Epri It Eam 2007

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Information Technology for Enterprise

Asset Management
An Assessment Guide
Information Technology for
Enterprise Asset Management
An Assessment Guide
1012527
Final Report, March 2007
EPRI Project Manager

J. Bloom
ELECTRIC POWER RESEARCH INSTITUTE

3420 Hillview Avenue, Palo Alto, California 94304-1338 PO Box 10412, Palo Alto, California 94303-0813 USA
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Copyright 2007 Electric Power Research Institute, Inc. All rights reserved.
CITATIONS
This report was prepared by
B. Parkinson, Consultant
4151 Baker Ave.
Palo Alto, CA 94306
Principal Investigator
B. Parkinson
This report describes research sponsored by the Electric Power Research Institute (EPRI).
The report is a corporate document that should be cited in the literature in the following manner:
Information Technology for Enterprise Asset Management: An Assessment Guide. EPRI, Palo
Alto, CA: 2007. 1012527.
iii
REPORT SUMMARY
Integration of business applications across the electric utility enterprise is a high priority in the
electric utility industry to reduce information technology (IT) costs and realize a range of
business benefits. Asset management, a business process that integrates with most other utility
business processes, is particularly enhanced by an integrated information technology solution.
Background
An integrated and automated solution for asset managementfrom data acquisition, to
calculations, to reports that exploit a utilitys current IT system portfolio of enterprise systems
from both commercial vendors and EPRIcan reduce the number of applications that need to be
implemented and supported. Enabling efficient integration of applications across business units
can greatly reduce information technology costs and yield a range of business benefits. Similarly,
improved data collection using those systems can substantially reduce the number of evaluation
hours for asset managers and increase the timeliness of information for decision makers.
Objectives
To assist utility IT and asset managers in addressing the unique and particularly challenging
needs for asset management and to focus on data collection, use of existing enterprise systems
such as work management systems, and the integration and use of decision support systems for
specific problems such as managing aging assets and monitoring asset health.
Approach
The project focuses not only on the elements of an information technology plan, but also on the
progression of its development. By describing in detail certain aspects of asset management
program development, the project provides the context in which the information technology
infrastructure must operate and grow as well as the asset management capabilities that result.
The project raises the bar for asset management considerably. While many companies can and
should be happy with reaching an organizing level of maturity, the project lays out the
potential for further growth beyond that point. This growth is within reach because many of these
programmatic improvements not only have and are occurring in more competitive industries like
manufacturing, but also because performance in the nuclear generation industry has improved
dramatically, with some of that improvement attributable to process and information technology
improvements that are described in this report. Some electric utilities have already begun to
transfer nuclear powers business improvements to other business units.
The project draws heavily from a number of EPRI asset management reports in both the power
delivery and nuclear generation sectors. Each has a strong asset management research program at
EPRI, characterized in particular by a broad degree of utility involvement.
v
Results
The report discusses critical topics for developing an asset management information technology
infrastructure. Because the needs and capabilities of an enterprise IT depend strongly on its asset
management program, the report provides a self-assessment method to help either an IT
professional or an asset manager determine the current maturity level of their program. The
method classifies asset management programs into five different levels of maturity using seven
attributes with six sub-attributes to create a table of over 130 criteria for measuring development
of an asset management program.
The report discusses over twenty critical topics for asset management information technology
infrastructure, grouped by maturity level into three sections. Each topic contains a set of
recommended steps for improving asset management information technology infrastructure and
program that, when combined with the criteria, allow readers to develop a roadmap for program
improvement based on the results of the self-assessment. Because of the breadth and depth of
participation and experience in EPRIs work on asset management in both the power delivery
and nuclear sectors, this report represents a corresponding breadth and depth of asset
management issues in an enterprise program.
Finally, the report highlights important current advances in information technology, especially
related to the topic of service-oriented architecture, which seems particularly amenable to
advanced forms of enterprise asset management. The importance of this evolving information
technology discipline is demonstrated by the substantial investment made by vendors of
enterprise asset management and enterprise resource planning systems. The report shows how
EPRIs asset management technology can facilitate such an architecture and how ongoing EPRI
research can lead to even further possibilities for advances in asset management.
EPRI Perspective
Much has been accomplished in asset management in the last ten years in terms of improved
equipment reliability, reductions in cost, and increases in business process productivity.
Advances have been made across the board in data, decision support, and results visualization.
Asset management lessons learned abound in information integration and application. The
collective experience of the industry is substantial, and as the reports self-assessment method
asserts, such experience lays the foundation for raising the bar for asset management to a new
and even more effective level.
Keywords
Asset management
Asset manager
Maintenance program
Root cause analysis
Performance monitoring
Risk management
PM basis database
Reliability
Information technology
vi
ACKNOWLEDGMENTS
The author would like to acknowledge the contributions of the many people who contributed to
this effort either by contributing directly to the reports concepts or by contributing to the EPRI
asset management reports and programs upon which a good portion of this report is based:
Vince Gilbert of Model Performance, LLC and Mitch Baughman of Duke whose leadership in
Nuclear Asset Management community of practice enabled the nuclear asset management
process description to be written with all its attendant benefits to asset management capabilities.
Maureen Coveney, of OSIsoft, who introduced the author to the true potential of Service
Oriented Architecture and participated in the development of a number of the principles
described in this report.
Serge Hugonnard-Bruyere of EdF, who contributed a number of concepts in this report including
in particular the modularization method described in Chapter 5.
Jeremy Bloom of EPRI, who immediately understood the value and applicability of the PM
Basis and who contributed descriptions of corporate value models and risk management.
Mike Lebow of Coplaner Consulting, the prime contractor for developing the Power Delivery
Asset Management guidelines and process models, the source of many insights as well as some
notable words in this report.
David Worledge of Asset Performance Technologies, Inc., the prime source of material and the
creative force behind the failure data models upon which important portions of this proposed
approach is based.
John Gaertner of EPRI, whose continued support and encouragement and sage advise enabled
many of these ideas to formulate into EPRI research.
Rick Grantom, Drew Richards, Ernie Kee and Alice Sun of South Texas Project and Jose Gomez
Moreno and Luis Adriano Gerez Martin of Iberinco for their comments and contributions to asset
management requirements in general and to visualizations of asset management results in
particular.
Tina Taylor, Ron King and Nikki Delse of EPRI, whose many discussions and cooperative work
inspired a number of important developments.
vii
CONTENTS
1 INTRODUCTION ....................................................................................................................1-1
2 ASSESSING MATURITY OF INFORMATION TECHNOLOGY FOR ENTERPRISE

ASSET MANAGEMENT............................................................................................................2-1
Asset Management Program Maturity Levels .......................................................................2-2
Reacting ...........................................................................................................................2-3
Awakening ........................................................................................................................2-3
Organizing ........................................................................................................................2-4
Processing........................................................................................................................2-4
Continuously Improving ....................................................................................................2-5
The Attributes of an Enterprise Asset Management Program...............................................2-6
Data Collection and Use...................................................................................................2-6
Performance Monitoring ...................................................................................................2-8
Decision Support Capability General.............................................................................2-8
Decision Support Capability Investments ....................................................................2-10
Decision Support Capability Risk Management ..........................................................2-11
Business Process Documentation and Modeling ...........................................................2-11
Information Technology Infrastructure General ...........................................................2-12
Information Technology Infrastructure Knowledge Management ................................2-12
Business Analysis Role ..................................................................................................2-13
Management Support .....................................................................................................2-13
The Maturity Index Table of Criteria ....................................................................................2-14
3 FIRST STEPS FOR NEWCOMERS TO ENTERPRISE ASSET MANAGEMENT .................3-1

Developing a Good Asset Inventory......................................................................................3-2
Collecting Asset Equipment Data..........................................................................................3-5
Developing and Employing Analytical Models.......................................................................3-9
Employing Decision Support Tools .....................................................................................3-15
ix
4 BREAKING OUT TOWARD A MATURE ENTERPRISE ASSET MANAGEMENT
PROGRAM ................................................................................................................................4-1
Increasing Sophistication of Decision Support Tools ............................................................4-2
Ranking and Screening ....................................................................................................4-2
Ranking........................................................................................................................4-2
Screening.....................................................................................................................4-4
Systems-Level Thinking ...................................................................................................4-7
Project Prioritization and Investment Tools ......................................................................4-8
Improving Data Quality and Integration...............................................................................4-11
Developing a Data Strategy............................................................................................4-12
Ensuring Efficiency of Data Collection and Management...............................................4-15
Ensuring Data Quality.....................................................................................................4-16
Providing For Data Access .............................................................................................4-16
Employing Critical Systems in the Information Technology Infrastructure ..........................4-17
Asset Management Technology Ownership...................................................................4-18
Data Mining Capability....................................................................................................4-19
Data Acquisition Layer ...............................................................................................4-20
Algorithms and Applications Layer.............................................................................4-21
Reporting Layer .........................................................................................................4-23
5 ADVANCED INFORMATION TECHNOLOGY CONCEPTS FOR ENTERPRISE

ASSET MANAGEMENT............................................................................................................5-1
Information Technology Infrastructure for Advanced EAM....................................................5-1
Use of a Service Oriented Architecture in Enterprise Asset Management .......................5-2
The Natural Role of SOA in Asset Management .........................................................5-2
Business Processes and Models .................................................................................5-4
Enterprise Asset Management Repository of Services................................................5-6
Library of Algorithms and Calculations....................................................................5-7
Modular Approach to Asset Management...............................................................5-7
Visualization Services ...........................................................................................5-10
Automating Service Implementation Re-usable Analytics ......................................5-16
Methodology..........................................................................................................5-17
Architecture for Re-usable Analytics .....................................................................5-18
Applicability to Asset Management .......................................................................5-20
Proof-of-Concept...................................................................................................5-20
x
Knowledge Management................................................................................................5-22
Advanced Concepts in Data and Decision Support Tools...................................................5-24
Accurate and Useful Cost Data ......................................................................................5-25
Advanced Decision Support Tools .................................................................................5-26
Long-Range Planning ................................................................................................5-27
Use of Simulation in Asset Management ...................................................................5-28
Opportunities for Estimating Failure Rates in Real Time ...........................................5-29
Use of Risk Management...........................................................................................5-30
Risk Management for the Asset Manager.............................................................5-31
Risk Management for Asset Operator...................................................................5-31
Information Technology Requirements for Risk Management ..............................5-32
Illustrative Example for Risk Management............................................................5-33
6 CONCLUSIONS AND RECOMMENDATIONS ......................................................................6-1
7 REFERENCES .......................................................................................................................7-1
A SURVEY OF EXISTING ASSET MANAGEMENT CAPABILITY ......................................... A-1

