to address the abovementioned IT challenges.
A five-phase project in this program uses primarily existing EPRI technology as a research test
bed for the work. After an initial feasibility study (Phase I), the project includes developing a
software integration testing and development lab (Phase II) in which EPRI technology can be
evaluated for its effectiveness to meet these objectives. Next, through two pilot applications
(Phase III), the project evaluates how an IDS might function. The lessons learned from the pilot
applications will facilitate the study of EPRI software capabilities and utility needs (Phase IV).
This fourth phase of the project will identify the potential opportunities, the feasibility of
meeting them, and the benefits that would result. The fifth and final step in the project is to
produce a formal architecture and strategy and high level functional specification. This
functional specification will contribute to an Enterprise Knowledge Management System
specification. Overall, the project will leverage multiple capabilities (e.g., software technical
applications, data transfer software, and dynamic link libraries) established within EPRIs
existing software applications.
The EPRI report 1008233 also describes a feasibility study that reviewed RIAM data needs
against enterprise system information and analyzed integration strategies and applicability to
RIAM. The feasibility study reviewed an existing industry implementation of RIAM at the South
Texas Project Nuclear Operating Company against a leading enterprise system application at
Progress Energy. The team then analyzed an EPRI life cycle management problem to identify
important underlying work management system data elements.
This project concluded that a three-tier architecture should be used to facilitate integration of
EPRI products with enterprise systems. This architecture consists of a data acquisition layer
(which makes use of the Common Information Model, CIM) [8], an algorithms and applications
layer (which is the focus of EPRI development), and a reporting layer (see Figure 2-4).
2-13
Reporting
www charts reports
Layer
Algorithms and
Applications Retrieve data Analyze/graph data
Layer
Data Databases
Acquisition
Layer
Figure 2-4
Three Layer Architecture [2]
Figure 2-5 shows another way of looking at this three-tier architecture in the context of the EPRI
IDS program. The databases, database connectors, and CIM correspond to the data acquisition
layer in Figure 2-4. (The report recommends that a library of database connectors to enterprise
systems such as work management systems, process data, and financial data should be
developed and/or acquired from vendors and/or members.) Similarly, the virtual data warehouse
and applications library correspond to the algorithms and applications layer in Figure 2-4. The
maintenance management, operations management, and engineering decision making is
facilitated by the reporting layer in Figure 2-4. Using this three-tier approach, the EPRI IDS
creates knowledge to guide action.
Via a RIAM case study, this project demonstrated the feasibility of integrating business
applications in an asset management context. See EPRI report 1008233 for more information [2].
2-14
Maintenance Management Operations Management Engineering

Decision Making Decision Making Decision Making
?
Applications Library
EPRI IDS
Virtual Data Warehouse
creates knowledge
to guide action
Database Connectors and CIM
Database 1 Database 2 Database 3 Database 4
Work SCADA Outage Design

Management Management Basis Data
Figure 2-5
EPRIs Integrated Delivery System (IDS) Consists of a Three-Tier Architecture that Creates
Knowledge to Guide Action [2]
2-15
3
ASSET MANAGEMENT FUNCTIONAL MODULES
A fundamental premise of the risk-informed, performance-focused asset management

methodology is that decisions affecting the design, operation, and maintenance of components
and systems (assuming that they are not constrained by local, state, or national regulatory
requirements) will not only impact reliability and power quality from an engineering perspective,
but will also affect the economic performance of the asset through their impact on expected costs
and revenues. The asset management application will enable evaluation of these costs and
revenues via several key business functions in the form of modules (see Figure 3-1). These
modules are discussed in the following paragraphs.
PM Cost
Calculator
Component
O&M Data
Provider
(CMMS)
Total Economic
CM Cost Cost Calculator
Calculator Calculator (Profitability)
Failure &
Maintainability
Rate Non-
Provider Maintenance
Cost
Calculator Asset
Improvement
Optimizer
(Portfolio)
Recovery/
Repair Time Reliability
Provider Calculator
Delivered
Power Revenue
Calculator Calculator
Power
Quality
Calculator
Power Externality
Price Value
Forecaster Provider
Figure 3-1
Asset Management Module Interaction
3-1
Asset Management Functional Modules
3.1 Asset Improvement Optimizer (Portfolio)
This module allows management of groups of proposed changes in order to maximize

profitability. This module provides the means to evaluate groups in light of various constraints,
such as available budget, labor resources, and sufficient scheduled outage time. The input to this
module is projects that have been approved as a result of applying the project analysis process.
Output from this module provides an input into construction, maintenance and outage planning.
3.2 Externality Value Provider
The purpose of this module is to assist in addressing qualitative attributes of a project

(i.e., externalities), such as impact on the environment, worker and public safety, customer
satisfaction, security, regulatory assurance, and organizational effectiveness. Methods for
addressing such soft sources of value typically assign value using scales for each contributor to
value and weighting factors to combine economic and non-economic value measures [3].
3.3 Economic Calculator
This module is the calculation engine for the profitability portion of the process. All costs
associated with an asset (including project implementation, PM, CM and overhaul costs) are
compared to the expected revenue change based on implementing the project. Using the
Economic Calculator (including tax effects as applicable), the Net Present Value (NPV)
or other profitability metrics for any project can be determined.
3.4 Revenue Calculator
The Revenue Calculator is used to determine the revenue that would accrue to the asset. The
revenue primarily consists of funds that distribution system owners collect from ratepayers and
that transmission system owners collect via wholesale power sales or via direct sales to large
customers. Both of these are a function of the level of reliability and power quality that is
provided. The Revenue Calculator makes use of the Delivered Power Calculator and the
Power Price Estimator Modules.
3.5 Total Cost Calculator
The Total Cost Calculator is used to total the costs associated with implementing a change and
the costs associated with the ongoing operations and maintenance of an asset. The output of the
Cost Calculator (in terms of periodic cash flows) is used to provide the total asset cost to the
Economic Calculator. The Cost Calculator obtains cost values from additional modules,
including the PM Cost, CM Cost, and Non-Maintenance Cost Calculators.
3-2
3.5.1 Preventive Maintenance Cost Calculator
The PM Cost Calculator is used to calculate the labor, material, spare parts, and contractual
costs associated with performing PMs over the proposed project life. It requires input from the
Component O&M Provider in order to ascertain the frequency of occurrence.
3.5.2 Corrective Maintenance Cost Calculator
The Corrective Maintenance (CM) Cost Calculator is used to calculate the labor, material,
spare parts, and contractual cost associated with performing CM over the proposed project life.
It requires input from Component O&M Provider and the Failure Rate and Maintainability
Predictor Module (via the Reliability Calculator) in order to ascertain the expected frequency
of occurrence.
3.5.3 Non-Maintenance Cost Calculator
The Non-Maintenance Cost Calculator is used to calculate all other costs that may be associated
with a component or system. Such costs may include avoided costs associated with changes in
costs associated with management, operations, regulatory compliance, insurance, etc.
3.6 Power Price Forecaster
The purpose of the Power Price Forecaster is to provide, for any defined period and contract or
other sales agreement, the expected price of power. The Power Price Forecaster is used in
conjunction with the Delivered Power Calculator in the Revenue Calculator to determine the
NPV of expected revenue over the span of the analysis.
3.7 Delivered Power Calculator
The purpose of the Delivered Power Module is to quantify the number of megawatt hours
expected to be delivered for the period of analysis in order to support the calculation of expected
revenue under given set of forecast conditions. The Delivered Power Calculator uses the
Reliability and Power Quality Calculator Modules to determine the expected amount of time
the asset is expected to be delivering power and the average level of power provided.
3.8 Reliability Calculator
The purpose of the Reliability Calculator is to quantify the effect of the frequency of unplanned
events (e.g., component failures) and planned events (e.g., planned maintenance outages)
on the ability of the asset to deliver power. The Reliability Calculator Module performs these
calculations through the use of a reliability model. A reliability model is a logical model that
relates the frequency and effect of the occurrence of an event or combination of multiple
events on the frequency of failing to deliver power. Changes in reliability can effect revenue
(a proposed change resulting in increased power delivered) and cost (a proposed change resulting
in a reduced PM and CM frequency).
3-3
The primary inputs to the Reliability Calculator are component and event failure probabilities
and repair durations (including the affects of the availability of labor and spares resources and
the time required to test and restart). The component and event failure probabilities values are
obtained from the Failure Rate and Maintainability Predictor Module. The logistics data for
calculation maintainability values (repair time duration) are obtained from the Recovery/Repair
Time Provider via the Failure Rate and Maintainability Predictor Module.
3.9 Power Quality Calculator
The purpose of the Power Quality Calculator is to calculate the effect of a change in the
operation of a component on delivered power quality. The Power Quality Calculator performs
these calculations using a power quality logical model. Changes in power quality can affect both
revenue (a proposed change that results in maintenance of high power quality for a higher
percentage of the time) and cost (a proposed change resulting in a reduced PM and CM
frequency).
Changes proposed to improve power quality can affect reliability. Therefore, in some instances
the Reliability Calculator is exercised in conjunction with the Power Quality Calculator.
3.10 Component O&M Data Provider
The Component O&M Data Provider Module is the collection of databases or systems related to
a units computerized maintenance management system (CMMS), its Master Equipment List
(MEL), accounting system, and payroll system. It is the primary source of information related to
the maintenance and repair of assets. The Component O&M Data Provider may provide, directly
or indirectly, data that may include the following:
Component design, engineering, and operating data
Planned or preventive maintenance schedules
Component failure and repair histories
PM and CM labor resource requirements
Historical PM, CM, and Non-Maintenance Costs
Materials management information (stock level, part cost, replenishment time, etc.)
The particular values provided by this module depend on the asset management application
3.11 Failure and Maintainability Rate Provider
The Failure and Maintainability Data Predictor provides information related to the frequency
of component or system failures and the time to repair systems or components once they have
failed. The Failure and Maintainability Data Predictor takes information from a number of
sources and combines to provide data tailored to the unit. The data is typically collected from
the following sources:
3-4
Outage Management System (OMS)

