How Colorado's settlement...
keys to Transmission and Distribution Reliability
and selects the actions with the highest ratios, until the total expenditure has been allocated. These calculations are either performed on a strictly deterministic basis or, in some cases, with the addition of rudimentary uncertainties, such as the likelihood of equipment failure. In all cases, however, the dollar allocations are problematic: they fail to account for the interconnected nature of the T D system and they incorrectly compare decisions that may have different value dimensions.
Another common fallacy is to equate efficient T D asset management with maximum utilization. The logic of this so-called "sweating" assets approach equates unused capacity, such as a distribution circuit that is not fully loaded at all times, with "wastefulness" and lost margin. There are several basic problems with this approach. First, T D assets that are operated at or near their rated capacities can wear out more quickly or be more prone to catastrophic failures, both of which increase costs. Second, such an approach fails to consider the cost of adding new capacity, which may be much lower. Moreover, this approach fails to account for a basic economic principle: sunk costs are sunk. Once a T D asset is purchased and installed, the only costs that matter are those going forward, whether replacement equipment or maintenance.
'Oops' Is Not Enough
T D system engineers frequently use contingency analysis to determine the need for system investments. Such "N-contingency" planning examines layers of events that adversely affect system reliability and capacity. For example, the loss of a major high voltage transmission line can be called a first contingency, or "N-1" event. Subsequent loss of a second high voltage line would be a second contingency, or "N-2," event, and so forth. Generally, high voltage transmission systems are planned so as to provide reliable service under N-2 conditions.
A fundamental problem arises when the contingencies are treated as independent events when they are, in fact, dependent. Electric systems are highly interdependent, some more so than others. This interdependence creates the potential for dependence among multiple contingencies. If this dependence is not taken into account, the likelihood of catastrophic events can be severely underestimated-depending on the degree of interdependence, the underestimates can be off by as much as several orders of magnitude. 2
Utilities have different customers and face markedly different reliability problems. Rural utilities tend to have higher outage rates and longer outages than urban utilities. High-tech industries need better power quality than grocery stores. Rapidly growing areas are more likely to suffer from too little capacity than slow-growing ones. Simply defining "reliability" can be problematic, and problems that aren't well-defined cannot be solved, or at least solved well. Add to this complexity the issues of competing utility objectives to reduce costs, meet short-term financial goals, or even respond to outside political and regulatory pressures that have nothing whatsoever to do with T D system management, and you create a recipe for failure. This is why prudent T D asset management must be well-defined. It must incorporate reasonable standards that define overall system objectives, recognize the multiple facets of reliability, and address sound