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Project Setting

Project Portfolio Management Is Important because of three factors: (1) Asset Intensive Business, (2) Pressure to Reduce Costs, (3) Hundreds of Competing Project Options.
Asset Intensive Business: Electric Utilities are extremely asset intensive requiring about four dollars of capital in-place for every dollar of annual revenue. This high ratio translates into extra-long periods for capital recovery

  • The market will not allow quick capital recovery.
  • Long-period capital recovery requires necessarily long economic lives and significant maintenance requirements

Pressure to Reduce Costs: Industry restructuring has and will continue to create pressure to reduce costs. At the same time the delivery infrastructure is aging and as a result demanding increasing levels of maintenance and replacement. For many companies, the funds allocated to capital and especially maintenance projects has been and is being reduced. Engineers are starting to be ask to build sound business cases for all significant projects.

Hundreds of Project Decisions: For most power companies building and maintaining electric utility infrastructure requires funding and executing literally hundreds of capital and maintenance projects every year. Excellence in managing these assets requires that utility planners and engineers treat fairly and consistently projects with different attributes (including large and small projects, projects with different time horizons, and projects that respond to different needs — financial, environment, safety, reliability, and customer requirements).