Computerized Maintenance Management System (CMMS)
EPRI data bases (Asset Performance Database, Industry-wide Database, etc.)
Other industries reliability data including nuclear power and the military
3.12 Recovery/Repair Time Data Provider
The purpose of the Recovery/Repair Time Provider is to combine the following information to
calculate the total time needed to return a system or component to operation once it has failed:
Time to isolate the equipment
Time to mobilize labor resources, obtain appropriate clearances, and obtain access to the
failed item
Time to repair the failed component or system (including test)
Time to restore the equipment to full operation
The Recovery/Repair Time Provider provides data to the Reliability Calculator Module.
3.13 Sample Application of Asset Management Module Approach
This modular approach to asset management decision making can be illustrated via an example
in the distribution asset area.
This forecasting of future capital, operating and maintenance (O&M), and general and
administrative (G&A) distribution costs is becoming particularly critical for utilities because: 1)
a significant number of distribution assets installed 30-50 years ago in the service areas of many
utilities will require either refurbishment or replacement within the next 10 years, and 2) serving
new customers requires significant one-time capital outlays on distribution systems. In both
cases, meeting these needs can result in higher than normal capital, O&M, and G&A costs in
particular years, necessitating advance planning. At most utilities, these outlays are unexpected,
resulting in reduced O&M or capital spending on other projects, at the potential expense of
distribution system reliability.
Hence, a framework is needed for projecting capital, O&M, and G&A costs for particular
classes of assets over a specified future time horizon. To do this, the application would
obtain information on the number of assets and their age from the utilitys asset registry. By
supplementing this information with failure rate data as a function of asset type and asset age,
the application can project the levels of capital, O&M, and G&A needed to repair, upgrade, or
replace the distribution equipment. This facilitates: 1) decision making as to the appropriate
courses of action (e.g., repair, upgrade, or replace), and 2) planning for capital, O&M, and
G&A outlays.
3-5
EPRI report 1008565 [5] applies this approach to an assessment of distribution wood pole assets.
Table 3-1 shows the type of data that could be obtained from an asset registry. Tables 3-2 and
3-3 show additional input data O&M and capital data, respectively to the application.
This information gathering corresponds to the Component O&M Data Provider and Failure &
Maintainability Rate Provider modules in Figure 3-1. Based on these input data, the application
then calculates annual outlays for the following categories:
Maintenance cost for assets (i.e., the PM Cost Calculator module in Figure 3-1)
Operating costs, capital replacement, and administrative and general (i.e., the
Non-Maintenance Costs Calculator in Figure 3-1)
Total revenue requirements (i.e., the Total Cost Calculator in Figure 3-1)
Table 3-1
Distribution Wood Pole Example: Asset Input Data from Asset Registry [5]
Date Lifespan Installed Number of Failure

Description
Installed (Years) Cost Units Rate
Pole 50 -3 cedar 1972 35 $2,000 8 0.001

Pole 50 -3 concrete 1973 40 $2,000 9 0.001
Pole 50 -3 concrete 1974 40 $2,000 100 0.001

Pole 50 -3 concrete 1975 40 $2,000 1000 0.001
Pole 50 -3 concrete 1976 40 $2,000 10000 0.001
Transformer 20 MVA 1960 50 $65,000 1 0.001
3-6
Table 3-2
Distribution Wood Pole Example: O&M Input Data [5]
Maintenance Cycle Maint Maint Cycle Maint Maint Cycle Maint Failure Failure
Description
Type (Years) Cost (Years) (Years) Cost (Years) (Years) Cost Cost Rate
Pole 50 - 3 cedar Inspection 3 $150 $1,000 0.001
Pole 50 - 3 concrete Inspection 3 $75 $1,500 0.001

Transformer 20 MVA Insulation 5 $2,800 Oil Test 1 $200 Gas 0.08 $100 $20,000 0.001
Table 3-3
Distribution Wood Pole Example: Capital Input Data [5]
Installed Life Replacement Retirement Salvage

Description
Date Span Cost Costs Value
pole 50 - 3 cedar 1972 35 $2,000 $200 0

pole 50 - 3 concrete 1973 40 $2,000 $200 0
pole 50 - 3 concrete 1974 40 $2,000 $200 0
pole 50 - 3 concrete 1975 40 $2,000 $200 0

pole 50 - 3 concrete 1976 40 $2,000 $200 0
transformer 20 MVA 1960 50 $2,500,000 $450,000 25,000
3-7
4
PORTFOLIO EVALUATION AND RISK ASSESSMENT
EXAMPLE: TREE TRIMMING
This section illustrates portfolio evaluation and risk assessment in an asset management context
via an example that is of interest to both distribution and transmission system owners: tree
trimming. In this example, the decision posed is whether to trim trees this year, or wait until a
future year. A preliminary analysis without considering risk determined that the total cost
of not trimming the trees (considering outage costs, etc.) was $10,425, and that the total cost
of trimming was $13,543, indicating that not trimming is the lower cost option. These results,
called expected values, flow from a purely deterministic analysis (i.e., an analysis that does
2
not consider uncertainty or probability). However, considering risks could lead to a different
conclusion.
A brief review of the principles of risk assessment provides useful background information for
another way of looking at this example. Risk means uncertainty, and good decision-making
requires consideration of risk. When considering risk, a good decision does not necessarily
guarantee a good outcome. However, consideration of risk does increase the likelihood that the
decision will be a good one.
The key steps in assessing risk include the following:

