Theoretical approaches to developing a strategy for managing the assets of a transmission and distribution company


The problem of measuring and estimating utility in the power industry is as important as ever. This study analyzes the concept of utility with respect to the operation of T&D companies. The utility of an asset management strategy is defined as a measure of the strategy’s conformity with reasonable expectations of the key stakeholders. There are two main approaches to utility estimation: cardinal and ordinal utilities. The cardinal approach assumes there is a single measure of utility, therefore, asset management strategies can be directly assessed and prioritized. In order to implement this approach, either the calculate monetary value of the physical risk needs to be calculated, or introduce additional functions should be introduced, e.g., the reliability penalty function. Within this approach, customer satisfaction is factored in only implicitly. There is no single utility measure when ordinal utility is used; therefore there is no need for monetary assessment of the physical risk, which is often inaccurate. The study introduces the concept of a utility vector of an asset management strategy compliant with the ordinalist approach. This vector comprises two base components: financial and service quality indicators. It can be used to determine the asset management strategies which are Pareto-optimal and cannot be improved for one group of key stakeholders without making the situation worse for another group. The set of these strategies represents different variants of reconciling conflicting interests. Consequently, T&D companies obtain a powerful asset management tool which allows balancing interests in practice. Moreover, it can help to accomplish the main objective of a T&D company, which is formulated in the study as stakeholder satisfaction and accommodation of their conflicting interests.