Asset Management Risk Planning and Project PrioritizationBringing PacifiCorp to the Next Level in Asset Management

Presented at the EEI TD&M

Conference in Charlotte, NC April 20, 2004

2

PacifiCorp is the USA-based subsidiary of Scottish PowerAnd is one of the West’s largest and lowest-cost electric utilities

A little history and some basic statistics1881 – Salt Lake City is 5th city in US with central

station electricity1910 - Pacific Power & Light in OR & WA1912 - Utah Power & Light in UT & ID 1989 - PacifiCorp merger1999 - Scottish Power merger  Headquarters: Portland, OR Employees: 6,400Territory: More than 135,000 square miles Line-miles: Transmission: 15,000

Overhead distribution: 44,000 Underground distribution: 12,000

Generation capacity: 8,300 megawatts Customers: Total 1,544,895

Utah 689,709 Oregon 510,254 Wyoming 122,493 Washington 120,094 Idaho 59,407 California 42,895

  

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T&D is a significant part of PacifiCorp’s CAPEX With a projection for declining T&D CAPEX in the next few years

PacifiCorp CAPEX Actual & Estimated

0

100

200

300

400

500

600

700

800

2003 2004 2005 2006

FY Ending March 31

$M

illio

ns

Other

Generation & Mining

Transmission & Distribution

Judi JohansenPresident & CEO

Matthew WrightEVP Power Delivery

Darrell GerrardVP T&D Engineering & Asset Management

Alec Burden (ret.)MD Asset Management

Tom WatersDir. Asset Planning

Tom EyfordRisk Manager

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Option Development Developing cost-effective alternatives for possible funding

- Additions- Upgrades- Replacement- Maintenance- Standards- Systems

Results Monitoring

Measuring & managing the drivers of the funded projects and processes

- Benchmarking- Unit costs- Failure rates- Event impacts- Value added

Recall the context within which prioritization is donePrioritization is only a part of asset management and risk planning

10-Year Present Value Project Cost and Value Funding Curve

$

$500

$1000

$1500

$2000

$2500

$ $200 $400 $600 $800 $1000 $1200 $1400

Cumulative PV of Project Cost ($ Millions)

Cum

ulat

ive

PV o

f Pro

ject

Val

ue ($

Mill

ions

) Funding Curve

2005 Project Cost and Value Funding Curve (Capital)

-$200

$

$200

$400

$600

$800

$1000

$1200

$ $50 $100 $150 $200 $250 $300 $350 $400

2005 Project Cost ($ Millions)

2005

Pro

ject

Val

ue ($

Mill

ions

)

5

2005 Project Cost and Value Funding Curve (Capital)

-$200

$

$200

$400

$600

$800

$1000

$1200

$ $50 $100 $150 $200 $250 $300 $350 $400

2005 Project Cost ($ Millions)

2005

Pro

ject

Val

ue

($ M

illio

ns)

‘Must Do’ is limited at about half the budget These categories need to be forecast well, and then fully funded

Po

ssib

le F

ina

nci

al T

arg

et

Pro

ject

s w

ith V

alu

e/C

ost

> 1

.0

Illustrative

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Today’s utility has to have a different story to tell investorsThe shift is from global energy traders to regional asset owner/managers

Load relief is a major part of the capital budgetRecommended funding reduces risk to acceptable levels

Load Relief Funding Curve and Risk Measure

0

50

100

150

200

250

300

350

400

450

0 10 20 30 40 50 60 70

Load Relief Spending ($Millions)

Val

ue

($M

il), R

isk

(Exp

MV

AH

rs) ExpMVAHrs at Risk

Cumulative Value Added

Load Relief Cost and Value Drivers

0

50

100

150

200

250

300

350

400

450

0 10 20 30 40 50 60 70

Load Relief Spending ($Millions)

MV

A

Capacity Added (MVA)

Load Relief: (n-1) MVA at Risk 2006

Load Relief: (n-0) MVA at Risk 2009

Load Relief: (n-0) MVA at Risk 2006

Load Relief Sensitivity Analysis

0 2 4 6 8 10 12 14 16 18

Percent Field Tie

Mobile Time/Restorationtime

XFMR Failure Rate

Total Cost

Load Growth Rate

Peak Load

Ratio

0

10

20

30

40

50

60

70

80

90

100

2005 2006 2007 2008 2009

0

50

100

150

200

250

300

350

400

450

Original SpendingSpending @ 1.0Capacity AddedRisk Avoided @ 1.0

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Today’s utility has to have a different story to tell investorsThe shift is from global energy traders to regional asset owner/managers