Pose the decision
Identify influencing factors
Identify sources of risk
Perform sensitivity analyses
Use judgment in decision making
Use historical data
Apply an analytical model
Evaluate portfolio risk
4.1 Influencing Factors and Risk Sources
It is essential in risk analysis to precisely pose the decision problem. Otherwise, ambiguities in
the problem definition will obscure the uncertainties that create the risks.
2
This section is based on an EPRI presentation by Jeremy Bloom [9].
4-1
Portfolio Evaluation and Risk Assessment Example: Tree Trimming
To pose the decision in this example, the issue is whether to trim trees along a substation feeder
this year or wait until later to reconsider trimming. Two situations need to be examined: 1)
ordinary (isolated) faults occur on the feeder, and 2) a major storm results in multiple faults on
the feeder. Factors that influence the decision include the following:
The fault rate under ordinary and storm conditions
The decrease in fault rate when trees are trimmed
The length of time required for service restoration after a fault under ordinary and storm
conditions
The number and type of customers affected
The cost of customer outages
The utility cost of service restoration
The tree trimming cost
Others
In order to clarify how these factors influence the decision, it is helpful to construct a conceptual
model (see Figure 4-1) that represents their interrelationships. Note that the top five elements
lead directly to cost. Also, note that the right side of the diagram addresses ordinary conditions,
while the left side of the diagram addresses storm conditions.
Cost
Customer Customer
outage Tree outage
cost Trimming cost
(storm) Cost (ordinary)
Utility Utility
# restoration restoration #
Customers cost cost Customers
interrupted (storm) (ordinary) interrupted
(storm) (ordinary)
Restoration Restoration
# Faults # Faults
time time
(storm) (ordinary)
(storm) (ordinary)
Tree
Trimming
Figure 4-1
Influence Diagram for Tree Trimming Example
The next step in the process involves identifying the sources of risk or uncertainty in the
decision, which can include the following:
4-2
The number of interruptions due to ordinary and storm conditions per year
The duration of interruptions due to ordinary and storm conditions
The storm probability
The customer outage cost
4.2 Sensitivity Analysis
In the next step in the process, the factors that have the most influence on the results are
identified. This is done by quantifying the influence diagram (Figure 4-1), then varying each
parameter (e.g., tree trimming cost, customer outage cost, storm probability, etc.) independently.
The same percentage change is applied to each parameter in each sensitivity run. The funnel
shaped set of results shown in Figure 4-2 is called a tornado diagram. The diagram shows,
for example, that for a given percentage change in a parameter (e.g., the tree trimming cost), the
impact on study results was an increase or decrease of $2500 (delta cost).
This sensitivity analysis does not consider probability or risk; its results pertain to the
deterministic results indicated at the beginning of this section. Hence, uncertainty in the tree
trimming cost can vary the cost of trimming from about $11,000 to $16,000.
Tornado Diagram - Trimming
Trimming Cost $/mi
Customer Cost (Ordinary) $/hr
Fault Rate (Ordinary)
Restoration Rate (Ordinary)
Storm Probability
Restoration Rate (Storm)
Fault Rate (Storm)
-$3,000 -$2,000 -$1,000 $0 $1,000 $2,000 $3,000
Delta Cost
Figure 4-2
Tornado Diagram Displaying the Sensitivity Analysis for Tree Trimming Example
4-3
4.3 Judgment and Historical Data
Probability is the means of measuring risk. Because assigning probabilities can be quite difficult,
judgment can be an important part of risk assessment. Judgment is a perfectly legitimate way to
assess risks because people often act on their judgments. Furthermore, when risk factors are
subjective, hard to measure, or hard to model, or if limited data is available, judgment may be the
only reasonable way to assess risks. For example, customer outage costs are often determined
based on judgment because available outage cost data are inconsistent among various studies; the
cost varies by customer sector, customer end-uses, the advance warning time of the outage
(if any), and many other factors. In many cases, customers do not even know what an outage
costs them. Ultimately, assigning customer outage costs is a judgment utility management needs
to make because they have to trade-off costs customers incur against costs the utility incurs.
Historical data can also be used to assess uncertainties. For example, the overall duration of
outages is captured by various measures such as SAIDI (System Average Interruption Duration
Index). A measure of customer reliability, this index indicates the system average number of
minutes each year that customers power is interrupted (excluding major events). Figure 4-3
3
illustrates this type of historical data for a 10-year period for 65 utilities in the United States.
Notice the range of variation both within a given year and also from year to year. This variation
indicates the uncertainty inherent in the occurrence of outages.
700
600
SAID I (W ith o u t M a jo r Eve
500
400
M ean (107 m in utes)
300
200
100
0
1992 1993 1994 19 9 5 1996 1997 1998 1999 2 0 00 2001
Year
Figure 4-3
Ten-Year SAIDI Scatter Plot Illustrates Useful Historical Data for Risk Assessment
3
Distribution Reliability Indices Tracking Within the United States. EPRI, Palo Alto, CA: 2003. 1008459.
4-4
4.4 Analysis
In addition to judgment and historical data, analytical risk models are very useful in risk
assessment because the uncertainties involved are often quite difficult to gauge. Figure 4-4
illustrates the results derived from such a model, applied to one particular feeder. The diagram
shows the expected values from the deterministic analysis as the two dotted vertical lines the
total cost of trimming on the right, and the total cost of not trimming on the left. The two curves
represent the plot of the analytical risk model for the two scenarios. While the expected cost of
not trimming is lower than that of trimming (the two vertical lines), the range of possible costs
for the trimming case is much narrower than the no-trim case; that is, trimming has much less
risk (i.e., uncertainty) than not trimming. Furthermore, the two curves cross at the 75 percent
probability point. According to this analytical model, there is a one in four chance (from 75-100
percent) that not trimming will cost more than trimming. Whether a utilitys management
considers such a risk to be prudent is a matter for their judgment.
0.9
0.8
0.7
Probability Cost < X
No Trimming
0.6
Trimming
0.5 No Trimming
0.4 Trimming
0.3
0.2
0.1
0
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000
Total Cost
Figure 4-4
An Analytical Risk Model (Curves) Shows the Results of a Probabilistic Analysis,
Compared with the Deterministic Expected Values (Vertical Lines)
In addition to the risk assessment for one project (i.e., a particular feeder), risk assessment
techniques can be applied to examine a portfolio (i.e., multiple feeders). For example, if ten
feeders are being considered for tree trimming, but the budget only allows for tree trimming
to be performed on five feeders, then various portfolios can be defined, each consisting of a
different combination of five feeders. For each portfolio, the expected total cost and risk
(measured by the standard deviation of this cost) can be calculated. Figure 4-5 illustrates a plot
on which each data point represents a portfolio. The line connecting the lower-most data points,
for a given expected total cost, is called the efficient frontier. For a given expected total cost,
this line represents the best portfolio because it yields the smallest risk (standard deviation) in
the total cost. This means that any portfolio above the line would not be selected, because a
portfolio with a lower standard deviation at that cost is a better option. Note that the shape of the
efficient frontier reflects the fact that the various risk factors involved in this problem are not
independent.
4-5
The decision then becomes which portfolio on the efficient frontier to select. The portfolios at
the right end of the diagram reflect the lower standard deviation, and hence less risk, albeit at a
higher cost. Highly risk averse managers would tend to select a portfolio at this end of the
frontier. Conversely, the portfolios at the left end of the diagram reflect the higher standard
deviation, and hence more risk, albeit at a lower cost. Highly risk tolerant managers would
tend to select a portfolio at this end of the frontier.
4.5 Conclusion
This example illustrates use of a rationale basis for decision-making that incorporates risk.
It shows that decisions made with consideration of risk are more likely to result in desired
outcomes, compared to decisions that are made purely based on expected values. In addition to
this risk management component of the Asset Management Toolkit approach, this example also
illustrates use of portfolio evaluation to determine the combination of projects that are most
likely to lead to desired outcomes.
$20,000
$18,000
Standard Deviation Total Cost
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
$104,000 $106,000 $108,000 $110,000 $112,000 $114,000 $116,000 $118,000 $120,000
Expected Total Cost
Efficient Frontier
Figure 4-5
Portfolio Risk Trade-Off (Efficient Frontier). Each Data Point Reflects a Different Portfolio
of Projects. Managers Select a Portfolio on the Efficient Frontier Based on Their Risk
Tolerance
4-6
5
VISUALIZATION OF RESULTS
Useful visualization of the results of asset management analyses is a critical requirement in the
asset management process. Illustration of results must consolidate views in various forms to
address the key criteria of a wide range of decision makers, including executives, upper
management, engineering management, engineers, financial analysts, and others. Hence, the
results must address various financial indicators, performance indicators, cash flow projections,
expenditure projections, and various ways of displaying uncertainties and risk. Decision makers
must also be able to use the results across a control area, corporation, or region as applicable.
This section provides examples using hypothetical results of various ways of effectively
displaying the results of asset management analyses in the power delivery industry.
5.1 Phase Plane Graph
Figure 5-1 illustrates a phase plane graph. This type of illustration is particularly useful when
two important stakeholder values (in this case, reliability and profitability) involve trade-off
decisions. Plotting one value against the other in this manner can produce some useful insights.
For example, projects in the upper right quadrant (e.g., tree trimming) improve both values,
while projects on the left side decrease one of the values.
5.2 Plot of Cumulative Benefit versus Investment
A plot of cumulative benefit versus investment (often mistakenly called an efficient frontier) is
useful for illustrating the effect of a constraint (e.g., a fixed budget) on the incremental value of a
ranked ordered list of investments. In Figure 5-2, the projects are shown in ranked order from left
to right along the curve. The budget constraint is shown as a vertical dotted line. In this case, the
first three projects (substation transformer replacement, tree trimming, and relay upgrades)
could be implemented and remain under the budget constraint. A scaled-back version of the
capacitor bank addition project or some other highly ranked, lower cost project, could also be
implemented. Alternatively, if the budget constraint could be relaxed somewhat, this next
project could also be implemented. Note that even though the pole inspection project cannot be
implemented, since the slope of the curve has flattened out in this region, the incremental benefit
of that project is less than that of the previous projects.
5-1
Visualization of Results
Figure 5-1
Example Reliability-Profitability Phase Plane Graph
Figure 5-2
Example Cumulative Benefit NPV versus Cumulative Investment NPV Graph
5-2
5.3 Project Uncertainty Comparison
Figure 5-3 illustrates a case in which two investment options have the same mean net present
value (NPV) of $300,000, but different levels of risk. This visualization enables the decision
maker to evaluate the probability of loss as well as potentially higher gains. In this example,
option A is a safer investment, because its probability of loss is zero (no part of the curve crosses
the vertical line at zero). Conversely, option B presents a 6 percent chance of loss, and a 7
percent chance of a higher NPV than option A. Hence, option B is riskier. Of course, this
presentation technique also provides useful information when the two investments have different
mean NPVs and less extreme differences in the shape of the probability distribution.
Figure 5-3
Example Project Uncertainty Comparison Graph
5.4 Probability of Loss for Multiple Projects

Probability of loss is a key concern for many decision makers. Figure 5-4 shows a convenient
way to illustrate results of multiple projects that displays probability of loss. By comparing
this loss probability to internal rate of return (IRR), decision makers can quickly see at a
glance which projects are more favorable than others. In the example, substation transformer
replacement offers a favorable IRR with no loss probability. The relay upgrade project provides
a much higher IRR, but with a significant loss probability. By these measures, a clear project to
avoid in this example is pole inspection, which shows a very high loss probability and very low
IRR.
5-3
Figure 5-4
Example IRR versus Risk of Loss Graph
5.5 Project Specific Uncertainty Histogram
The visualization illustrated in Figure 5-5 focuses on the uncertainty in IRR for a particular
project. The histogram (cluster of bar charts) shows the probability distribution across IRR. The
histogram is generated by making numerous simulation runs using a Monte Carlo simulation.
The curve represents the cumulative probability in percent. Hence, there is about a 50 percent
chance that the IRR will be lower than about 21 percent.
In addition to helping decision makers understand the risks of a project, this representation also
allows consideration of the value of information that might help to reduce this risk. For example,
the decision maker could commission an engineering study of uncertain parameters in this
project that caused the tails of the histogram. Such a study could reduce the uncertainty or
help identify changes to the project to reduce uncertainty. Similarly, the study could find ways
of increasing the likelihood of attaining a high IRR by emphasizing those factors that led to the
highest IRR. In one such study, the analyst could change the value of one of the parameters
preferably one that has the largest impact on cost as identified in a tornado diagram such as
Figure 4-2 (e.g., price of power). By obtaining a better evaluation of the market price of power
or investing in a hedge to eliminate this risk, the projects IRR can be increased.
5-4
Substation Upgrade Option A New Substation
45 100%
40 90%
80%
35
70% Cumulative Per Cent

