Process Evaluation and Cost Analysis Mechanism for Equipment Installation Ventures

Process Evaluation and Cost Analysis Mechanism for Equipment Installation Ventures

DOI: 10.4018/978-1-4666-2839-7.ch003

Abstract

This chapter explores how the lean quality principles and green initiatives are applied in capital project equipment installation of electric substations and line rehabilitation from the initial feasibility studies to the plant-in-service phase. Equipment installation process predicaments induce cost overruns and unnecessary extended electrical outages as well as extraneous strain on the bulk transmission system. Demand side management issues are best mitigated through astute planning of the power supply resources, load curtailment initiatives, and transmission flow contingency schemes.
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Overview

Electrical utilities and process industries are challenged to find methods to reduce costs from the raw material conversion process to the end-user. The continued cost overruns in electrical condition, capacity, and reliability project installation categories are an area where cost control methodologies are beneficial. Stricter regulations and environmental stewardship are the impetus for the continuous improvement efforts in the capital project arena to maintain consistent and reliable sources of power and minimize cost. This chapter explores how the lean quality principles and green initiatives are applied in capital project equipment installation of electric substations and line rehabilitation from the initial feasibility studies to the plant-in-service phase. Equipment installation process predicaments induce cost overruns and unnecessary extended electrical outages as well as extraneous strain on the bulk transmission system. The overall expenditures dedicated to capital-intensive projects are generally randomly prioritized as other rehabilitation and maintenance ventures take precedence. In fact, revenue and expense data compiled from one hundred and eighty investor-owned electric utilities (Table 1) exemplify the declining operating income relative to the rising expenses.

Table 1.
Selected revenue and expense statistics for major U.S. investor-owned utilities: 1995 to 20071
Item1995200020032004200520062007
Utility Operating Revenue199,967235,336226,227240,318267,534277,142282,875
Utility Operating Expenses165,321210,324197,459207,161238,590247,170252,216
Production68,983107,35296,181104,287121,058128,016128,914
Cost of Fuel29,12232,55526,47628,67836,16138,15842,178
Transmission1,4252,6993,5854,5195,6876,1856,095
Maintenance11,76712,18511,14111,77412,05812,87913,675
Other Expense54,02455,53360,07657,90363,62661,93261,354
Net Utility Operating Income34,64625,01228,76833,15828,94429,97230,659

(In millions of nominal dollars (199,967 represents $199,967,000,000))

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