Reviews the utility’s methodology and process of its investment plans and the prioritization and flexibility to deal with unforeseen events. Also includes the activities of maintenance of existing assets.
This activity reviews the utility’s methodology and process of its investment (financial and operational) plans and the prioritization of projects. It also includes the activities of maintenance of existing assets and the mechanisms the utility have to deal with unforeseen events and shocks.
One of utilities’ main duties is to provide electricity services throughout the geographical area of service coverage. For this purpose, utilities must develop investment plans to augment or sustain system capacity and to extend or improve electricity systems. Electricity utility companies is one of the most capital-intensive industries. Only with adequate planning will the utility be able to meet its short-, medium- and long-term investment needs and achieve the service quality and coverage goals set by the authority.
Irrespective of the circumstances, these plans are indicative of the utility’s future actions and are not a tool to constrain decision-making. Therefore, plan formulation and implementation must include the adjustments and flexibility needed to deal with unforeseen requirements that arise over time. Having a good investment plan in place is critical for good business decision-making, particularly in the power sector, which requires considerable investment in long-term infrastructure.
In several countries, having an investment plan in place is also a requirement established by the regulator as it forms the basis for tariff setting and for monitoring the utility’s compliance with its obligations. Investments can also be classified in two groups although in some cases due to economies of scale and indivisibility, they may serve both purposes. In other countries they have other categories; for example in Brazil the regulator requires information in three categories: (i) expansion, (ii) improvements, and (iii) renovation. In general, for most countries, investments can be divided and measured in two categories:
* Replacement or maintenance investment, where existing assets are repaired to ensure continued provision of an existing service at present quality levels, given the continual consumption of capital inputs during their use.
* Non-technical losses or commercial losses, where new assets are provided to improve quality or expand output, or both. New investments aimed at expanding quality may be addressing issues such as reliability and the quality of the service per se, or the mitigation of environmental impacts that arise from producing the service.
This area considers these fundamental criteria: (i) existence of a documented investment plan with minimum content; (ii) appropriateness of the methodology used to develop it; (iii) the way in which the utility manages and implements the plan over time; and (iv) special inclusion of physical asset management.
This activity of efficiency and execution of the investment plan and asset management in the utilities is currently under development and will be incorporated soon.