30
Population 60%
25
50%
20
40%
15
30%
10
20%
5 10%
0 0%
0.81% 9.53% 18.25% 26.96% 35.68% 44.40% 53.11% 61.83% 70.54% 79.26% 87.98%
IRR
Figure 5-5
Example IRR Uncertainty Histogram
(Note: histogram refers to left vertical axis; curve refers to right vertical axis)
5-5
6
NEXT STEPS
The business requirements documented in this report are an important intermediate step
rather than an ending point for the development of automation solutions for risk-informed,
performance-focused asset management. This section summarizes planned next steps to
accomplish asset management goals and address the relevant strategic industry issues. The
path forward is use of the Asset Management Toolkit concept described in this report.
Planned activities that will be executed in 2005 include the following:

Continued testing of the AMT concept on the power delivery asset management process
Considering lessons learned from ongoing EPRI asset management work, including power
delivery tools (e.g., P2 described in EPRI report 1001877 [3], Aging Assets described in
1000422 [4], and the Asset Management Applications Library described in 1008565 [5]), and
more generally, tools from other power industry sectors, such as those listed in Appendix A
of this report
Defining detailed business requirements for the Asset Management Toolkit modules, based
on the results of the above tasks
At the conclusion of 2005, the above steps are expected to lead to a robust set of AMT business
requirements sufficient to aid members in automating risk-informed, performance-focused asset
management. Asset management processes that can be sufficiently supported with existing AMT
tools will be identified and gaps in asset management tools will be better defined, thus enabling
better planning and execution of research to facilitate applications and fill gaps. The results of
this work will be included in the new Power Delivery Asset Management Guidelines.
Beginning in 2006, in addition to continuing asset management applications, EPRI will be

broadening the asset management collaboration to include the entire enterprise. The plan is to
bring these risk-informed, performance-focused asset management requirements and the AMT to
fruition through member applications, both in power delivery and in the rest of the enterprise.
Plans for this work will begin in 2006, but may start earlier with specific member interest.
6-1
7
REFERENCES
1. Guidelines for Applying Risk Based Tools to Maintenance Decision Needs, November 2004.
EPRI Report 1009842.
2. Integration of EPRI Products with Enterprise Systems, A Nuclear Asset Management
Case Study, 2004. EPRI Report 1008233.
3. Project Prioritization System, Methodology Summary, December 2001. EPRI
Report 1001877.
4. Monitoring Aging Distribution System Assets: Research Status Report, December
2000. EPRI Report 1000422.
5. Distribution Applications of the Asset and Risk Management (ARM) Workstation,
November 2004. EPRI Report 1008565.
6. Guidelines for Power Delivery Asset Management, A Business Model for Program
Implementations, November 2004. EPRI report 1008550.
7. Distribution Reliability Indices Tracking Within the United States, May 2003. EPRI
Report 1008459.
8. Common Information Model (CIM): CIM 10 Version, November 2001. EPRI
Report 1001976.
9. Assessing Risks in Asset Management Decisions, EEI Transmission, Distribution,
and Metering Conference, Jeremy Bloom, April 20, 2004.
7-1
A
SURVEY OF EXISTING ASSET MANAGEMENT TOOLS
A.1 List of Asset Management Tools
Following is a list of asset management tools that can be used as either a module or set of
modules in the Asset Management Toolkit. The software and methods described in these reports
were developed based on the requests of power delivery asset management personnel at EPRI
member utilities. One of the next steps in the process of implementing the Asset Management
Toolkit is to evaluate the tools in this appendix, as well as asset management tools commercially
available in the industry.
A.1.1 Strategic and Long-Range Planning and Life Cycle Management

EPRI TR-101162: Long-Term Capital Planning Considering Nuclear Plant Life-Cycle
Management. September 1992.
EPRI TR-103054: A Resource Guide to Nuclear Plant Life-Cycle Management. November
1993.
EPRI TR-104326: Nuclear Plant Life Cycle Management Economics. April 1995.
EPRI TR-104751: Utility Activities for Nuclear Power Plant Life Cycle Management and
License Renewal. May 1995.
EPRI TR-106109: Nuclear Plant Life Cycle Management Implementation Guide. November
1998.
EPRI TR-108984: Product Life Cycle Management Adapting the Best Practices of Other
Industries. November 1997.
EPRI TR-110676-V1: Life-Cycle Decision Making Volume 1: Getting Started. September
1998.
EPRI 1004479: Aggregated DR Generation Concepts Case Studies Using the DR
Economic Screening Tool. November 2002.
EPRI 109730: EPRI Area Investment Strategy Model: A Utility Perspective. September
1999.
EPRI TR-113988: Technology Risk Assessment in Combustion Turbine Based Power Plants.
December 1999.
A-1
Survey of Existing Asset Management Tools
A.1.2 Portfolio Evaluation

EPRI TR-106216: From Regulation to Competition Managing the Corporate Portfolio
For Maximum Value. March 1996.
EPRI TR-104917: Investing Resources to Create Value The Portfolio Approach to Capital
and O&M Budgeting. March 1996.
EPRI TR-108106: Portfolio Management Finding Growth Opportunities in a Restructured
Electricity Marketplace, December 1997.
EPRI 1000371: Understanding Energy Customers Profitability EPRIs Customer Portfolio
Management System. September 2000.
EPRI TR-113606-V1: R&D/Technology Management Best Practices Study: Volume 1 -
Executive Summary Report. November 1999.
EPRI TR-103883: Capital Expenditure Decisions: Obtaining Commitment to Action.
May 1994.
A.1.3 Risk Assessment and Risk Management

EPRI 1007969: A Dynamical Systems Model for Nuclear Power Plant Risk Management.
October 2003.
EPRI 1000637: The Market Price of Risk Implication for Electricity Price Forecasting,
Asset Valuation and Portfolio Risk Management. December 2000.
EPRI 1008242: Assessing Nuclear Power Plant Risk Management Effectiveness. July 2004.
EPRI TR-114185: The Role of Distributed Resources in Business Strategies for Risk
Management. January 2000.
EPRI 1007972: Review of Current Practices for Establishing Configuration Risk
Management Thresholds for Nuclear Power Plants. November 2003.
EPRI TR-110709: Watershed Analysis Risk Management Framework A Decision Support
System for Watershed Approach and Total Maximum Daily Load Calculation. December
1998.
EPRI 1005246: Incorporating Offset Projects into Corporate Greenhouse Gas Strategies
Risk Management Under Conditions of Policy and Market Uncertainty. December 2003.

EPRI TR-111387: Using RAMAS Methods to Solve Ecological Problems Facing Utilities.
December 1998.
EPRI 1000820: Turbine-Generator Maintenance Interval Optimization Using a Financial
Risk Assessment Technique. November 2000.
EPRI TR-108261: Property Damage Risk Assessment Scoping Study. July 1997.
EPRI 1001684: Probabilistic Model of Risk Assessment of Offering Premium Power
Services. March 2003.
A-2
EPRI 1004007: Technical Status, Operating Experience and Risk Assessment of Clean
Coal Technologies 2001. December 2001.
EPRI 1004382: Risk Based Maintenance Guideline. November 2002.
EPRI 1005337: Evaluating the Effects of Power Plant Operations on Aquatic Communities
An Ecological Risk Assessment Framework for Clean Water Act 316(b) Determinations.
July 2002.
EPRI 1008859: Utility Vegetation Management: Use of Reliability-Centered Maintenance
Concepts to Improve Performance. April 2004.
A.2 Strategic and Long Range Planning and Life Cycle Management
A.2.1 EPRI TR-101162: Long-Term Capital Planning Considering Nuclear Plant

Life-Cycle Management. September 1992
A.2.1.1 Goal
To provide a method to integrate into overall plant capital planning those projects identified
by life-cycle management
A.2.1.2 Results
This report illustrates an approach to creating a long-term capital plan that includes methods for
choosing, compiling, integrating, and presenting projects from the perspective of a life-cycle
management program at a nuclear power plant. It also addresses a rationale for capitalization of
life-cycle management program activities. The overall near-term and long-term capital planning
process addresses projects in three phases:
Phase I: Conceptual Corresponds to the inception of the project and addresses the overall
scope, schedule, and budget in very coarse detail.
Phase II: Preliminary Provides sufficient detail to support development of an
implementation plan including a project schedule and budget.
Phase III: Detailed Provides detail for implementation, including fabrication, installation,
and operation.
Many of the methods in this report are well-established or have existing analogs in nuclear
utilities while others are proposed and will necessarily evolve as life-cycle management becomes
more established within the corporate culture.
A.2.1.3 Intended Sector
Nuclear
A-3
A.2.2 EPRI TR-103054: A Resource Guide to Nuclear Plant Life-Cycle

Management. November 1993
A.2.2.1 Goal
To define the technical elements of life cycle management with focus on the determination of
adequate maintenance programs and the identification of data and records necessary to
support them
A.2.2.2 Results
No summarized results were available in this report.
Nuclear
A.2.3 EPRI TR-104326: Nuclear Plant Life Cycle Management Economics.