List of Asset Management Capabilities ................................................................................ A-1
xi
LIST OF FIGURES
Figure 3-1 EPRI PM Basis Database: Equipment Model Example............................................3-7

Figure 4-1 Three Layer Architecture for Asset Management and Performance Monitoring.....4-20
Figure 5-1 Asset Management Module Interaction ....................................................................5-8
Figure 5-2 Example Calculation Chain Decomposition..............................................................5-9
Figure 5-3 Example Reliability-Profitability Phase Plane Graph ..............................................5-11
Figure 5-4 Example Cumulative Benefit NPV Versus Cumulative Investment NPV Graph .....5-12
Figure 5-5 Example Project Uncertainty Comparison Graph ...................................................5-13
Figure 5-6 Example IRR Versus Risk of Loss Graph...............................................................5-14
Figure 5-7 Example IRR Uncertainty Histogram ......................................................................5-15
Figure 5-8 General Analysis Flow of a Calculation ..................................................................5-17
Figure 5-9 General Architecture of Re-Usable Acquisition Component...................................5-19
Figure 5-10 General Analytic/Calculation ................................................................................5-19
Figure 5-11 Circuit Breaker Measurements .............................................................................5-21
Figure 5-12 Influence Diagram for Tree Trimming Example ....................................................5-35
Figure 5-13 Tornado Diagram Displaying the Sensitivity Analysis for Tree Trimming
Example ...........................................................................................................................5-36
Figure 5-14 Ten-Year SAIDI Scatter Plot Illustrates Useful Historical Data for Risk
Assessment......................................................................................................................5-37
Figure 5-15 An Analytical Risk Model (Curves) Shows the Results of a Probabilistic
Analysis, Compared with the Deterministic Expected Values (Vertical Lines) .................5-38
Figure 5-16 Portfolio Risk Trade-Off (Efficient Frontier) ..........................................................5-39
xiii
LIST OF TABLES
Table 2-1 The Maturity Index Table .........................................................................................2-15

Table 4-1 Comparative Characteristics of Asset Management Analysis Levels 1, 2, and 3 ......4-5
Table 5-1 Information Available from Circuit Breaker Counts and Related Parameter
Data..................................................................................................................................5-21
xv
1
INTRODUCTION
Integration of business applications across the electric utility enterprise has become a high
priority in the electric utility industry to reduce information technology costs and realize a range
of business benefits. Asset management, a business process that integrates with most other
utility business processes, is particularly enhanced by integrated information technology (IT)
solutions. Asset management is also a discipline that is developing a variety of new business
applications to facilitate decision-making, and it depends on those applications integrating with
enterprise systems such as work management, operations data historians, and financial systems.
Integrating and automating solutions to asset management (from data acquisition, to calculations,
to reports) that exploit a utilitys current IT system portfolio of enterprise systems from both
commercial vendors and EPRI can reduce the number of applications. Enabling efficient
integration of applications across business units can greatly reduce information technology costs
and yield a range of business benefits. Similarly, improved data collection using those systems
can substantially reduce the number of evaluation hours for asset managers and increase the
timeliness of information for decision makers.
The propose of this report is to provide guidance to assist utility information technology
managers and asset managers alike in addressing the unique and particularly challenging IT
needs for asset management. This project devotes particular emphasis to data collection, use of
existing enterprise systems such as work management systems, as well as the integration and use
of decision support systems for specific problems such as managing aging assets and monitoring
asset health.
This report focuses not only on the elements of an information technology plan but also on the
progression of their development. By describing in detail certain aspects of asset management
program development, the report provides the context in which the information technology
infrastructure must operate and grow as well as the asset management capabilities that will
result.
This report also raises the bar for asset management considerably. While many companies can
and will be satisfied with reaching a certain level of maturity in asset management, described
here as Organizing, this report lays out the potential for further growth beyond that point. This
growth is within reach because many of these programmatic improvements have and are
occurring in more competitive industries like manufacturing. But further evidence in their
attainability lies in the improvements demonstrated in the nuclear generation sector.
Performance in that sector has increased dramatically, and some of that increase certainly can be
attributed to the process improvements and information technology improvements that are
described in this report. Some electric utilities have already begun to transfer nuclear powers
business improvements to other business units.
1-1
Introduction
Chapter 2 of this report provides an approach for determining the maturity of asset management
programs in an electric utility and their associated information technology needs. Performing a
self-assessment against this maturity index will help an electric utility determine how to develop
information technology for an enterprise asset management program.
In Chapters 3 through 5, this report discusses important topics related to the improvement (or
maturation) of an asset management program and its associated information technology
infrastructure. At the end of each topic, the report summarizes the discussion in terms of a
bulleted list of steps or concepts. Together with the criteria in the Maturation Index Table
discussed in Chapter 2, the report attempts to provide a concise description amenable to self-
assessment and developing an asset management information technology program.
This report has drawn heavily from a number of EPRI asset management reports cited in the
References, Chapter 7. These reports were developed in both power delivery and nuclear
generation sectors. Each of those sectors has strong asset management research programs at
EPRI, characterized in particular by a broad degree of utility involvement.
1-2
2
ASSESSING MATURITY OF INFORMATION
TECHNOLOGY FOR ENTERPRISE ASSET
MANAGEMENT
This chapter lays out an approach for determining the maturity of asset management programs in
an electric utility. Performing a self-assessment against this maturity index will help an electric
utility determine how to develop information technology for an enterprise asset management
program.
This maturity index approach is built upon the concept that an asset management program and its
supporting information technology program must develop in concert. If one develops faster than
the other, inefficiencies will result. Either asset managers will be unable to get the information
they need, or they will spend time feeding information systems that they are incapable of using.
The maturity index also provides insight into the risks of programmatic setbacks that are
inevitable in a business transformation of the kind entailed in asset management. Accepting
setbacks and turning them into opportunities for organizational growth is an important
precondition to successful enterprise asset management. In this regard, the maturity index also
includes criteria related to management support and the role played by business analysts in the
company. Both of these organizational factors are important to business transformation.
The following maturity index is not a quantitative, percentile-based approach for self-assessment
common to many utility benchmarking efforts. Few companies will fit in the highest
continuously improving category. More than a quartile may fit in the lowest reacting
category. Currently, there are no studies which have systematically evaluated the maturity of
electric utility asset management practices upon which a quantitative quartile approach could be
based.
Nevertheless, EPRI research programs provide sufficient experience upon which to base a useful
maturity index and self-assessment approach for enterprise asset management. EPRI research
reaches both member and non-member asset management practices across the full gamut of
electric utility business units. Additionally, the Nuclear Asset Management industry working
group, operated under the auspices of the Nuclear Energy Institute and actively supported by
EPRI, provides excellent access to the practices and lessons learned of that portion of the electric
power industry. It is upon this broad base of experience that this maturity index has been built.
The five-category maturity index is adapted from a similar approach developed by the
Department of Transportation for asset management of roadways [1]. The DOT indices are in
turn based on maturity indices for general application to software development [2-5].
2-1
Assessing Maturity of Information Technology for Enterprise Asset Management
However, there are two important changes:

1. the criteria of the indices in this report are specific to the electric utility industry, and
2. the criteria reflect recent developments in enterprise level information technology.
Finally, the criteria reflect the experiences of the author in developing asset management and
associated information technology programs with a large number of generation and power
delivery business units as well as the abovementioned EPRI and industry groups.
In this effort for enterprise asset management, we do not attempt to reach an exhaustive level of
detail in the individual criteria. Largely, this choice reflects the fact that different business units
at a utility often have uneven levels of experience with self-assessment. That said, this work is
not intended to address the lowest common denominator. Rather, it is intended to be practical
and effective in bringing multiple business units together to facilitate a successful enterprise
asset management program. The level of detail is judged to be within reach of those with little
institutional experience in self-assessment and yet still a valuable guideline for those at the high
end of the self-assessment scale.
The remainder of this report chapter describes the levels of maturity and their implication to
enterprise asset management and information technology development. We start with the
important attributes of enterprise asset management programs, especially as they relate to
information technology. Finally, we present the Maturity Index Table which provides criteria or
representative characteristics for each attribute at each level.
In subsequent chapters of the report, we delve further into topics related to these criteria. Those
topics are arranged in a manner to provide assistance in developing a roadmap for a more mature
enterprise asset management program. While that discussion is at the insight level, the report
makes reference to a variety of EPRI reports and other sources where the reader can look for
further detail.
Asset Management Program Maturity Levels
This approach defines five levels of maturity for asset management programs:
1. Reacting
2. Awakening
3. Organizing
4. Processing
5. Continuously Improving
Essentially, these levels vary from no asset management program to a living asset management
program.
2-2
In general, a company will have to move through each of the intermediate levels to reach a
higher state. As with any approach to a difficult problem, it is important to take the long view on
developing asset management capabilities. This long view does not mean that every step should
be a small step. Rather, the long view means that every step should be measured, followed by an
evaluation of results and possibly an adjustment to the overall plan. Employees are often
skeptical of organization change, and asset management programs should be undertaken with the
same management attention and determination given to other organization change initiatives.
The levels of maturity of an asset management program are most influenced by management
interest and support in asset management. Because effective asset management is an integral
part of good business management practice, asset management maturity is also strongly
influenced by the organizational roles of business analysts and by management adoption and
employee acceptance of a philosophy of continuous process improvement.
Information technology plays an equally important role in maturing asset management programs,
over and above the fact that it is a focus of this report. The importance to asset management of
accessing data and communicating information make information standards and data mining
capabilities the veritable nervous system of a living AM program. Even more relevant are the
work flows and business processes, the muscle behind turning AM concepts into productive
work. These two parts of the information technology infrastructure are directed by decision
support applications. These applications reside in the brain of AM. Not only do they perform
the sometimes simple and sometimes sophisticated calculations that identify the best actions to
take, but they also simulate the outcome of those actions.
The following paragraphs describe each of the maturity levels in business and information
technology terms. Subsequently, the report describes more detailed attributes of maturity and
displays them for each level in tabular form.
Reacting
A company in the reacting state is really not doing asset management. Executive management
may well be actively skeptical about asset management techniques. Regulatory requirements
dominate decision making. Consequently, few if any employees are willing to risk moving
beyond strict adherence to regulatory requirements and manufacturer recommendations. If an
infrequent, but high consequence event occurs, such as a major equipment outage, it will likely
catch the company by surprise, and the recovery of company performance, and share price will
be extended. Investments in information technology for asset management likely will fail or
have little impact at the enterprise level. But, if the experience is maintained within the corporate
culture, it will nevertheless be valuable when the company awakens.
Awakening
A company in the awakening phase has management that is aware of asset management goals
and techniques. Such a company is much more likely to have risk-taking employees who
undertake asset management initiatives at the local level. But a company that is awakening
is also more likely to have initiatives that fail. Failure generally occurs because it is difficult for
2-3
a risk-taking employee to sustain asset management initiatives when they cross organizational
boundaries. Capturing the lessons learned from the asset management activities undertaken by
risk-taking employees is an important step in getting to the next level of maturity. If risk taking
is discouraged by management, these failures could result in a fall back to the reacting phase.
At the awakening level, management and employees are getting used to the role of performance
indicators in process improvement. However, because these indicators are typically incomplete
and sometimes difficult to use, a dangerous skepticism to asset management can result if the
indicators are not improved. Web based performance indicator systems are likely, but they
probably lack associated drill down and analysis capability. These capabilities are probably
provided by power users of such generic tools as Microsoft Office. Valuable asset management
experience is starting to be gained with the use of equipment condition information, a broadening
of the role of business analysts, and the development of business processes centered on use of
Enterprise Asset Management (EAM) and Enterprise Resource Planning (ERP) systems.
Information technology investments in asset management are still risky, but building blocks like
EAM and ERP systems are starting to be exploited.
Organizing
An organized company is well along on the road to success for enterprise asset management.
For the most part though, they have succeeded with power users employing isolated tools, by
improving data access for a broad set of users, and as a result of increased management
acceptance. The organized company has made one very important step toward a high level of
maturity in enterprise asset management. They have overcome the inertia inherent in large EAM
and ERP installations and have begun to establish a long-range plan for information technology
improvement. Geographic Information Systems (GIS) and mobility data systems are being
installed and integrated. The long-range plan includes a continuous improvement effort that
encourages widespread input from employees. Because of the abovementioned successes,
investments in asset management information technology are much more likely to generate
benefits, even if the results are not always the exact ones that were initially planned.
A change in management can still threaten the asset management culture, because it is mostly
leaders and power users who are exploiting the value of asset management techniques and the
associated information technology investments. Nevertheless, benefits from asset management
are accruing, and the foundation exists for a substantial improvement in asset management
capabilities.
Processing
The processing company has recognized that a good asset management program involves not
only enjoying successes in business improvements, but institutionally overcoming failures,
including damaging ones. This attribute is in evidence in a number of ways. First, important
pilot efforts are underway to improve both the information technology and the business
processes surrounding and encompassing asset management. Second, cost data is created,
collected, and analyzed with little or no angst or retribution. Third, organizations share
information effortlessly, even while they compete internally to show the most improvement.
2-4
Specific to asset management information technology, data systems are rapidly maturing with
costs dropping and benefits increasing. Part of this is improvements in technology, but a process
approach to data that emphasizes quality is being built upon the experience gained from the use
of condition and cost data and the associated lessons learned gained during the organizing
phase. Performance monitoring and decision support tools are much better understood and relied
upon. Simultaneous improvements in business process modeling, software integration, and
knowledge management lay the foundation for further information technology improvements.
But most importantly, the active support of executive management and the team work between
business analysts and line management is reaping benefits and setting the stage for further
improvement.
Continuously Improving
The continuously improving company is robust and can withstand and even benefit from changes
in the marketplace and regulations as well as the occurrence of an infrequent adverse event. The
strength of the company is in part due to the flexibility of its plans as well as completeness of its
strategy.
Performance monitoring, analysis, and improvement are a way of life. Performance goals are set
based on value, and their relationship to stakeholder goals is clearly specified, explicitly
modeled, and measurable. Quality assurance and corrective action processes are widely
embraced. Suboptimal performance is seen as a step toward optimal performance as opposed to
a reason to start over.
Cost information is collected, verified, and analyzed at the individual asset and business process
level. Condition information is integrated with degradation models and used in a wide variety of
decision support tools. Optimization and simulation techniques are employed, as are risk
management techniques.
Information standards and a Service Oriented Architecture (discussed in Chapter 5) are used to
facilitate information technology that supports enterprise asset management. Business processes
are not only modeled, but intimately associated with the IT infrastructure. Users can specify the
asset management processes and techniques they want automated in their own terms, and the IT
department can readily and accurately develop the corresponding services and integrate them
into existing applications. Knowledge management techniques and tools are used systematically
and in conjunction with decision making and decision support tools.
Executive and line management has ensured that asset management is part of the corporate
culture. Business analysis is consistently and routinely done by many employees. Management
understands uncertainty and risk, and investments are made accordingly. Managers of financial
assets and managers of physical assets speak the same language and work together to find the
right balance between the constraints of the market and the constraints of the physical plant.
As can be seen from the descriptions of the five maturity levels, investment in information
technology for enterprise asset management is not without its challenges. The road from
reacting to continuously improving can be a long one. Certainly setbacks will occur during
2-5
the trip. But if an incremental approach is taken and lessons are learned along the way,
continuously improving will become the natural destination.
The Attributes of an Enterprise Asset Management Program
This report employs seven different attributes to describe important aspects of maturity in an
enterprise asset management program. One attribute addresses the information technology
infrastructure directly. Four attributes address enterprise asset management capabilities which
require critical support from information technology. Two attributes address organizational
factors, e.g., management support, which are critical in to the success of information technology
investments. Of the seven total attributes, three have additional sub-attributes that allow the
criteria to focus in on key capabilities.
The seven attributes and their corresponding sub-attributes are:

Data Collection and Use
General Capability
Condition Data
Cost Data
Performance Monitoring
Decision Support Capability
General
Investments
Risk Management
Business Process Documentation and Modeling
Information Technology Infrastructure
General
Knowledge Management
Business Analysis Role
Management Support
Data Collection and Use
Data collection and use is a critical attribute for an enterprise asset management program. Data
needed for asset management is often input or collected by others in the organization.
Maintenance workers record labor hours and describe the condition of equipment. Operators
record log entries and the number of times equipment has operated. Reliability engineers report
equipment failures. Most times these collectors of data have different uses for the data than asset
managers. Because data is often not integrated between applications, basic things like equipment
names often differ, yielding inconsistencies and making it difficult to merge data from different
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sources. These problems are well known, even in the reacting or awakening organization, but
they are difficult to solve without organizational willpower.
Often it is the installation of EAM, ERP, GIS, or mobility systems the backbone of asset
management information technology that brings these problems to the fore. Those companies
that let these difficulties diminish the value of information technology will not mature. Those
companies which develop work processes to ensure data consistency and accuracy, which break
down organizational barriers between collectors and users, and which increasingly expose the
data to use by decision support tools will improve the value of data and mature their asset
management programs. Standardized data mining tools often help to contribute to success.
Equally important is a high quality asset inventory that is used in multiple applications. Being
able to find a variety of sources of data for a specific piece or type of equipment will naturally
expose issues that need resolution, as well as dramatically increase the value of the data that
already exists or is being created in the backbone systems mentioned above.
Two kinds of data, asset condition information and cost information, are particularly important to
the maturity of asset management programs, largely because developing them is difficult.
Consequently, the maturity index drills down on these types of data.
Condition data, information that exposes the health or condition of a piece of equipment,
naturally develops out of an improving maintenance program. Typically maintenance programs
focus on equipment manufacturers recommendations or historical rules of thumb, often causing
maintenance to be done a time intervals that are independent of the frequency and severity of
use. Generally, maintenance planning will be the first asset management application of
condition data. But condition data plays an important role in life-cycle planning as well. The
most mature programs combine condition data with degradation models to predict asset
performance.
Cost data poses other challenges. Electric utility cost data is typically driven by two
considerations. Initially, cost data is collected primarily for regulatory performance reasons. As
a result, costs of individual assets and business processes are difficult to determine. With the
installation of EAM and ERP systems, more and better information becomes available. Yet the
quality of cost data is still limited because of employee time charging practices. Generally,
EAM systems are populated only with labor hours for maintenance personnel. Engineering and
management charges remain as indirect costs. But since engineering and management time is
often spent on problems or special projects, their costs are underestimated, and the net costs and
benefits of such programs are inaccurately estimated. Another typical problem is that contracted
charges are usually reported as lump sums rather than broken down by task, which can provide
similar misleading indications.
An important step to maturity occurs not only when these problems are solved, but when costs
are estimated by activity. Activity Based Costing (ABC) is a well-known and well-described
discipline that can address this need. Another important process improvement is the use of cost
estimating and cost control techniques.
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Performance Monitoring
Performance monitoring, while typically done for other reasons, is an important discipline in the
asset management process. Equally important, the information technology infrastructure to
support it often has ancillary benefits to asset management functions, e.g., portals and data
mining tools. But performance monitoring can also be an important barrier to maturity. Many
performance indicators, even those developed with improving techniques such as Balanced
Scorecard, can be developed without a clear and measurable link to value.
The first indication of maturity in performance monitoring occurs when more time is spent
analyzing the meaning of the indicators than manually inputting data and calculating them. Once
the real meanings of indicators are revealed by a record of analysis, three things can happen.
First, more employees see the value of indicators and more are developed. Second, indicators
become a part of a process for business improvement.
Finally, and perhaps ultimately most importantly to a mature enterprise asset management
program, models of value develop. The most desirable model is a corporate value model (see
EPRI reports 1001877, 1012954, 1012501) that is hierarchical in nature. Such a corporate model
is based at the top on models of stakeholder goals and at the bottom on models of the
performance of assets, e.g., degradation models. In the middle, the corporate value model must
be clearly related to the model used in decision support tools for investments. Even if these
models develop independently in different organizations, it is important that they develop. But
eventually those models will have to be consistent across the enterprise.
From an enterprise perspective, there are two good opportunities for developing consistent
modeling disciplines across business units. More and more executive management teams are
comparing asset investment strategies across the enterprise, looking at investments as diverse as
call centers for distribution in comparison to generating capacity increases at nuclear power
plants. Another opportunity exists for maintenance and engineering departments in generation
and transmission. Some of the highest valued assets in each are large transformers. Consistency
here can save significant costs because monitoring these high valued assets can be expensive and
the lessons learned from their use even more so.
Decision Support Capability General
Decision support capabilities pose some of the most difficult problems in asset management,
both from the information technology perspective and from the organizational perspective. From
the information technology perspective, decision support capabilities provide intelligence or
logic that should be embedded in EAM systems. From the organizational perspective, decisions
on maintaining and replacing assets are often simple rules of thumb, typically based on time
since the last maintenance activity or age of the equipment. Sometimes these rules of thumb are
based on failures, e.g., replace a cable after two failures. These rules of thumb are easy to
understand and easy to load into EAM systems.
Moving behind this stage requires overcoming barriers of management and employee
understanding. Skepticism of new techniques that are difficult to understand is one aspect of the
problem. But, many times the developers and users of decision support capability are insensitive
2-8
to the importance of the role played by gaining widespread understanding to achieving

