Tap into your logic15 September 2000
BC Hydro has developed software which allows plant managers to make optimum decisions on their financial investments, maximising the benefits derived from their generation assets. Niels Nielsen reports
BC Hydro, as the third largest utility in Canada, has a comprehensive portfolio of assets of varying size, production capability and age. Considerable amounts of data have been obtained over the years on their condition, performance and risk exposure through condition surveys, performance assessments and risk evaluations. The company has adopted an asset management philosophy that captures, analyses and manages asset-related data in a manner that supports the overall strategic objectives of the organisation. The information is evaluated based on the utility’s ability to meet market demands, recognising and incorporating operating constraints. Historical, current and forecast financial information on the assets is integrated, and spending activities are derived with associated costs, risks, benefits and timing that reflect the business drivers for each production facility.
Optimised decision making
BC Hydro’s software application, TAPlogic, is a decision support application for short and long term business planning which, the utility claims, will lead to cost-effective operations and optimised productivity. It stores and integrates asset and market information, assumptions and decision criteria enabling users to screen, assess, manage and prioritise asset investment decisions in a manner that supports optimised decision making.
TAPlogic applies accepted economic and financial analytical frameworks to annual budgeting, long term planning, and short term decision analysis. It provides information on assets or groups of assets to enable the review of decisions on the basis of standard business decision criteria:
•Economic value added.
•Cash flows (real, nominal and discounted).
TAPlogic can value the short and long term profitability and cash flows of individual production facilities. The user can analyse the impacts of varying spending, operating conditions or market assumptions on profitability and cash flows, and review the impacts of decisions and scenarios at a variety of operational levels. To assist business case preparation, it completes standard capital and operating project analyses on individual projects or portfolios of projects grouped by rivers, geographic area, or on the basis of user defined criteria.
BC Hydro’s application has also incorporated the business decision framework known as value based management to enable the evaluation of projects that may provide non financial benefits (ie environmental initiatives, protective coating projects, dam safety projects etc) in addition to measurable financial returns. It incorporates non financial decision criteria to ensure that projects are analysed and ranked based on a business’ overall goals and objectives.
TAPlogic has assisted the power generation group with two annual planning cycles, providing decision-makers with prioritised, rationalised and ranked lists of projects in a context consistent with divisional and corporate goals and objectives.
According to BC Hydro, TAPlogic reduced subjectivity in the review, reporting and analysis of budget requests and has provided consistency to the budgeting process and other decision support functions such that all projects are analysed and presented using a consistent framework.
TAPlogic has allowed the Canadian utility to value the return provided by its hydroelectric generating stations, enabling it to broaden planning functions beyond the traditional annual budget approval. BC Hydro now has a mechanism to facilitate long term planning around the management of its generating stations and related production assets, resulting in an ability to fine-tune its business operations to be more cost-effective and productive now, and in the future.
TAPlogic has been designed to assist managers at production facilities and communicate decision priorities and the needs of such facilities. It allows production managers, project managers and engineers to understand the business requirements of the decision-makers.
BC Hydro International has developed a commercial application of TAPlogic to serve electric utilities and asset based companies.