April 1995
A.2.3.1 Goals
To give an overview of life cycle management planning strategy
To create a simple software program capable of comparing relative costs and financial risks
of generation alternatives over the long term
To gather information needed to make the above cost comparisons
A.2.3.2 Results
This report is one of a series that was developed to aid in utility asset management decisions for
light water reactors (LWRs). It contains:
An overview of life cycle management planning strategy and a list of strategic questions
A compendium of data on capital costs, outage durations, lead times, expected lifetime, and
related experience for capital upgrades and replacements in operating nuclear plants
LCMECON: an MS-DOS computer program for comparing costs between a baseline
generation station scenario and the same station with a modified operating regime and/or
capital modifications, extended operating life, or other methods of providing the same
amount of power.
A-4
Nuclear
A.2.4 EPRI TR-104751: Utility Activities for Nuclear Power Plant Life Cycle
Management and License Renewal. May 1995
A.2.4.1 Goal
To provide guidance to nuclear utilities on steps to take, industry activities undertaken, and
products developed for life cycle management and license renewal activities
A.2.4.2 Results
This report describes the four phases of activities a utility may undertake when considering the
license renewal option. The phases are illustrated in a broad, integrated overview and then in a
level of detail adequate for input to management planning. The report also includes reference to
products that can support an individual utilitys conduct of specific activities and associated
industry products for life cycle management evaluations of plant systems, structures, and
components. The final section of the report identifies the component aging evaluation results
to date and discusses how some utilities have determined that aging is adequately managed for
specific components.
Nuclear
A.2.5 EPRI TR-106109: Nuclear Plant Life Cycle Management Implementation

Guide. November 1998
A.2.5.1 Goals
To provide background information and guidance to those nuclear power plants just
beginning to implement dedicated life cycle management programs and to others desiring
to improve existing LCM programs
A.2.5.2 Results
This guide introduces the reader to the LCM concept; gives an overview of asset and aging
management; describes activities, staffing needs, and long-term benefits of LCM plant programs;
and, provides key references related to LCM. It also presents major elements of LCM required
for license renewal. A set of appendices address historical background, near-term benefits of
LCM, component aging, examples of plant programs that manage aging, and descriptions of
EPRI LCM Technology Program products.
A-5
Nuclear
A.2.6 EPRI TR-108984: Product Life Cycle Management Adapting the Best
Practices of Other Industries. November 1997
A.2.6.1 Goal
To provide energy services providers with information regarding the process of managing
product life cycles, including examples from other industries
A.2.6.2 Results
This report describes the four life cycle stages of introduction, growth, maturity, and decline,
and then investigates a variety of important issues related to managing offerings in these stages.
The issues addressed include the timing of expenditures on products in relation to a life cycle
management plan, the appropriate marketing mixes for various product types in each of the life
cycle stages, the integration of product life cycle management practices into a companys overall
business planning process, the monitoring of the life cycles of products, and the management of
single products versus entire product lines. The report also includes references to other EPRI
reports that can actively feed into the overall market planning and implementation process.
Distribution
A.2.7 EPRI TR-110676-V1: Life-Cycle Decision Making Volume 1: Getting

Started. September 1998
A.2.7.1 Goal
To help utilities reduce costs and increase revenues by making better decisions based on life-
cycle costs and revenues
A.2.7.2 Results
Life cycle decision making (LCDM) methods and software have been used to make hundreds
of decisions, which are expected to save utility companies an average of $250,000 per year in
ongoing savings. One partner utility has implemented a company-wide LCDM business initiative
with documented savings of over $40 million. Another partner utility is conducting life-cycle
cost evaluations of all their hazardous waste streams over five years, with ongoing annual
savings of nearly $1.2 million. LCDM has been used to make a wide range of design,
acquisition, operations, maintenance, and disposition decisions on a broad spectrum of utility
A-6
activities. These activities have included replacement of transmission and distribution poles
and cross arms, disposition of overhead transformers, painting equipment at substations, siting
substations, controlling biofouling in power plant condenser tubes, choosing sandblasting media,
managing parts washers, recycling antifreeze, selecting flashlight and pager batteries, and
recycling wood pallets, just to name a few.
Transmission & Distribution, Generation
A.2.8 EPRI 1004479: Aggregated DR Generation Concepts Case Studies

Using the DR Economic Screening Tool. November 2002
A.2.8.1 Goal
To illustrate how EPRIs Distributed Resource (DR) Economic Screening Tool can help
planners quickly assess the most cost-effective option between traditional T&D expansion
plans and an appropriate DR alternative
To give results of sensitivity analyses that show how economic results from the Screening
Tool can change by varying the magnitude of certain key parameters
A.2.8.2 Results
This report examines DR cost impacts on T&D systems through the use of the EPRI-sponsored
DR Economic Screening Tool. The tool requires users to input up to several dozen parameters
into an Excel worksheet and then to run an analysis to obtain results. The tools capabilities and
requirements are described. The report also provides several relevant case studies that show how
the tool can be used. In addition, the case studies are presented to show examples when DR has
potential to be the economic choice for solving a particular T&D system problem.
Utility planners can quickly and easily use this tool to assess the potential of DR when
considering T&D capacity expansion plans. In addition, sensitivity analyses can be performed on
selected parameters to determine how they affect the economic ranking of various DR and T&D
plans.
T&D
A.2.9 EPRI Area Investment Strategy Model: A Utility Perspective
A-7
A.2.9.1 Goal
To enable the user to determine local distribution area expansion plans that are least-cost
under uncertainty
A.2.9.2 Results
First, system engineering is used to establish the capacity of the existing local area distribution
network and to identify alternative investment sequences that provide enough capacity to
maintain a given service level. The Area Investment Strategy Model is then used to identify
optimal sequences of investments that are conditional on future load conditions and other
uncertainties. The sequences describe which investment to make today and how to respond as
load and other uncertainties are resolved. The sequences are optimal since they provide the
pre-defined level of service at least cost.
The Area Investment Strategy Model captures the uncertainty of future load and costs in the
design of plans for infrastructure additions. It provides the cost and risk information utilities need
to build business cases for least-cost investment strategies.
The model provides an analytic framework for users to specify alternatives, characterize
important uncertainties, and develop strategies that minimize the expected cost of meeting future
customer needs. The Area Investment Strategy Model is the only distribution planning tool
currently available that includes analysis of future load and cost uncertainties, and develops
leas-cost plans given the future uncertainties. The model allows join consideration of T&D
upgrades and distributed resources, including load management programs.
Distribution
A.2.10 EPRI TR-113988: Technology Risk Assessment in Combustion Turbine

Based Power Plants. December 1999
A.2.10.1 Goal
To review the approach project developers and financial organizations use for risk
assessment and mitigation and to develop a process for evaluating options and
communicating results to the financial community by focusing specifically on
technology risk, risk mitigation, and cost containment options
A.2.10.2 Results
Risk identification and allocation are important parts of developing and implementing a financial
strategy for any project. Most project development organizations devote significant resources to
risk management as part of the development process. And yet, even though the technology
A-8
component of risk is recognized as an important issue, it is typically not considered in any

formalized fashion during initial technology selection and design configuration of the power
plant. The key elements in evaluating technical risk for emerging and newly commercial
technology are established parts of EPRIs Combustion Turbine and Combined-Cycle O&M
Target and the New CT Design, Repowering, and Risk Mitigation Target. This report proposes
an approach that synthesizes data and information derived from these key elements into an
approach that can be used to quantify technology risk and evaluate the economics of cost
containment options. Such options include extended warranties/guarantees, maintenance
contracts, and O&M contracts. The result would be better visibility of risk versus cost trade-offs
and the ability to deal with trade-offs more objectively. The ultimate result translates into a more
profitable power project in todays competitive market.
Generation (Combustion Turbine, Combined-cycle)
A.3 Portfolio Evaluation
A.3.1 EPRI TR-106216: From Regulation to Competition Managing the Corporate

Portfolio For Maximum Value. March 1996
A.3.1.1 Goals
To describe a method to evaluate different corporate portfolio options that will result in
maximum shareholder value
To apply the principles of Strategic Asset Management to a wide variety of electricity
industry applications
To transfer insights developed from Strategic Asset Management applications to
EPRI members
A.3.1.2 Results
This report discusses how the principles of Strategic Asset Management can be used at the
highest levels of corporate decision making to improve how executives select business
enterprises and set strategic direction. The report is organized in three parts:
Meeting the Competitive Challenge identifies how competitive challenges are changing
utility managers thinking about investments and how regulatory changes are affecting the
risks and returns of differing business enterprises.
Investing in Strategic Enterprises describes how business alignment and the search for
business synergies should guide development of the corporate portfolio. Discussed is a
method for evaluating combinations of businesses with different risk and return profiles
and determining which combination creates the greatest shareholder value.
A-9
Aligning for Business Success discusses the challenges of redesigning and reengineering an
organization to create the alignment of business enterprises that delivers maximum value.
All
A.3.2 EPRI TR-104917: Investing Resources to Create Value The Portfolio