acceptance and use of those tools. Successful decision support capabilities often communicate
in new, but understandable rules of thumb.
On the information technology side, many decision support tools desire or require integration
with diverse sources of data, e.g., data beyond that included in EAM and ERP systems. Data
stored in image or text form in design documents is a good example. Eventually, as decision
support tools are applied to an increasing number of assets and as they increase their need for the
amount and type of data, software integration becomes desirable. Only recently have EAM and
ERP systems begun to open up their integration capabilities. Even if a utility has procured an
open brand of EAM/ERP system, they still have to upgrade to obtain the capability.
Consequently, the maturity of decision support capability eventually becomes linked to the
maturity of information technology.
Another important concept behind the maturity of decision support tools is the maturity of the
models upon which they are based. Maturity in models is best assessed by their sophistication
and their documentation.
Typically models first develop in the awakening or organizing phase and are based on judgment
of employees and facilitators. Such models have several distinguishing characteristics and
corresponding limitations. First, the models tend to be qualitative and the basis for the
relationship between the observed value and condition is often not clearly documented. Second,
observed conditions are often limited to what is readily knowable rather than what is needed to
be known. Third, when the models do have a number of concerns being represented, the criteria
used to represent the concerns may overlap or even be contradictory. Fourth, the models may
not be tied to specific actions corresponding to the conditions observed. Basically these types of
models lack the rigor of an integrated and comprehensive view.
Maintenance planning tools often contain models with these types of limitations. The most
common approach uses a stop light in which green, yellow, and red represent okay, watch, and
act. The conditions that determine the lights color in the maintenance planning tool are often
related to the existence of one or more indications of component degradation. (A quantitative
approach would estimate failure rate or remaining life based on observed equipment condition
and a degradation model.) More than one negative indication typically produces a red light.
(But these indications can easily overlap. For example, consider a case with two negative
conditions, one caused by exceeding a code condition and one caused by a concern about
personnel safety. If the basis of the code condition is also personnel safety, the same concern is
counted twice.) A red light tells the maintenance planner that maintaining the component high
priority. Because the component is high priority, the scheduled maintenance activities for that
component are high priority. (An alternative is triggering the maintenance activities
corresponding to the observed degradation mechanisms.)
However, use of models with limitations is part of a maturing asset management program.
Gaining experience with these simple models and gaining management and employee acceptance
are usually a precondition for obtaining the resources to develop more sophisticated models. A
maturing asset management program must overcome organizational barriers like employee and
management acceptance. Learning how to implement an approach with limitations is much more
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valuable organizationally than learning nothing at all. Equally important, the sub-optimal
approach is almost always better than the traditional approach based on rules of thumb.
Utilities will find it difficult to mature beyond the organizing level if they do not make a
concerted effort to document the bases of their models. Sometimes this documentation can be
developed as part of a knowledge management effort, including efforts to capture knowledge
from an aging workforce. As the documentation improves, models used throughout the
organization become more consistent and often times the same or similar models can be used for
maintenance planning, project prioritization (investment), and even operations risk. When
models become consistent with information standards and when they become compatible among
finance, business processes, and equipment, a truly mature asset management program exists.
The organizational growth from simple to complex models follows the progression of decision
support tools based on ranking to those based on optimization techniques. The simple to
complex path also lends itself to the application of screening techniques. Screening techniques
are critical because they allow simple models to be applied to simple problems, thereby reducing
the cost and turnaround time for overall evaluations. Two or three levels of evaluation are
probably sufficient with the lowest level being a bounding calculation and the highest level
including detailed measures of uncertainty and risk.
Decision Support Capability Investments
Decision support tools to evaluate investments, sometimes called project prioritization tools, are
one of the most important aspects of asset management maturity. Project funding often starts
based on regulatory requirements and capacity additions and, when additional capital is
available, possibly some limited modernization. As maturity increases, regulatory projects no
longer become sacrosanct but instead are evaluated more rigorously. The temptation to add
project scope to beyond regulatory requirements often overwhelms the reacting and awakening
company. But as projects become more precisely evaluated and broken into smaller parts with a
variety of alternatives, it becomes organizationally easier to increase the sophistication of
investment tools. Developing alternatives is important, but maintaining them in the investment
decision process until final budgeting is even more crucial.
Another characteristic of a maturing asset management program is the increasing precision of

long-range plans. Long-range plans help avoid surprises in increased expenditures and reduced
levels of service because of the need to replace large assets. They also provide a repository for
unfunded projects which may be good investments in other years. Long-range plans also provide
a framework to monitor changes in technology and to create a vision for its incorporation into an
electric utility asset base well known for its long life time. In a mature asset management
organization, long-range plans include contingency plans for dealing with uncertainties.
Lastly, as companies mature, their focus on capital begins to extend to O&M. The extension
first appears in large, infrequently scheduled O&M activities, like major overhauls or
refurbishments. Since these do not necessarily occur in a levelized manner, it is inefficient to
include them in a routine maintenance budget. Often O&M budgets are the same as or a
percentage different from prior years. Said another way, they are not strictly based on need. But
employees are less fungible than capital, so often there is logic to small swings in O&M budgets.
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But companies with the flexibility to move people from O&M projects to capital projects, from
one large asset to another or even from one department to another will have the greatest
capability to take full advantage of asset management techniques. In a mature asset management
organization, capital costs trade-off against O&M costs in a lifecycle cost analysis.
Decision Support Capability Risk Management
Risk management is becoming an ever increasing expectation in our world. Shareholders want
to know that needless risks are avoided and that unavoidable risks are being hedged or mitigated.
Investors and regulators have seen that companies with risk management programs often run
more efficiently. The public expects interruptions in service and sudden price increases to be
minimized.
Risk management tends to enter the asset management program in higher levels of maturity. The
data and modeling techniques needed are often the most complex of the tools in the asset
managers toolbox. Similar to condition information and decision support tools in general, there
is a logical progression from simpler and qualitative to more sophisticated and quantitative
analysis of risks.
What is most important though is the understanding that uncertainties in investments are a risk
that can be managed, often using the same basic concepts that financial asset managers use.
Once a company can understand the level of risk it wishes to accept, with effort it can find an
investment portfolio that matches that risk. Often it can identify hedges for the risks as well,
ranging from traditional fuel futures contracts to additional research in new technology.
Measuring the options value of projects, especially additional generation, is becoming more
commonplace and is more often expected by investors and regulators alike.
Another aspect of risk is preparing for and, if possible, designing against so-called low
probability, high consequence events. Often traditional engineering does not explicitly address
these types of risks, whether they are natural events, such as hurricanes, or attributes of complex
technological systems, such as our increasingly interconnected grid. Often these events lead to
very high losses and dislocations, when prudent, low cost investments would have been available
to prevent or mitigate them, had they only been increased in priority. Other times, prevention
requires substantial investment; risk management techniques will help to make an informed
decision on raising the capital necessary to implement them.
Business Process Documentation and Modeling
For the most part business process documentation and modeling has ranged from a capability
many managers think is routinely done to an esoteric capability that management has little desire
to sustain. But two important developments are changing that perspective. First, business
process modeling has more and more been included in benchmarking initiatives that have led to
important improvements in efficiency and consistency in company business practices. As
utilities grow larger through mergers and acquisitions, common business processes are seen as a
way to increase significantly economies of scale. More and more, utilities are realizing that
modest and determined investments in business process modeling can yield improvements in
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generating capacity and service levels as well as capturing knowledge from an aging workforce
and demonstrating prudence to regulators.
The second important development is the increased use of business process models in the
development of effective information technology infrastructures. Technologies like workflow
have been particularly important to improving the effectiveness of EAM systems. New
initiatives like Service Oriented Architectures (SOAs) are also dependent on good business
process models. In this latter approach, described more fully in Chapter 5, business processes
become the specification for information technology services like asset management. Because
business processes can be described by asset managers, the Ill know if youve provided it when
I see the software syndrome can be better managed or hopefully even avoided altogether.
Information Technology Infrastructure General
Of course, this chapter must turn directly to the infrastructure upon which the other asset
management technology is based. Perhaps the best indicator of maturity of an asset management
infrastructure is the success of investments in IT. That does not mean that more investment is
necessarily better. Rather, it means that getting effective results out of the information
technology infrastructure is a strong indicator of the readiness of that infrastructure to support the
complexities associated with mature asset management programs.
Because of this strong relationship, this report recommends (see Chapter 6) that electric utilities
strongly consider using asset management business processes as the test cases for some
information technology infrastructure improvements, including for example Service Oriented
Architecture, Knowledge Management, and Mobility Systems.
The first indication of maturing asset management programs is the successful installation of
EAM and ERP systems. Here we stress the word successful. These installations are difficult and
sometimes just getting them done is a success. But as we have mentioned above, seeing the
installation progress to the point that good data is loaded and that new data is both valuable and
accessible is equally important. For distributed assets, GIS capability becomes equally
important. Mobility systems are likewise an indicator of maturity, as long as they are
accompanied by a business process which ensures the data needed by asset managers is captured.
When moving into the processing and continuously improving phases of asset management
programs, information standards facilitate a flexible architecture and go hand in hand with SOA
and knowledge management. Similarly, improvements in integration techniques characterize the
higher states of maturity. Finally, we have already pointed out the potential gains from
information technology infrastructure when it is accompanied by business process modeling.
Information Technology Infrastructure Knowledge Management
Knowledge management is important to asset management over and above the critical aging
workforce concerns that the electric industry faces. Knowledge management also is an important
enabler of model development and business process modeling, largely because capturing
knowledge from people in a systematic way is so important to those efforts.
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In this regard, it is important to truly recognize the amount of undocumented information that
resides in employees heads about how business is done and how equipment functions and fails.
Besides the areas we mentioned already, qualitative approaches to condition assessment and to
risk management are often based on expert judgment. The more that information is captured
when the organization is in the organizing phase, the easier it will be for the company to progress
to higher levels of maturity. The reason is that knowledge capture techniques would first be
piloted on simpler models and decisions, yet those decisions would be sufficiently business
critical to gain organizational interest initially and organizational appreciation when the pilots are
completed.
In the most mature asset management programs, knowledge is captured as a matter of course
with rigorous methods. Similarly, such knowledge is easily accessed, verified, and modified by
interested parties. Because that knowledge (otherwise known as bases for models and
processes) is captured effectively, decision support tools can grow in complexity while at the
same time remain understandable to managers and people who participate in the process.
Business Analysis Role
The last two attributes are truly organizational in nature. While they do not involve information
technology directly, they do affect the likelihood that asset management information technology
will be used effectively. This attribute relates to the organizational role played by business
analysts. In less mature organizations, business analysts play a more traditional role involving
reacting to management and line organizations. As organizations mature, business analysts work
more closely with line organizations until they even become embedded directly in them. In the
most mature asset management organization, the principals of value creation and costs are so
well understood by employees as a whole that it almost seems like each employee is a part time
business analyst.
Another aspect of the role of business analysis in a mature organization is reflected in changes to
the budgeting process. Budgets move from annual to quarterly. Risks of exceeding the budget
are known, and the conditions or events that underlie those risks are known and monitored.
Management Support
The second organizational attribute and quite probably the most important attribute in asset
management is management support. Management benefits most from asset management
techniques and associated information technology, largely because the type of information they
need to do their jobs is provided in a more timely and accurate manner. But it is more than that.
Management can better explain to shareholders and regulators why decisions were made as they
were and the difference between bad luck and bad management can be distinguished. Another
important benefit to management is realizing the value they receive from the investments they
are making in the EAM and ERP systems that form the foundation of the enterprise asset
management information technology infrastructure. Seeing that investment bear fruit is a critical
part of their job performance.
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Consequently, management support is a natural outcome as well as a natural precondition to