Feeder reliability has a direct impact on SAIDI-SAIFIRecommended funding reduces risk to acceptable levels

Feeder Reliability Cost Effectiveness

$- $200 $400 $600 $800 $1,000

$1,200

$1,400

$1,600

$1,800

Wasatch Front Distribution AutomationWorst Circuit Program Tier 1Worst Circuit Program Tier 2Worst Circuit Program Tier 3Worst Circuit Program Tier 4Worst Circuit Program Tier 5

Tree Trimming (UT/ID/WA/WY)Tree Trimming Oregon and California

Storm HardeningOH Three ph Structure PM Replacement

OH Single-phase Structure PM ReplacementLine inspection and repair- Backbone

Line inspection and repair- LateralsUG Sw itches(G&W) in Vaults PM

URD Tier 1 PM ReplacementURD Tier 2 PM Replacement

Feeder Overload Tier 1Feeder Overload Tier 2Feeder Overload Tier 3

Feeder Undervoltage Tier 1Feeder Undervoltage Tier 2

Pole Replacement

$ Per Customer Interruption Avoided

Vegetation Management

0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8

Mitigation Deterioration Rate

Restoration colst

Cycle

CI per outage

Value of Avoided Interruption

Mitigation Effectiveness

Cost Per mile

Total Cost

Ratio

Feeder Funding Curve & Risk Measure

0

50

100

150

200

250

300

350

400

0 10 20 30 40 50 60 70 80

Feeder Reliability Spending 2005

Val

ue

($M

il),

Avo

ided

CIs

(ks

)

Impact of Spending on SAIFI

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2005 2006 2007 2008 2009

SA

IFI

Cutoff = 2.0

Cutoff = 1.5

Cutoff = 1.0

0 200 400 600 800 1000 1200 1400 1600

$ Per Customer Interruption Avoided

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The capital prioritization process has become a board-level issueBoards want to see what is driving the business’ needs for cash

Substation reliability addresses selected assetsWith programs to replace the most trouble-prone assets

CB Replacement Sensitivity Analysis

1.5 1.55 1.6 1.65 1.7 1.75 1.8 1.85 1.9 1.95 2

Total Cost

Addition to Tgt Population

CI per CB outage

Collateral Damage

PM Unit Cost

% CB causing XFMR Outage

Avg Duration

Avg XFMR MVA

Failure Rate

New Breaker Cost

Ratio

Substation Reliability Funding Curve & Risk Measure

0

20

40

60

80

100

120

140

0 5 10 15 20

Substation Reliability Spending 2005 ($Mil)

Va

lue

($

Mil)

, Ex

pM

VA

Hrs

Weibull Curve - MV Circuit Breakers

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

0% 20% 40% 60% 80% 100%

Annual Percent Maintained

An

nu

al F

ailu

re R

ate

Inventory of Failure-Prone Devices

-

50

100

150

200

250

300

350

400

2005 2006 2007 2008 2009

# o

f D

evic

es

MV CBs

Battery Banks

Regulators

HV CBs

LTCs

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Each project is modeled from cost to impacts to valueThe process has brought some key insights Which will allow PacifiCorp to save money and reduce risk

• Optimal timing of load relief projects

- Model shows that some should be deferred, some accelerated

- Emphasizes the need for exploration of cost-effective alternatives

• Identifies critical data based on sensitivity analysis

- Failure rates, condition of certain assets, load growth rates, unit costs

• Quantifies how reliability value can drive allocation

- $25,000/MWH, $25/CI are good baselines for further refinement

• Causal relationships built in

- Weibull curves and condition-state models address key questions on PM

• Good feedback for planners

- Gives an early indication of project value versus cost

• Improved cost-effectiveness

- ‘Sharper pencil’ on URD, worst circuits, etc. from analysis of failure rates

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Next StepsWhile initial estimates are satisfactory, more can be learned

• 10-year plan

• 2006 Plan and Budget

• Transmission grid

• Model and data refinements (continuous)