Approach to Capital and O&M Budgeting. March 1996
A.3.2.1 Goals
To describe a methodology and process for resource investment decisions in the capital
and O&M budgeting process
To apply the principles of Strategic Asset Management to a wide variety of electricity
industry applications
To transfer insights developed from Strategic Asset Management applications to EPRI
members
A.3.2.2 Results
This report discusses how the principles of Strategic Asset Management can be used to create
a more effective budget allocation process. The report is organized in four parts:
The overview identifies the fundamental principles of resource investment in a competitive
business environment and discusses the challenges that an effective resource allocation
process must overcome.
The resource investment methodology describes a resource allocation process that guides
project selection based on corporate value and associated risk. Identification of promising
projects, project evaluation, and project ranking are discussed in detail.
The resource investment process focuses on the organizational challenges in making a
resource allocation process work and provides recommendations on how decision quality
tools can be used to help overcome these challenges.
Applications describes how these methods have been used to allocate budgets in various
business areas, including generation, transmission, distribution, environmental compliance,
and R&D.
All
A-10
A.3.3 EPRI TR-108106: Portfolio Management Finding Growth Opportunities

in a Restructured Electricity Marketplace, December 1997
A.3.3.1 Goals
To illustrate the key issues underlying portfolio management
To investigate the portfolio management techniques and experiences of competitive
industries
To describe an approach that can be used to develop a well-integrated portfolio management
process in the energy industry
A.3.3.2 Results
This report describes a four-phase project design that covers the mobilization, assessment,
design, and implementation of a portfolio management process. The mobilization phase involves
the commitment of the personnel, including a core team, an executive-level sponsor team, and a
project manager. The assessment phase includes careful consideration of the companys strategic
direction and the construction of a database describing existing and proposed projects. The
design phase involves first developing and then employing the criteria or frameworks that will
be used to judge the degree of balance within a portfolio. A wide range of frameworks can be
used, including ones based on lifecycle stage, technology type, and market type. The last
phase implementation involves assigning long-term responsibilities, training of personnel,
and performance monitoring.
All
A.3.4 EPRI 1000371: Understanding Energy Customers Profitability EPRIs

Customer Portfolio Management System. September 2000
A.3.4.1 Goal
To define and illustrate a new business framework that helps utilities to systematically
evaluate and optimize customer portfolios
A.3.4.2 Results
This paper presents the market-based rationale behind the development of the new business
framework, called the Customer Portfolio Management System (CPMS). The CPMS consists
of a calculation engine that estimates the profitability of customer assets and the total customer
portfolio. Key decision variables within the engine include market segment definitions, service
pricing, market penetration of the services, and appropriate hurdle rates. Primary market research
information (or default data) about customer purchasing behavior and the energy market pricing
A-11
drives the engine. Scenario or risk analysis can be applied to determine the sensitivity of the
calculated outcomes to input assumptions. The results of the analysis are used to formulate a
marketing strategy for existing and targeted customers, and to support marketing and customer-
related investment decisions. The marketing strategy will be consistent with the financial goals
of the energy service provider whether this is measured in terms of return on investment,
contribution to earnings, or even market share.
All
A.3.5 EPRI TR-113606-V1: R&D/Technology Management Best Practices Study:

Volume 1 - Executive Summary Report. November 1999
A.3.5.1 Goals
To acquire first-hand knowledge of the most successful R&D/technology management
practices of leading non-utility companies outside the electric power business.
To document and report that information in an easily accessible form that helps participating
EPRI members implement study findings.
To enhance participating EPRI members' strategic positions in the emerging energy business
by helping them best organize, manage, and leverage their R&D and technology investments.
A.3.5.2 Results
The R&D/Technology Management Best Practices Study resulted in eight major foundation
findings and 15 enabling lessons learned. Foundation findings cover a range of R&D strategic
and management issues. These findings include the role of R&D in corporate and business unit
strategy and goals' development and implementation and the establishment of standardized R&D
processes. The action-oriented lessons learned cover such issues as portfolio management,
cross-organizational teams, and internal communications. Each participating EPRI member will
need to tailor these results to their companys unique future business needs. Implementation will
touch every area of the company and will require the leadership of executive management, the
commitment of business unit leaders, and the major involvement of R&D professionals and
managers.
A portion of this study focuses on portfolio analysis.
All
A-12
A.3.6 EPRI TR-103883: Capital Expenditure Decisions: Obtaining Commitment to

Action. May 1994
A.3.6.1 Goal
To identify ways of improving the capital budgeting process at San Diego Gas and Electric
Company (SDG&E); to identify and document those improvements that are likely to provide
value at other utilities
A.3.6.2 Results
The study demonstrated that decision quality analysis techniques can be used to diagnose the
quality of a project evaluation analysis. This process helps utilities focus on the areas that will
best clarify whether or not to proceed with the project. The study also demonstrates that
difficult-to-quantify, highly uncertain intangible contributions to value/cost can be taken into
account using decision analysis methods. In fact, decisions made without considering these
effects are unlikely to generate management or staff commitment to action, despite analysis
recommendations. Finally, the study demonstrates that value translation from high-level
corporate goals to measures that are meaningful for business are staff can help ensure that the
appropriate projects are recommended for management approval.
Generation (Fossil)
A.4 Risk Assessment and Risk Management
A.4.1 EPRI 1007969: A Dynamical Systems Model for Nuclear Power Plant Risk
Management. October 2003
A.4.1.1 Goals
To present a mathematical model that can be used to ascertain how plant risk is impacted by
the performance of plant processes and management effectiveness
To validate the model by demonstrating, in a qualitative sense, that plant risk responds
appropriately to postulated changes in the performance of the modeled process
To use dynamical systems theory to analyze the structure of the model and obtain insights
for plant management to effectively control risk
A-13
A.4.1.2 Results
This research resulted in the development of a dynamical systems model for nuclear power plant
safety risk. Testing of the model verified that it responded in an appropriate qualitative manner to
postulated changes in process performance and interprocess couplings. The model also provided
several useful insights that are important from a nuclear safety perspective. These include the
following:
The equipment reliability and loss prevention functions of the Standard Nuclear Plant
Process Model are absolutely essential to minimizing plant risk. Because these functions are
dependent on the skills and experience of the plant staff members who perform these
functions, it is critically important to ensure that mechanisms are in place to maintain
qualified and motivated personnel in these positions.
An important contributor to reducing plant risk is to provide a high degree of interaction
between the operations and work management decision-making processes. Provided a
collaborative decision-making environment was found to have major benefits in providing
robust decisions that improve safety performance.
Similarly, development of an effective risk culture also provides a significant contribution to
improving plant safety and minimizing risk.
Nuclear
A.4.2 EPRI 1000637: The Market Price of Risk Implication for Electricity Price
Forecasting, Asset Valuation and Portfolio Risk Management. December 2000
A.4.2.1 Goals
To update peoples understanding of the market price of risk for electricity, based on
significant changes in electricity markets witnessed since the price spikes of 1998
To present alternative theories on how the market price of risk influences forward prices
To address implications of these alternatives for price forecasting, asset valuation, and
portfolio risk management
A.4.2.2 Results
The report starts with a laymans introduction to the market price of risk and continues with a
review of the empirical evidence for energy commodities and electricity. Next it describes
how the EPRI/North Bridge Forward Price Forecasting System uses the market price of risk to
distinguish between forward prices and expected spot prices for power. Alternate theories
for the market price for electricity are presented. The report discusses how these theories lead to
dramatically different forecasts of expected spot prices, implications for valuation methods,
and the willingness to pay to hedge portfolio risk.
A-14
All
A.4.3 EPRI 1008242: Assessing Nuclear Power Plant Risk Management

Effectiveness. July 2004
A.4.3.1 Goals
To identify aspects of risk management that are necessary to adequately control plant safety
risk during various operational configurations; support cost-effective transition to a risk-
informed, performance-based regulatory environment; and support the licensing of next-
generation nuclear generating stations
To provide an assessment method from which a particular plants success in implementing
effective risk-management policies and developing a risk culture is measured
To obtain insights into the applicability of the methods from limited application at a host
nuclear plant site (the structure and methods described herein are intended to provide a
starting point from which a risk-management framework can be used to effectively control
plant risk and to transition to a risk-informed, performance-based regulatory framework)
A.4.3.2 Results
The approach described in this report provides a framework for the application of risk
management to effectively control safety risk at nuclear power plants. This framework identifies
processes and functions in place at commercial nuclear plants that significantly affect plant risk.
The approach has also been used to develop an assessment methodology (including a detailed set
of evaluation questions) to permit the evaluation of the effectiveness of risk management. The
approach was demonstrated by a limited application at a host nuclear plant. This demonstration
validated the approach and resulted in several enhancements. However, due to the limited nature
of the validation, the completeness of the process and of the evaluation questions has not been
fully validated. Thus, additional applications should be performed to validate the methodology to
permit industry-wide application.
A.4.3.3 Intended Sector: Nuclear
A.4.4 EPRI TR-114185: The Role of Distributed Resources in Business Strategies

for Risk Management. January 2000
A.4.4.1 Goal
To explain how power marketers and electric retailers can use gas-fueled distributed
resources for both gas-electric arbitrage and risk management
A-15
A.4.4.2 Results
This report details the risks and opportunities that result from a competitive electricity
marketplace and describes basic concepts and tools to identify and exploit risk management and
arbitrage opportunities. It also explains the risks and gas-electric arbitrage opportunities created
by DR projects and how electricity retailers and power traders can use DR for risk management
and arbitrage.
Distributed Resources
A.4.5 EPRI 1007972: Review of Current Practices for Establishing Configuration

Risk Management Thresholds for Nuclear Power Plants. November 2003
A.4.5.1 Goals
To provide comparative information about risk criteria, thresholds for risk categories, and
models and methods for evaluations of individual configurations used in individual
Configuration Risk Management (CRM) programs at-power
To develop insights from this information that can be used by individual plants to improve
the consistency and effectiveness of their CRM programs
A.4.5.2 Results
A questionnaire to survey EPRI-member nuclear plant CRM programs was prepared and
distributed under the auspices of the EPRI Configuration Risk Management Forum Steering
Group. Questions about risk criteria, thresholds for risk categories, software, and models for
evaluation of individual configurations were included. The survey was completed by 40 plant
sites, representing 60% of the U.S. nuclear units and one non-U.S. plant. A cross section of CRM
methods is represented by the data. The results showed a high level of consistency. Instantaneous
risk (Core Damage Frequency) was the most prevalent measure. Thresholds for risk categories
were quite consistent, even if developed by different methods. Cumulative or accrued risk is
commonly used, in a variety of forms, together with instantaneous risk measures. Quantitative
risk measures are universally used for internal events, and a majority also includes internal
flooding. Other initiators are sometimes treated quantitatively or by a spectrum of qualitative
approaches. A significant group of plants uses structured defense-in-depth models along with
quantitative risk measures. Insights are provided on the relative benefits and opportunities for
improvements offered by some of the observed industry practices, specifically, quantification of
external events, defense-in-depth models, treatment of non-modeled factors, treatment of
cumulative risk, and use of Large Early Release measures.
Nuclear
A-16
A.4.6 EPRI TR-110709: Watershed Analysis Risk Management Framework A