asset management success. Asset management matures as management takes interest in the
topic, whether it be because competitors use it or because they need to justify large IT
investments. As management works through the organizational transformations in asset
management, they become a critical part of the process, and executive sponsorship is necessary.
In the highest level of maturity, executives, managers, and employees all become asset
managers, and asset management processes themselves appear seamless.
The Maturity Index Table of Criteria
A companys progression along these seven attributes will necessarily vary with management
interest, employee capabilities, and information technology. It is expected, for example, that cost
data collection and use may progress slower than general data collection capabilities or that risk
management might lag other decision support capabilities. In part these differences in maturity
can be due to different conditions or management priorities. For example, sometimes a moderate
or high risk event must occur before management aggressively pursues risk management. A
utility with financially oriented management may move earlier to improve cost data.
Engineering oriented management may move more quickly with condition data.
This subsection provides a table of criteria to help measure what level of maturity exists for each
attribute and sub-attribute. The criteria are intended to be useful for both self-assessment and
guidance for improvement. The criteria were developed based on a variety of sources (1, 6) as
well as previously mentioned experience of the author and the institutional experience of EPRI.
In subsequent chapters of this report, the report drills down on important topics organizing them
loosely by level of maturity. Some other topics are described separately, in part because they are
ubiquitous and in part because to avoid distraction from the more important topics. Chapter 3
describes first steps for those who fit the reacting and awakening maturity levels. For example,
Chapter 3 focuses in on data collection and use and initial steps with decision support tools and
performance monitoring.
Chapter 4 focuses on what is often the pivotal level of maturity, namely Organizing. At this
level, the foundation of asset management information technology infrastructure is in place,
namely the EAM and ERP systems. But the use of ranking techniques and condition information
has also opened up new interest in improving the management of assets and greater
understanding of the benefits and challenges involved.
Not many years ago, the Organizing level was close to the pinnacle of asset management
maturity. But with the advent of improvements in management techniques and information
technology, most of which are particularly pertinent to asset management, new opportunities
exist for even more mature asset management programs. Chapter 5 talks about some of these
improvements, the most important of which may be the Service Oriented Architecture.
All of the above mentioned topics in Chapters 3 through 5 are addressed by the criteria in the
Maturity Index Table. The table puts them in perspective with how they fit into the bigger
picture offered by all the seven attributes.
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Table 2-1
The Maturity Index Table
Maturity Index Reacting Awakening Organizing Processing Continuously

Attributes Improving
Data Collection and Use Data collection and Investment made in Data collection Data integration Both the collectors
- General Capability processing, including data collection and capabilities include efforts have and the users of data
equipment and processing mobility data. eliminated many collection and
process failures, capabilities often has inconsistencies and processing systems
serves primarily limited influence GIS capability, e.g., reduced data are involved in
regulatory beyond the map-making collection costs system specification,
requirements. immediate user and capability, is in use. development, use,
many investments fall Equipment data and continued
Inconsistent and short of their original Some success has collection is primarily improvement.
unreliable data is the goals. been achieved in automated
norm. multi-organizational Information collection
initiatives, e.g., Data collection and standards play an
operations and use is treated as a important role in
engineering. process, with data streamlining and
quality and feedback improving data
Data mining tools being key objectives. collection.
begin to be
standardized across Data collection
business units activities increasingly
include business
A well-thought-out processes.
and verified asset
inventory, developed
perhaps for EAM and
ERP systems but
used in multiple
applications, helps to
standardize access to
data.
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Table 2-1 (continued)

Data Collection and Use Little if any condition Condition data has Asset managers are Condition data is Condition data and
- Condition Data data is collected. limited and aware of the variety increasingly used with degradation models
haphazard use in of available condition degradation models are well-linked and
maintenance or information and have to predict asset validated.
operations and is begun to tap that performance.
infrequently used in information for high Use of expert opinion
engineering or valued assets and to generate condition
lifecycle decisions. business processes. information is well-
controlled and well-
A significant fraction understood
of condition data is
input by experts, but
the associated
processes are
typically ad hoc.
Data Collection and Use Cost data is collected Cost information is Cost information from Activity Based Cost information is
- Cost Data primarily for available in EAM/ERP EAM/ERP systems is Costing is collected, verified,
regulatory purposes. systems but is not mined and evaluated, implemented and and analyzed at the
validated. but expenses like deficiencies in cost individual asset and
contractor, data collection are business process
Cost data is not management, and identified and level.
widely used, but may engineering costs are evaluated for
be used by selected not detailed. improvements. Time charging by
departments or asset and business
individual power Life-cycle costing is Time charging by process is company
users. beginning to be done asset and business policy, and its
effectively. process is initiated. importance is
understood by
Cost control employees.
techniques are
routinely employed.
Variability in indirect
costs is understood.
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Performance Monitoring Performance Performance Portals and data Performance Performance
monitoring serves Indicators exist, e.g., mining capabilities monitoring is widely monitoring, analysis,
primarily regulatory Balanced Scorecard, support performance accepted. and improvement are
requirements. but few if any monitoring and allow a way of life
indicators are based access to a much Employees show throughout the
on models and greater amount of individual initiative in company.
analysis of historical data, but that data is developing and
data. primarily used by exploiting their own Performance goals
power users. indicators are set based on
Data processing to value and their
maintain the Performance indicator relationship to
indicators often takes models become more stakeholder goals is
more time than is commonplace. clearly specified,
spent evaluating the explicitly modeled,
indicator results. and measurable.
Performance
monitoring and
resource allocation
are clearly related.
Indicators of risk are

monitored.
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Decision Support Regulatory Decision support Decision support Decision support Decision support
Capability - General requirements tend to tools begin to be used capabilities include tools are used widely, capability includes
dominate decision by individual ranking and what-if and managers and optimization and
making. innovators. However, analysis. executives simulation tools.
accurate input data understand their
Rules of thumb and and management Screening or bases and results. Models are used
manufacturer acceptance lag. importance analysis routinely for finance
recommendations are techniques are used Decision support and business
the basis for most to determine the level tools for asset processes, as well as
asset repair and of detail for decision replacement and for individual assets
replacement support analysis. maintenance planning and systems. These
decisions. use condition models are well
Management information and documented for ease
Staff skill and awareness of degradation models. of understanding and
experience is the decision support is update.
basis for most increasing. Probabilistic
decisions and that information is Staff skill and
knowledge is neither Ranking techniques beginning to be experience is
managed nor are used extensively developed and used. incorporated in
captured. in maintenance models and decision
planning. Data collection for making as a matter of
ranking applications established process.
is increasingly
automated, and
management has
confidence in the
results.
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Decision Support Regulatory A process for A robust ranking The strategic Investment risks and
Capability Investments requirements evaluating capital process emerges for planning, project returns are evaluated
dominate capital investments exists, capital investment. prioritization, and and balanced.
investment decisions but the resulting budgeting processes
for existing major investments are still Large O&M are well integrated, O&M budgets are
assets. strongly influenced by expenditures are and decision support increasingly flexible in
management separated from O&M tools are used responding to
O&M budgets are preferences. budgets and ranked. throughout. changes in
based primarily on investment strategy.
prior year spending. A robust set of Long-range plans for
alternatives are capital investment are The hidden costs,
generated as projects developed and risks, and benefits of
are defined. comprised of new technology are
individual projects. well understood.
Alternatives are Optimization

considered techniques are
throughout the employed in
decision process. determining the
project investment
Project cost and portfolio, including the
performance are selection of
measured and alternatives.
compared against
original estimates.
Lifecycle costing is
used to trade off
capital and O&M
expenses.
All major assets and

asset types have
long-range plans.
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Decision Support Regulatory Risk management Risk management is Management is Decision support
Capability - Risk requirements, such a techniques may be beginning to evolve becoming familiar tools bring predictive
Management prudence, tend to used by selected beyond traditional with the use of risk and risk management
dominate any use of individuals and by loss control. management capabilities to high
risk management safety and loss techniques, including risk operations.
techniques. control groups. Project control groups quantitative risk
estimate and monitor estimates. Risk management
risk of project failure. techniques and tools
Asset performance are used routinely.
Qualitative data, e.g., reliability
techniques based on and failure data, are Quantitative risks are
expert judgment are incorporated into risk estimated for all
used selectively for evaluations and other business critical
ranking and decisions. projects and threats.
managing important
risks. Some qualitative risk Techniques to
techniques are measure, model, and
Risks may be improved with manage uncertainty
systematically quantitative data are employed.
identified for some and/or automation.
processes or All business critical
business critical assets have risk
functions management plans.
Risk mitigation and

hedging are routinely
used for large risks.
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Business Process Regulatory Documentation of Most business Business processes Business processes
Documentation and requirements drive business processes is processes are are specified, are thoroughly
Modeling business process growing, but it is not documented in modeled, and well- modeled for business
documentation. done uniformly. procedures or described for general critical functions.
equivalent understanding by
No formal modeling is documents. employees. Business process
done. models conform to
Benchmarking is Business process information standards
taking on growing models are used for for Business Process
importance as a benchmarking as well Modeling (BPM).
business as process
improvement improvements.
technique.
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Information Technology Information EAM and ERP EAM and ERP Software integration Information standards
Infrastructure - General technology systems have been systems have been techniques based on and a Service
investments focus on installed, but their installed, and services and Oriented Architecture
large, capital- features and systematic efforts information standards are used to facilitate
intensive systems limitations drive have been made to have been piloted. IT support of EAM.
and recurring business processes, capture data and
maintenance costs to procedures, and performance Management Business processes
keep them reports. information in them. recognizes the link are intimately
functioning. between business associated with the IT
An integration process modeling and infrastructure.
strategy exists for the information
decision support tools technology Users can specify the
as well as for mobility infrastructure. asset management
and/or GIS systems, processes and
but the cost of Search techniques techniques they want
integration causes allow broad and automated in their
this to occur on a effective access to own terms, and the IT
case-by-case basis. information, not just department can
data. readily and accurately
develop the
Ownership of asset corresponding
management services and integrate
information them into existing
technology is well applications.
established
Management and
An asset asset managers can
management specify and IT can
information build visualizations of
technology strategy asset management
exists and has been results that enhance
approved by the use and
management. usefulness of asset
management decision
support tools.
2-22

