Investing resources to create value - The portfolio approach to capital and O&M budgeting. Final report
Few activities have greater impact on value than the decisions required to allocate resources in capital and O&M budgets. To achieve success in a competitive business environment, decision-makers need an approach that focuses on value enhancement while ensuring quality, defensibility, and prudence in the process itself. Further, the approach must address whole portfolios of proposed alternatives as well as the individual projects under consideration. Making the best decisions requires a comprehensive methodology that determines which portfolio of capital investments and O&M projects shows the greatest promise for increasing value. This report describes a powerful approach that helps utility managers and technical staff make effective resource investment decisions in the capital and O&M budgeting process. The report has the following parts: (1) Overview - We begin with the fundamental principles of resource investment in a competitive business environment. Then we describe the challenges in capital and O&M budgeting currently faced by utilities and provide an overview of the decision-making methodology and process needed to meet these challenges. (2) Resource Investment Methodology - We introduce a structured methodology, based on the principles of decision analysis, for formulating, evaluating, and appraising resource investment decisions. (3) Resource Investment Process - Based on the premise that decisions are not made solely on the basis of good analyses, we present a process that deals with organizational complexity and builds both understanding and commitment to action. (4) Applications - We present applications of the methodology and process in a variety of business areas. We demonstrate how the methodology applies to maintenance decisions and environmental decisions as well as decisions to support transmission and distribution.
- Research Organization:
- Electric Power Research Inst. (EPRI), Palo Alto, CA (United States); Strategic Decisions Group, Menlo Park, CA (United States)
- Sponsoring Organization:
- Electric Power Research Inst., Palo Alto, CA (United States)
- OSTI ID:
- 233390
- Report Number(s):
- EPRI-TR-104917; TRN: 96:003126
- Resource Relation:
- Other Information: PBD: Mar 1996
- Country of Publication:
- United States
- Language:
- English
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