Decision Support System for Watershed Approach and Total Maximum Daily
Load Calculation. December 1998
A.4.6.1 Goal
To develop a scientifically sound and user-friendly decision support system (DSS) for the
watershed approach
A.4.6.2 Results
The United States Environmental Protection Agency is promoting the adoption of a new
water quality management policy using a watershed management perspective that emphasizes
consensus building among local stakeholders in lieu of regulatory command and control. This
new policy incorporates consideration of all-point and non-point source dischargers within a
watershed and the determination of total maximum daily loads (TMDLs) of various pollutants
for water quality limited sections. The analysis must be performed on a watershed basis and is
commonly referred to as the watershed approach.
The research produced the Watershed Approach Risk Management Framework (WARMF),
which can apply the watershed approach to any river basin. This report provides a documentation
of WARMF, describing its structure, model formulations, and application procedures. The
application was made for the Catawba River Basin with approximately 5,000 square miles
of drainage area and 11 reservoirs along the main stem of the river.
Environmental (All-point or non-point dischargers into watershed locations)
A.4.7 EPRI 1005246: Incorporating Offset Projects into Corporate Greenhouse

Gas Strategies Risk Management Under Conditions of Policy and Market
Uncertainty. December 2003
A.4.7.1 Goal
To provide companies in the electric sector and other energy sectors with information and
insights to better understand todays project-based greenhouse gas (GHG) offset market, to
assess future market conditions, and to weigh the potential risks and rewards associated with
market participation
To provide an analytical framework for evaluating individual projects, emissions reduction
sectors, and project-based portfolios and for informing the development and implementation
of project-based strategies
A-17
A.4.7.2 Results
This report reviews the issues and questions facing companies as they consider participation
in the project-based GHG market. It explores the crucial role of political decisions, policy
outcomes, and technical advances in shaping the project-based and overall GHG market. It
identifies advantages and disadvantages of different market entry options and project-based
mechanisms, including the Kyoto Protocols Clean Development Mechanism and Joint
Implementation. It also describes advantages, disadvantages, and cost-performance potential of
diverse emissions reduction sectors, as well as benefits of a sectoral approach to project-based
evaluation and a portfolio approach to project-based strategy development and implementation.
Practitioners Notes highlight key considerations for industry executives and planners.
The report concludes that in todays GHG market context, project-based strategies are likely to
offer many companies opportunities for hedging climate policy risks while making investments
with the highest potential upside. To aid in strategy development and implementation, the report
provides a fundamental framework for making judgments about the future of the GHG market,
the price of project-based credits, and potential returns from project-based activities. It displays
supply curves and forward price curves for the GHG market developed by experts in the field. It
also identifies the unique criteria companies should consider in evaluating potential GHG offset
projects and in making investments that stand the test of time by creating both compliance
efficiencies and competitive advantages.
Environmental (Greenhouse Gas emitters)

A.4.8 EPRI TR-111387: Using RAMAS Methods to Solve Ecological Problems
Facing Utilities. December 1998
A.4.8.1 Goal
To provide a description of the risk assessment approach and its direct application to existing
utility issues, including thermal impacts, entrainment and impingement, eco-toxicology,
ecosystem-level effects, alteration of flow, utility right-of-ways, endangered species,
ecological valuation, and landscape management
A.4.8.2 Results
EPRIs RAMAS software tools allow scientists and managers to make predictions of future
trends in population abundance, to test hypotheses about impacts, to identify critical assessment
and management parameters, to evaluate impacts on populations and communities, to estimate
land values, and to plan more effectively for better management. The risk assessment approach
using RAMAS software offers an effective set of methods that maximizes use of existing data.
A-18
Environmental
A.4.8.4 Related References:

AP-113048, RAMAS Risk Calc Risk Assessment With Uncertain Numbers Version 3.0,
1999
AP-113031, RAMAS GIS Linking Landscape Data with Population Viability Analysis
Version 3.0, 1999
AP-110332, RAMAS Ecotoxicology Population-level Risk Assessment Version 1.0, 1998
A.4.9 EPRI 1000820: Turbine-Generator Maintenance Interval Optimization Using a

Financial Risk Assessment Technique. November 2000
A.4.9.1 Goal
To provide turbine-generator (T-G) operators with a tool for maintenance interval planning
that is based on financial risk assessment and component-specific reliability data
A.4.9.2 Results
EPRIs Turbo-X software allows users to easily develop risk analyses involving key T-G
components. Turbo-X contains industry data on component reliability, collected over 15 years,
as one of several bases for assessing failure probability. Users must supply estimates of all
required maintenance costs (planned and unplanned) as well as data to estimate potential future
operating revenue. A sequence of deferred maintenance options is then evaluated automatically
by Turbo-X to yield the financially preferred option on the basis of maximum net present value
(NPV). Where applicable, user-defined safety limits take precedence over NPV.
Version 2.0 of EPRIs Turbo-X program is now being implemented in the O&M planning
processes of several member organizations. EPRI is facilitating this process by creating
additional collaborative research opportunities with the objective of further refining the accuracy
of the critical Turbo-X input such as component failure probability and consequential costs of
unplanned outages.
Generation
A-19
A.4.10 EPRI TR-108261: Property Damage Risk Assessment Scoping Study.

July 1997.
A.4.10.1 Goal
To provide nuclear plant owners with information about financial risks from accidents to
guide them in purchasing property insurance and making other decisions that may impact
such risks
A.4.10.2 Results
A sharp demarcation in losses was found between non-nuclear accidents such as turbine rupture,
with insured losses of less than $400 million, and nuclear fuel melting accidents such as the
one at Three Mile Island Unit 2. All fuel melting accidents would cause potentially recoverable
losses larger than $4 billion, which would be greater than the existing STPEGS property
insurance and the maximum available insurance. Most of the differences between potentially
recoverable losses and total losses take the form of replacement power costs, which STPEGS is
not currently insured against. The results of this study support the following conclusions:
If accident frequencies below about 1 in 30,000 per year are regarded as insignificant, then
there is a negligible risk of exceeding the NRC-mandated minimum insurance of $1.06
billion. Perhaps the strongest case for selecting the minimum level of insurance is the finding
that the financial risk burden on owners is dominated by replacement power, which is not
covered by current property damage policies. Only about 16% of the expected annual losses
comprising the financial risk are addressed by available property insurance.
If the current level of insurance coverage were reduced to about $1.06 billion, there would be
sufficient funds for the recoverable costs for stabilization, cleanup, and the decommissioning
shortfall from a core damage event contained inside the reactor vessel such as occurred at
Three Mile Island.
If the plant had in place a severe core damage event cleanup plan, uncertainties in estimating
the costs to stabilize and decontaminate the facility after a severe core damage event, and the
magnitude of the costs themselves, could be reduced.
Nuclear
A.4.11 EPRI 1001684: Probabilistic Model of Risk Assessment of Offering

Premium Power Services. March 2003
A.4.11.1 Goals
To introduce various probabilistic methods used to determine the variability and uncertainty
in sag data, which determine the terms of premium power contracts
A-20
To assist utilities in better understanding the decision processes that their customers go
through in selecting power quality mitigation hardware, help utilities learn how a life cycle
cost analysis is performed to select the optimal solution that meets the customers needs, and
help utilities learn how to sell premium power services as an insurance product in the same
way as auto insurance, medical insurance, and home insurance
A.4.11.2 Results
The concept of a premium power service is based on an insurance policy model. Offering
premium power services requires the utility to price the services in such a way as to provide
benefits to both customers and the utility. Many premium power contracts are developed based
on the deterministic approach in which the average sag rate and other input variables are used to
establish contract premium and payout. The deterministic approach, although simple to use,
does not consider variability and uncertainty inherent in any real-life data, which may give
misleading results. Premium power contracts based on deterministic analyses are vulnerable to
this limitation. This is especially true when a utility is planning to install a custom power device
to achieve a desired power quality level.
This report begins by introducing various probabilistic approaches that can be used to estimate
variability and uncertainty in the sag rate at a customer facility. Once the methods have been
explained, the report describes cost analysis of custom power devices for evaluating premium
power contracts. The difference in analysis results by using deterministic and probabilistic
approaches is clearly shown.
Transmission & Distribution
A.4.12 EPRI 1004007: Technical Status, Operating Experience and Risk