Information Technology Staff skill and Staff skill and Knowledge A plan is being Knowledge
Infrastructure - experience, despite experience is management actively implemented management
Knowledge being the basis for sometimes captured techniques and tools to capture aging techniques and tools
Management many decisions, is in procedures or have been workforce knowledge. are used
neither managed nor decision guides, but successfully piloted. systematically and in
captured. managing and Captured aging conjunction with
maintaining the Aging workforce workforce knowledge decision-making and
information occurs knowledge is being is employed in decision-support
only as a result of captured on a equipment tools.
individual initiative. selective basis. performance data,
decision support Staff skill and
models, and business experience is
processes used in captured as a matter
asset management. of established
process.
Business Analysis Role Business analysts Business analysts Business analysts Budget analysts are Business analysis is
remain largely within audit various work closely with line embedded in line consistently and
the confines of the functions and are an organizations to organizations and routinely done by
finance department. active part of ensure quality and viewed by employees many employees.
evaluating capital consistency in both as part of the
investments. capital and O&M implementation team. Budgets are updated
budgeting. regularly and vary
with conditions and
events.
Management Support Management has little Management is Management follows Executive Executive and line
interest in asset aware of asset through on EAM and management actively management has
management, management ERP investments to supports asset ensured that asset
preferring more techniques in use by ensure the associated management. management is part
traditional business peer companies. business process of the corporate
practices. improvements occur. An executive sponsor culture.
Management has an for asset
expectation that EAM management is Asset management is
and ERP and certain responsible for seamlessly integrated
other IT investments improving and into the appropriate
will improve asset expediting its use. business processes.
management.
2-23
3
FIRST STEPS FOR NEWCOMERS TO ENTERPRISE
ASSET MANAGEMENT
This chapter describes some of the critical issues that need to be addressed for Reacting and
Awakening Asset Management programs. In the least mature asset management programs,
collecting and using data is typically the single greatest constraint on asset managers. Asset
management data feeds models, which in turn are employed in decision support tools.
Sometimes the models are part of performance indicator programs; sometimes they stand alone
in the decision support tools. The maturing of an asset management program requires growth to
occur on all three topics in some organized and integrated manner.
One logical forum for integrating data, models, and decision support tools are the EAM and ERP
systems, the backbone of the asset management information technology system. While these
systems have their own objectives and needs in supporting a wide variety of core business
processes, such as maintenance, design engineering, procurement, and others, they also are the
repository of the asset inventory. The asset inventory is the data base that provides some of the
key attributes of an asset, including its name, location, manufacturer, model, and size. Many
data collection and use systems operate off the data structure of the asset inventory.
In this chapter, we will examine the following topics:

Developing a good asset inventory system, upon which an asset management program can be
developed
Collecting asset equipment data (reliability and condition) and doing so in a manner than
supports immediate use in asset management, as well as future use as the asset management
program matures
Developing and employing performance indicators, including using models and integrating
with data sources
The best way to start out with decision support tools
Beginning to exploit the EAM and ERP systems and their role in the enabling the above
efforts
In this following discussion, we describe the most important aspects of these topics as they relate
to information technology. References for further details in other EPRI reports are provided as
well.
3-1
First Steps for Newcomers to Enterprise Asset Management
Developing a Good Asset Inventory
An asset inventory is essentially a list of assets owned by the company (in this context, we refer
to the physical assets of the company, plant and equipment, rather than its financial assets).
What would seem like an easy concept is made more difficult because: such lists often appear in
multiple, different information technology systems, the recorded characteristics of assets vary
according to different user needs, assets are comprised of other assets, e.g., subcomponents, and
some assets change location at various times.
The first step in defining a good asset inventory is to identify the variety of databases and
applications which have an asset inventory. The starting point is the EAM system. The EAM
system will usually contain the largest list of assets, as well as the most general list of asset
characteristics. But there can be many other applications which have inventories. At one end of
the spectrum are spreadsheets used by engineers to track specific types of equipment, e.g., air-
operated valves or large transformers. At the other end could be new large information
technology systems such as GIS or mobility data systems. Any asset management decision
support tools would also be of interest.
Assembling these sources will provide important insight into the desirable structure of the asset
inventory, e.g., by exposing types of user needs and asset characteristics that the asset inventory
needs to support. Also, it will provide a roadmap for configuration control of these databases.
For example, a design parameter may need to be maintained for a particular piece of equipment.
The parameter might currently be stored in a spreadsheet maintained by the corresponding
equipment engineer. If the decision is made to maintain the spreadsheet separate from the asset
inventory, then the requirement for synchronizing the two can be established in a documented
business process.
Additional asset information that may be required by an asset management program include
items such as:
ratings
size
principal material
test values
The amount and type of additional information will vary by asset type. For example,
transformers, because of their value, importance, and the assessment tools that are used to
measure their condition, will often have more characteristics than other assets. Some of this
information may be stored outside the actual asset inventory and related by a key field such as
asset type code.
It is important to note that not all assets may be currently in the asset registry. Typically
passive equipment are the ones omitted. Examples include internal structures like fire barriers
in generating plants or poles in the power delivery system. If important assets are not in the
inventory, the effort to include these assets in the inventory is often substantial. Consideration
should be given to incorporating (and possibly even labeling) such assets as part of other
3-2
business processes, e.g., inspections, installation, maintenance, etc. Assets not in the asset
inventory may pose some problems for asset management programs as they mature. For
example, certain asset management tools integrated with an EAM system may function better if
the assets are in the inventory. However, the substantial effort in data collection and processing
to include these assets in the EAM typically is not warranted for less mature asset management
programs.
The above discussion points out that the true asset inventory may really be virtual and comprised
of a set of databases. One typical setback that can occur in the least mature asset management
programs is that management or IT sets an expectation that all information will be stored in the
new EAM system. Typically one of two things happen: Either the asset inventory becomes
large and unwieldy, or users such as equipment specialists must maintain separate systems. This
setback can be avoided by developing a good understanding of all the asset inventories and the
application needs that drive them and then making a conservative decision about what to include
in the core asset inventory. As the asset management information technology system matures,
decisions can continue to be made to consolidate and improve the asset inventory, thereby
reducing the need for maintaining separate databases and increasing the accessibility of the
information in those separate databases.
Perhaps the next most important aspect of an asset inventory is to establish a logical hierarchy
that addresses the concept of assets that are composed of other assets. Important components
like relays and check valves are often piece parts of larger components such as pumps, diesel
generators, and transformers. Nevertheless, important business processes like maintenance,
testing, and asset replacement may occur at the subcomponent level. Typically an EAM system
will provide the required capability. The IT group, however, must ensure that other capabilities,
such as data mining and performance monitoring, support asset managers and others who need to
evaluate components that might appear at either level.
A logical hierarchy also includes the concepts of systems. The typical generating plant has its
systems pretty well defined, and the power delivery system has its circuits. The concept of
systems thinking is described in the next chapter. We mention systems here because it is
another concept that requires a hierarchical asset inventory.
Another challenge to developing asset inventories results because the location of the asset can be
important. First, it is important that assets can change locations. An asset such as a circuit
breaker may be removed from service, refurbished, and then put back in service in a different
location. If the performance history of the asset is lost because of inadequacies of the asset
inventory, then asset managers may misinterpret the information they get when analyzing the
component. Second, locations may influence the performance of an asset. In geographically
distributed systems like power delivery systems, this concept is better understood and can
supported by GIS capability. But even in generating facilities, hotter or more humid conditions
can affect equipment life in ways the asset manager must be aware of.
Asset inventories typically contain text fields that can be important. One such field is the so-
called noun name. The noun name may contain information like the type of component or its
rating. Consequently, the more consistently text information is input, the more useful it will be
when searches are performed to find groups of related equipment.
3-3
The same is true even of fields that are not text fields, of course. Data input from different
organizations or different groups may use different abbreviations, different units, or different
terms. While it is impractical to make databases perfectly consistent, it is appropriate to attempt
to develop a process for upgrading data of this sort when it begins to negatively influence the
capabilities of asset managers and other users. Typically, a data update process for the asset
inventory will accompany the installation of an EAM system. Incorporating lessons learned into
the EAM data update process is a logical way to mature asset management information
technology at a reasonable and sustainable pace.
While adoption of information standards often comes later in a maturing asset management
information technology program, information standards do provide immediate insight and value
to the problem of creating an asset inventory. Information standards cannot function without a
standardized approach to asset inventories. Hence, a standard like the Common Information
Model [7] can be quite helpful to defining an asset inventory, even if the company is not ready to
commit to the broader uses of information standards. Equally important, a use such as this
provides a cost effective means of increased training and understanding of information standards.
In summary, the following steps or considerations should be given in developing a good asset
inventory:
Identify the variety of databases and applications (including asset management decision
support tools) that contain asset inventories.
Make an informed decision about how to consolidate this information into an asset inventory
(even a virtual one). A central role for the asset inventory is the EAM system.
Document what assets are not in the inventory and identify any opportunities to include them
as part of other planned or anticipated business processes, e.g., pole inspections.
Give careful consideration to a hierarchical structure that supports subcomponents and
systems.
Look to information standards as a potential source for a good asset inventory data structure,
regardless of whether information standards are being used in software integration.
Pay careful attention to how location information will be handled in the asset inventory and
give consideration to future enhancements such as GIS capability.
Remember that information in general and text information in particular is more valuable
when it is consistent among databases.
Establish a configuration control process for maintaining the asset inventory data in the
EAM. Use the process for the virtual asset inventory and use lessons learned from
application in the EAM to improve the process so that the consistency and quality of data
improves as asset management matures in the company.
3-4
Collecting Asset Equipment Data
Much of the data collected today that asset managers need is difficult to use. Data is often
collected in forms that are not electronic. And the data that is available electronically is often
stored in text or narrative forms, which are difficult to evaluate. While some Enterprise Asset
Management systems provide the means of collecting data more efficiently, the current
implementations of these systems often suffer from lack of anticipation of asset managers needs.
These needs include easy access to asset performance data, such as reliability estimates, return to
service times, equipment health, and cost information. The result is that analyzing existing data
to determine equipment failure rates and equipment condition can be a costly proposition.
Good asset equipment data starts with a good asset inventory. Equipment data must be grouped
to provide truly meaningful information. Since equipment fails only occasionally, equipment
failure information must be grouped by component type. Since equipment condition comes from
a variety of sources, information from different applications must be able to be brought together
by a common equipment name.
But ultimately it is the structuring of the data which allows the most information to be derived
from failure and condition information. The data structure needs to include the subcomponents
or piece parts of the asset and also the causes of equipment failure and degradation.
Unfortunately, there are no consensus information standards upon which to turn. Standards such
as the CIM have barely touched this topic or have not involved equipment failure specialists.
Industry database structures that do exist vary, even within disciplines of the same electric utility
sector, e.g., maintenance and risk analysis, and even more so between sectors, e.g., power
delivery and generation. For the most part, such data structures remain the domain of a variety
of consultants.
The consequences to asset management are twofold. Within a particular sector, it is difficult to
compare collected data to industry-wide or generic data. For the enterprise asset management
program, it is difficult to share data between business units. Fossil generation data typically
differs from nuclear generation data and both differ from power delivery system data, even when
the equipment is the same. Disparities in data narrow the scope of asset replacement and
maintenance improvement studies to individual business units as well as hindering opportunities
to collectively improve industry performance. The disparities reduce the opportunities for
enterprise wide asset management actions.
Despite these problems, asset management programs have much to gain from good structuring of
equipment failure and condition data. Even early in the maturity of an asset management
program, a well-structured database can support the development of strong and stable condition-
based maintenance programs. As asset management matures further, more selective asset
replacement strategies become possible. Moving early on data structures is sufficiently
straightforward that it can be done in anticipation of asset management program growth. Doing
so will also speed the maturation process in this and other areas such as decision support models
and information standards.
3-5
The following describes a technique developed by EPRI for structuring equipment failure and
condition data. This technique has been proven in its ability to support condition-based
maintenance programs ranging from simple to sophisticated. The technique has also been
validated against generic industry failure rates, demonstrating its consistency with failure data
collection methods. Finally, the technique has been shown to be amenable to growing with the
sophistication of asset management decision support systems. In Chapter 5, this report briefly
discusses a more complex implementation of the program that supports integrating condition
data with degradation models. Such an approach is within the reach of an asset management
program at the Processing or Continuously Improving level of maturity.
The Preventive Maintenance Basis Database (PMBD) has been in ongoing development in
EPRIs Nuclear Power Sector since 1996 and has become a widely-used tool and information
resource in the nuclear power industry. Over time, small groups of subject matter experts drawn
from operating nuclear power plants and vendors have developed preventive maintenance (PM)
tasks and task intervals. The PMBD was created as an information resource to supply
recommendations on PM based on this disparate set of knowledge and experience.
Recently, these subject matter experts have included representatives of power delivery and fossil
generation business sectors. The nuclear only database has recently expanded rapidly from
approximately 80 major components to an enterprise database of more than 120 components.
Additional components continue to be added to the database.
For each major component type, the PMBD provides a detailed description of failure
mechanisms, a recommended program of PM tasks, a synopsis of the task content and intervals,
and the reasons why these choices are technically valid in a variety of circumstances. Various
industry bodies have conducted ongoing reviews and updates of the data in the PMBD. As a
result, the PMBD is now approaching the status of a consensus repository of industry PM
experience and expert judgment.
Over the same period, the PMBDs capabilities as an analytic decision tool have been greatly
enhanced. These improvements have focused continually on answering the question What is
the quantitative effect of PM on equipment failure rates? No other existing maintenance or
reliability application provides such an answer to this question.
In the PM Basis Database data structure, each asset type, e.g., a substation transformer, is
subdivided into a list of Failure Locations (e.g., core, desiccant, electrical connections, fans,
etc.), which are basically its subcomponent parts (see Figure 3-1). Each of these is assigned
Degradation Mechanisms (e.g., loose condition, loss of core ground, multiple core grounds, etc.).
The latter are the processes by which the subcomponents degrade with use and the passage of
time. Each degradation mechanism is further described by one or more Degradation Influences
(e.g., assembly or shipping error, vibration, over-excitation or arcing, etc.). These are the
stressors that initiate the degradation process and affect how rapidly degradation develops.
Figure 3-1 also lists corresponding Discovery Methods for each degradation influence. These
methods are ways to detect the degradation (e.g., dissolved gas analysis, vibration analysis, core
ground testing, thermography, etc.).
3-6
Transformer - Substation
No LTC Asset Models How to detect
degradation
What can fail? What determines rate?

