FITTING YOUR CAPITAL PROGRAM TO YOUR CUSTOMERS’ NEEDS
Abstract:The Business Case Evaluation (BCE) methodology is a key element of any asset management program. Applied to capital projects, it ensures that a utility has correctly identified the problem and defined an approach to solving it that best serves the customer.
The Sacramento Regional County Sanitation District (SRCSD), a large conveyance and treatment agency in California's Central Valley, recently applied the BCE methodology to two projects, well advanced in design, with a total capital cost of 75 million. One project was deferred, for an immediate capital savings of 60 million and a minimum whole-life present value savings of 12.5 million. The other, described in this paper, was re-defined for a capital savings of 3.5 million and a whole-life present value savings of 7.5 million.
SRCSD is now moving to integrate the BCE into its capital formation process and apply it more broadly within the organization.
Significant capital investments entail ongoing operating and capital costs over many years. Every addition to a utility's plant has an impact on costs and rates that will be felt for a very long time. Thus, it behooves responsible utility managers to make sure that their investments are the right ones, that they are truly needed, and that they benefit the customer. The BCE methodology is designed to those ends.
Document Type: Research Article
Publication date: January 1, 2004
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