Assessment of Clean Coal Technologies 2001. December 2001
A.4.12.1 Goals
To assess the state of the art and operating experience for the various competing clean coal
technologies
To evaluate changes made to achieve improvements in reliability and performance
To identify key issues for further commercial deployment
A.4.12.2 Results
Several ultra supercritical pulverized coal (USC PC) plants of 400-1000 MW incorporating
newly qualified steels have entered service in Japan and Europe over the past five years with
design heat rates 5-7% lower than standard subcritical PC plants. Longer-term reliability of these
USC plants in Europe and Japan is of key importance to this technologys future. The early
operating experience of USC plants in Denmark and Japan described in this report is very
encouraging.
A-21
AFBC plants are particularly suitable for lower quality and high-ash coals. IN the smaller
sizes < 150 MW, they have shown reliabilities similar to PC plants of the same size. Some plants
have experience > 90% availability. Several units of 250-MW size have been deployed in Europe
and the U.S. However, with high-sulfur fuels, it may be necessary to add a scrubber to meet
stringent emission regulations and avoid excessive limestone usage. A 300-MW plant with this
configuration in Jacksonville, Florida is due to start up late in 2001.
Coal-based integrated gasification combined-cycle (IGCC) plants in the U.S. and Europe are
coming to the end of their subsidized demonstration periods and some have already entered the
competitive deregulated market place. Natural gas price volatility and improved availability of
U.S. IGCC plants are favorable to their continued operation. Several heavy oil and petroleum
coke IGCC plants have recently entered commercial service. Experience from these plants and
introduction of advanced gas turbines should improve IGCC economics and performance.
ABB (now Alstom) is no longer actively marketing pressurized fluidized bed combustion
(PFBC) in the U.S. PFBCs future will be determined in Japan where the 350-MW plant at
Karita and the 250-MW unit at Osaka are entering service. However, PFBC faces stiff
competition from the 800 to 1000-MW USC plants with their operational reliability and
economic advantages of scale.
The greatest uncertainties for future coal plants are environmental requirements for SOX, NOX,
PM2.5, mercury, and CO2 emissions. EPA is scheduled to issue regulations on mercury emissions
by December 15, 2004. At this time, it is uncertain what standards will be required and what
technologies will be effective. EPA also is considering new regulations and approaches to
emissions control. If CO2 removal is required to any major extent, then natural gas prices will
most probably rise, and IGCC would become the preferred coal technology.
Generation
A.4.13 EPRI 1004382: Risk Based Maintenance Guideline. November 2002
A.4.13.1 Goals
To introduce the concept of risk and how it relates to fossil power plants
To provide a risk assessment framework that allows utilities to apply those concepts and
manage the level of risk in fossil power plants
A.4.13.2 Results
EPRIs Risk Based Maintenance Guideline is particularly applicable to generation vice

presidents and plant leadership teams. It can greatly aid them in assessing how much risk exists
at a plant, where that risk is, and how to expend resources on a strategy that manages risk so as
to balance reliability and costs.
A-22
The guideline presents a risk assessment framework that focuses on five levels of risk
assessment:
Management Program Risk Risks inherent in the organization, processes, and component
conditions
Program Implementation Risk Risks due to ineffective application of appropriate program
attributes
Component Condition Risk Risks associated with current component conditions, with
emphasis on use of that knowledge in plant management
Risk Based Task Prioritization Task-specific risk assessment to prioritize the most critical
work
Risk-informed Decision-Making A process that uses risk to aid in day-to-day decision
making
Generation
A.4.14 EPRI 1005337: Evaluating the Effects of Power Plant Operations on

Aquatic Communities An Ecological Risk Assessment Framework for Clean
Water Act 316(b) Determinations. July 2002
A.4.14.1 Goal
To describe the U.S. Environmental Protection Agencys (USEPA) general ecological risk
assessment (ERA) framework including definition of key terms and concepts and to provide
a detailed discussion of how this framework can be adapted for assessing the potential
ecological risks of cooling water withdrawals
A.4.14.2 Results
This report concludes that the US EPAs ERA framework is a logical and technically sound
approach for assessing the potential for adverse environmental impact of cooling water
withdrawals under 316(b) of the Clean Water Act. The approach can also be used to support
the 316(b) determination of best technology available by: 1) providing a method for quantifying
ecological benefits that could accrue from potential management alternatives, 2) supporting
site-specific evaluation of cost versus benefits, 3) aiding in the selection of the most appropriate
intake fish protection technology, and 4) providing a framework for identifying the form, amount
and benefits of environmental restoration for mitigating intake impacts.
A-23
This report provides guidance relative to many key issues involved in assessing ecological
risk under 316(b) including 1) the role of ERA in the 316(b) decision-making process, 2)
appropriate risk management goals and objectives, 3) appropriate assessment endpoints and
measures, 4) a generic analysis plan and selection of focal species, 5) components of exposure
and ecological effects, 6) methods to estimate ecological risk, and 7) the evaluation of
assessment uncertainty.
The 316(b) ERA framework is flexible and can be used as the foundation for ecological risk
assessments at sites involving a wide spectrum of assessment complexity. The systematic, tiered
approach discussed herein offers advantages in efficiency and cost over the case-by-case
approach historically used in 316(b).
Environment, Cooling Water Intake Systems
A.4.15 Utility Vegetation Management: Use of Reliability-Centered Maintenance

Concepts to Improve Performance
A.4.15.1 Goal
To apply the concept of Reliability-Centered Maintenance (RCM) to vegetation management
in order to cost-effectively improve system reliability
A.4.15.2 Results
This method of planning and scheduling line clearance work utilizes the principles of RCM. The
basic goal is to maintain system reliability by lowering the risk of system failure. To achieve this
goal, the pertinent systems and sub-systems with a critical function to be maintained must first be
defined. Next, system failure and its consequences must be defined. Then data must be collected
detailing past reasons and causes of failure. This data is used, logically and systematically, to
create a plan for system-wide changes that will decrease the risk of future system failure. Initial
findings are tested and refined as the program is implemented and managed. Risk-based planning
and scheduling assigns inspection cycles to different system components, and uses field
condition assessment prior to scheduling tree maintenance. Continued reassessment leads to
further program refinement. By focusing maintenance resources on system components
determined to be most at risk of failure and having the greatest detrimental consequences of
failure, risk-based scheduling can achieve focused reliability benefits.
Transmission
A-24
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Asset Management Toolkit Modules

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Asset Management Toolkit Modules

An Approach for Risk-Informed Performance-Focused Asset

Final Report, July 2005

EPRI Project Manager

(A) MAKES ANY WARRANTY OR REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, (I)

(B) ASSUMES RESPONSIBILITY FOR ANY DAMAGES OR OTHER LIABILITY WHATSOEVER

ORGANIZATION(S) THAT PREPARED THIS DOCUMENT

This report was prepared by

Asset Management Toolkit Modules: An Approach for Risk-Informed, Performance-Focused

EPRI also acknowledges Steve Hoffman of Hoffman Marketing Communications, Inc.,

2 ASSET MANAGEMENT HIGH LEVEL BUSINESS OBJECTIVES .......................................2-1

3 ASSET MANAGEMENT FUNCTIONAL MODULES..............................................................3-1

4 PORTFOLIO EVALUATION AND RISK ASSESSMENT EXAMPLE: TREE

A SURVEY OF EXISTING ASSET MANAGEMENT TOOLS .................................................. A-1

1.1 Strategic Issues Facing the Electric Utility Industry

Balance long-term and quick-payback planning. Historically, long-term equipment

Explicit treatment of equipment failure impact on power system reliability. Because of

1.2 Goals of the Risk-Informed, Performance-Focused Asset Management

The goal of the risk-informed, performance-focused asset management approach is to help

1.3 General Requirements for an Asset Management Toolkit

1.4 Report Organization

2.1 The Power Delivery Asset Management Model

2.2 Economic Elements of an Asset Management Decision

Power Sale Capital

Transmission FERC, PUC, Preventive Lost Time

Sale Contract Corrective

Bad Debt Inspections Refurbishment Depreciation Fires

Research and Environmental

2.3 Asset Management Business Applications

2.3.1 Economic Analyses of Capital and O&M Projects

2.3.2 Optimized Portfolios of Capital and O&M Projects

2.3.3 Forecasting Key Performance Indicators

2.3.4 Repair/Replace Decisions for Aging Equipment

2.4 Asset Management Tiered Evaluation Approach

Level 1 Level 2 Level 3

Main feature An optimistic A realistic point value An uncertainty analysis

Modules Simple +/- sophisticated +/- sophisticated

Main Outputs Optimistic Point Value Best-estimate Point Risk profiles

Decision Reject if BOI<1 Accept project if very Decision based on

Level 2 analysis employs deterministic, best estimate assumptions of expected improvement

variation in profitability (NPV change or benefit-to-investment ratio) are identified as decision

2.5 Modular Approach to Asset Management

A modular approach and framework of these economic calculations promotes understanding of

2.5.1 Additional Uses of the Modular Approach

2.5.2 Benefits of Modularization

2.6 Integration of Asset Management with Enterprise Systems

Maintenance Management Operations Management Engineering

Database 1 Database 2 Database 3 Database 4

Work SCADA Outage Design

A fundamental premise of the risk-informed, performance-focused asset management

3.1 Asset Improvement Optimizer (Portfolio)

This module allows management of groups of proposed changes in order to maximize

3.2 Externality Value Provider

The purpose of this module is to assist in addressing qualitative attributes of a project

3.3 Economic Calculator

3.4 Revenue Calculator

3.5 Total Cost Calculator

3.5.1 Preventive Maintenance Cost Calculator

3.5.2 Corrective Maintenance Cost Calculator

3.5.3 Non-Maintenance Cost Calculator

3.6 Power Price Forecaster

3.7 Delivered Power Calculator

3.8 Reliability Calculator

3.9 Power Quality Calculator