Quantify failure rate
How can it fail?
Figure 3-1
EPRI PM Basis Database: Equipment Model Example
The terms failure location, degradation mechanism, and degradation influence are approximately
equivalent to similar terms in typical industry reliability data bases, e.g., subcomponent,
proximate cause, and root cause, respectively. A unique combination of values for these data
fields forms one row or record in the component data table. This unique combination can be
referred to informally as the failure cause or failure mechanism. All other information specific to
that unique combination (e.g., discovery methods) are contained in the same row of the table.
Note that a failure location may have multiple degradation mechanisms. For example, the core
may suffer from a loose condition, loss of core ground, multiple core grounds, etc. Similarly, a
degradation mechanism may have multiple degradation influences. For example, the loose core
condition may be influenced by an assembly or shipping error or by vibration.
These failure mechanisms may not always represent complete failure of the component
functions. They more accurately correspond to the occurrence of clearly degraded states to
which a maintenance professional would not wish to subject critical equipment.
The data structure shown in Figure 3-1 lends itself equally well to the description of the full
range of assets from complex active components to passive components. Proof of this assertion
lies in the fact that the same approach has already been used with equal success for a broad range
of components, including heat exchangers, feedwater heaters, DC power supplies, battery
charger and inverters, 18 types of wooden utility poles, and ten types of underground power
cables.
3-7
The PMBD is based on a modeling approach that is initially driven by the input of expert
knowledge, but it is then amenable to refinement based on the input of event data collected using
its data structure. Because the PMBD is fundamentally a degradation modeling approach, it
allows asset managers to look forward evaluating possible future scenarios in an effort to
recommend the most reliable and economic course of action. Its initial reliance on the
knowledge of maintenance, operations, and engineering personnel draws on the expertise and
career-long experience of these power industry professionals. Such reliance brings the greatest
possible experience and equipment understanding to the data structure as well as a consensus
upon which information standards are traditionally based.
The PMBD data structures and degradation models can be used in conjunction with the other
sources of data both inside and outside the company:
Generic failure rate data from various published sources.
Industry-wide databases of individual events collected by participating utilities using some
level of standard data structures.
Records and estimates of planned and forced outages and related reliability measures.
Individual equipment studies which might report numbers and types of failures as well as
recommendations on maintenance programs and asset replacement strategies.
More information and further references on this approach can be found in:
Asset Performance Database, A Recommended Approach for Data Modeling to Facilitate

Power Delivery Asset Management, 1008553, EPRI, Palo Alto, CA: 2005
Information on how equipment fails is often rudimentary at best. The legendary broke, fixed
entry is all too common in a maintenance record. One benefit of early implementation of all or
part of the equipment model is to build a process in which failure and condition information
improve in quality as the asset management information technology capabilities mature.
Return-to-service times may be important for some assets. Often return-to-service times include
a variety of different contributors, other than equipment repair, including for example time to
reach the asset, isolation/tag-out times, times for obtaining parts, and time for returning the
system to service. Since these contributions can vary widely for the same asset types, it is often
important that return-to-service times be specified clearly.
At the Awakening level of maturity, there will still be risk in many information technology
investments. The risk stems not from technology, but from the organization failing in its efforts
to adopt the technology. But improving maintenance programs with condition-based approaches
often yield substantial benefits, and improving data collection lays the foundation for many
benefits from asset management. Because the application of equipment modeling, discussed
above, begins as a maintenance improvement, there is less organizational risk than trying to drive
a similar approach from asset management into the rest of the organization. With lower
organizational risk and high benefit, this approach to structuring asset failure and condition data
is more likely to yield benefits in the early stages of an asset management program.
3-8
To conclude, the following steps should be considered when collecting asset equipment data:
Start by developing a good asset inventory.
When collecting equipment failure and equipment condition information, select a data
structure that has room to grow with the asset management program.
Give consideration to, but avoid being driven by, the structure of industry-wide databases.
Monitor information standards developments in the areas of failure locations
(subcomponents) and failure mechanisms.
Incorporate the equipment model data structure in the EAM, even if it is done one level at a
time.
Work to improve the information collected in the EAM, including in particular information
related to the cause and condition of equipment failures and to the various contributions to
return to service times.
Developing and Employing Analytical Models
The discussion above highlighted the importance of data in developing the foundation for a
maturing asset management information technology program. In many ways, data structures are
some of the most straightforward aspects of information technology, because information
technology providers and users understand their importance. The same cannot be said for
analytical models; such models are inherent to many of the decision processes of asset
management, yet they are often an afterthought in the IT implementation process.
The previous discussion is a case in point. If data is collected consistent with a model for
equipment degradation, the information in that model can be more quickly evaluated. Many
asset management information technology systems support evaluations or decisions for
components (e.g. power transformers), but it is the actual subcomponent (e.g. the transformer
windings) that most often determines the maintenance procedure executed. Furthermore, it is the
degradation mechanism that helps engineering determine if the maintenance program is adequate
and the design is appropriate.
Initially, asset management systems too often short shrift models. The resulting asset
management decision process becomes more ad hoc, and its success more dependent on staff
skill and experience. This problem is often most evident in performance monitoring, where
performance criteria might be selected based on what is already measured by regulators or by
what other companies measure.
The following discusses the use of analytical models in performance monitoring, but the basic
concept applies to the full range of decision support tools available to the asset manager. This
report focuses this discussion on performance monitoring because success in that discipline is a
key indicator of success in asset management and because successful performance monitoring
requires a good information technology infrastructure.
As utilities focus more tightly on improving performance while holding the line on costs,
establishing linkages between corporate objectives and key indicators of performance has
3-9
become increasingly important 1. The stakeholders goals of an electric utility are diverse, often
requiring trade-offs to effect a good asset management program. Increasingly corporations are
developing models of stakeholder values and using them to prioritize investments.
Similarly, corporations are looking to metrics and key performance indicators to drive
performance improvements throughout their organizations. The widely used Balanced Scorecard
approach to performance monitoring has led to many business process improvements. But the
method itself does not inherently guarantee good performance indicators. Studies of the
usefulness of performance indicators have shown significant differences in business
improvement among companies that based their performance indicators on formal models of
value.
However, prioritizing investments and monitoring performance are often not implemented
together or consistently. The effectiveness of asset management programs suffer when the
model for determining investment strategy differs from the model for measuring performance.
Perhaps more importantly, many corporate value models are not validated, nor do they connect
objectives with decisions the company can make. For these reasons, EPRI has embarked on
research to use value modeling techniques in the development of performance indicators. Work
to date indicates that the corporate value model developed as part of an asset management
program can be aligned with performance indicators. The result of such an alignment is an
organizational line of sight from the stakeholders and the corporate officers who lay out goals
and objectives to the supervisors and personnel who design, maintain, and operate the assets.
The purpose of a corporate value model is to quantify value, so that the value of various
activities, such as capital investments, maintenance programs, and the like, can be measured and
compared. Some kinds of value are readily measurable; for instance, the value of a kWh of
electric production is simply its price. Other kinds of value are more elusive; for example, what
is the value of reliable electric service? Nevertheless, it is a fundamental principle of
economics that value can be assigned to any tangible good or service.
In general, three difficulties arise in trying to assign value: precision, preference, and consensus.
Precision means that one must describe precisely what one is trying to value. For example, what
does reliable electric service mean precisely? Answering this question leads naturally to a
breakdown of this attribute into various subattributes, such as duration of outages and
frequency of outages and also to specifying the means of measuring them. Preference means
that one must be able to distinguish different levels of value for a particular attribute. For
instance, clearly fewer outages are preferred to more outages, but how much more valuable are,
say, two outages per year versus three? Consensus means that among any group of decision-
makers, preferences are likely to vary in ways that usually cannot be resolved objectively; thus,
to have a credible tool to guide decision-making, the relevant people must reach a consensus
about the value model. These difficulties can be overcome using a systematic process for
defining a value model.
1
See Value Modeling and Measuring Key Performance Indices for Power Delivery. EPRI, Palo Alto, CA: 2007.
1012502.
3-10
The following set of characteristics represents objectives in the design of a corporate value
model. 2
Level playing field. The value model should allow fair evaluation of all activities. The only
reason to undertake an activity is its contribution to overall corporate objectives. No other
characteristics should influence the choice of whether or not to do it. All activities are evaluated
on the same basis, and the relevant people should be able to agree on the measurement of value
provided by the activity.
Resolve differences of opinion rationally. The value model should provide a system for resolving
differences of opinion as well as determining which differences matter. The value analysis of all
activities should focus on the attributes that provide value, the corporate objectives, and the
structure of the portfolio of activities.
Defensible logic for peer review. The value model should make it possible to explain in detail
why a particular activity or portfolio of activities is undertaken. Reviews, like differences of
opinion, should be based on attributes, objectives, and portfolio structure.
Transparent analysis. Not only should the specification of all activities be clear, but the
evaluation criteria should also be readily apparent. It should be possible to explain why an
activity has been undertaken. Further, it should also be possible to observe how changing the
specification of an activity results in different evaluation. The value model should attempt to
eliminate all ambiguity regarding decisions whether or not to undertake activities.
Completeness with respect to performance measures. The value model should encompass
multiple performance measures for multiple objectives. It should be possible to compare value
with respect to different or competing objectives.
Bias- and error-free. The value model should minimize the effect of individual biases and to
eliminate, as far as possible, any cognitive errors. It is difficult to eliminate deliberate
misreporting or misassessments, but the transparency of the data and the analysis should tend to
prevent such deliberate misstatements from going undetected.
Practically applicable with respect to cost and time. If development or use of the value model is
cumbersome and time-consuming, it will not be used. The development process usually requires
significant efforts, but subsequent analyses should be relatively simple and timely. For example,
having too many attributes or not having readily available data to describe an attribute will
prevent simple and timely application.
Compatible with existing business practices. The value model should support existing processes
for capital and maintenance prioritization and performance monitoring.
2
Adapted from Project Prioritization System: Methodology Summary, EPRI, Palo Alto, CA: 2001. 1001877
3-11
In general, a value model consists of three major components:

A set of attributes of value representing the potential ways activities can contribute to
corporate value.
A set of scales to measure the value of each of the attributes.
A set of weights that enable one to compare and trade-off value among the various attributes.
The foundation of value modeling is a set of attributes. Attributes of value generally fall into
three categories:
Financial attributes, such as revenue, earnings, share price, etc.
Quantitative, non-financial attributes, such as reliability
Qualitative attributes, such as corporate reputation.
Since high-level objectives, such as reliable electric service, are usually not defined precisely
enough to measure, the attributes usually must be refined by defining component subattributes.
Thus, the attributes of value form a hierarchy, with the high-level corporate goals at the top.
Successive levels in the hierarchy represent increasing specificity, until, at the bottom level, the
attributes are readily observable and fundamentally measurable. The hierarchy defines each
component of value that an activity may contribute and establishes the relationship between that
value attribute and the overarching corporate goals. Development of the hierarchy requires
definition of each value attribute, including as necessary, additional levels of sub-attribute
definition to adequately capture all unique sources of value.
Usually, such attributes have readily observable natural units, but such units do not necessarily
represent value, so a means of translating the natural units into units of value must be devised.
The means of translation is the scale.
How does one create such a scale? Generally, a scale is developed through a group process
relying on the judgment of the individuals involved. A series of comparisons are posed of the
form Is it more valuable to reduce outage time from a to b or from b to 0? or At what point x
between a and 0 would it be equally valuable to go to either from a to x or from x to 0? By
successive refinements, the group can fill out the entire scale.
The process does not have to rely entirely on judgment, although that is a perfectly valid way to
establish preferences. For instance, in establishing a scale for customer outage minutes, many
utilities have customer satisfaction data from surveys that can estimate customers value of
3
reliability.
3
See. Customer Needs for Electric Power Reliability and Power Quality: EPRI White Paper. EPRI, Palo Alto, CA:
2000. 1000428
3-12
Developing scales for qualitative attributes presents further challenges, since a qualitative
attribute has no natural units. In this case, a scale has to be described by descriptive statements
indicating the various levels of value, and there is no direct way to determine the value of
changing levels. Nevertheless, it is possible to assign value to changes in a qualitative scale.
These attributes use anchored scales, which are numerical scales with verbal "anchor points" at
various values. Anchored means the qualitative rating statements for any given factor are
sufficiently well-defined that, given the same input data, different raters would usually select the
same rating. Rating statements are associated with numerical values between 0 and 10,
producing the desired quantitative value.
While scales measure the value of changing an individual attribute, they say nothing about the
relative value among different attributes. To compare value between two activities that affect
multiple attributes, it is necessary to have a way to compare value among the attributes. For
instance, one might ask How much is moving electric service reliability from 14.4 million
customer outage minutes to 0 worth compared with addressing a safety issue that significantly
contributes to resolution of multiple regulatory issues?
The weighting process starts at the lowest levels of the attribute tree. At each step of the process,
people are asked to compare the relative importance of changing two or more attributes. When
all the subattributes that roll up to a particular attribute have been weighted, the process moves to
the next set of attributes, and when all of the attributes at a particular level of the tree have been
weighted the process moves up to next level. The trick to eliciting accurate weights is to
structure a process that enables people to compare a small number of attributes at a time and to
always look at specific examples of the value impacts to anchor the comparisons in concrete
terms.
While the above discussion often describes how expert opinion and judgment can be used to
create value models, the same process can be applied to more quantitative sources of information
and to existing models. The EPRI references provide further examples of incorporating
quantitative data and models.
Throughout this information technology guide, we place heavy emphasis on consistency of data
structures and models used in the asset management process. While not in itself an information
technology attribute, consistency in these areas allows information technology to function more
effectively and at lower cost. For example, consistency facilitates integration because
information in one application can be readily compared and interchanged with information in
another application.
One important place for consistency is the equipment model mentioned in the previous
subsection. The equipment model, generated by experts and then validated against experience,
can and should be used in performance monitoring and project prioritization.
In a project prioritization application, the corporate value model described here would help to
identify the value of a particular asset or set of assets. The equipment model would help to
identify the value that a particular action would create in terms of improving the reliability and
maintainability of the equipment. Such a model is invaluable to making decisions regarding
whether to change maintenance practices or change equipment designs.
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In a performance monitoring application, the corporate value model would help to identify the
most important assets to monitor. The equipment model would identify the most important
degradation mechanisms to monitor as well as identify the maintenance activities that provide
information about degradation or renew subcomponents and reduce degradation.
By these two illustrations, this report describes how data, models, decision support tools for
project prioritization and critical asset management technology like performance monitoring can
all integrate to produce a self-consistent asset management program operating with a consistent
and straightforward information technology infrastructure.
But knowing that a linkage exists between the asset inventory, the equipment data model, and the
corporate value model is insufficient. Developing and maintaining the links and applying the
model consistently takes planning, organizational effort, and persistence by management and
asset managers to ensure that these models are applied. When the models are found to be
deficient, they must be improved. When new decision support tools are acquired or used, their
models should be derived from the corporate value model. When business conditions or
stakeholder values change, the model may need to be restructured at the top.
While this might seem like a daunting task, in reality all those things and the accompanying
work happens now. It just happens in different ways in different business units and at different
levels in the company. The decision making more often than not happens in an ad hoc manner
which in turn results in management energy to prevent inconsistent investment strategies at the
business unit level.
An additional benefit of this approach is that it is much easier to define requirements for the asset
management information technology infrastructure. Applications such as EAM, data mining,
business intelligence, strategic planning, and performance monitoring should all be evaluated to
ensure that they can support the corporate value model and equipment model described here.
Finally, it is beneficial to have a short note on knowledge management. The models we have
just described are accompanied by a tremendous amount of implicit knowledge. The more the
knowledge that forms the basis for the model can be captured, the easier maintaining and
enhancing the model will be. The importance of knowledge management is discussed further in
Chapter 5.
The approach proposed in this subsection is not without its challenges, but it does pave the way
for an Awakening asset management company to mature. To conclude, the following steps
should be considered when developing and employing analytical models:
Identify the various models that exist explicitly and implicitly in performance indicators and
project prioritization. Also identify models in other asset management decision support
processes.
Evaluate the identified models according to the above guidance, examining the overall
desirable characteristics of models and the specific aspects of attributes, scales, and weights.
Consult EPRI references for further details.
3-14
Merge the models into a corporate value model. Let corporate and stakeholder goals drive
the upper portions of the model hierarchy. Use the guidelines above and in EPRI references
to ensure the model has the characteristics that will support asset management decision
support tools in a comprehensive and consistent manner.
Understand that the asset equipment data structure for collecting data is also an equipment
model that can be linked at the asset level to the corporate value model.
Lay out an overall plan for developing, maintaining, and using corporate value models and
individual asset models in asset management decision support tools.
As information technology is acquired, implemented, and enhanced, ensure that the
information technology can readily support incorporation of corporate value and individual
asset models.
As knowledge management techniques and information technology is adopted, ensure that
the basis for the corporate value model and individual asset models are captured in as robust
a manner as practical (see also Chapter 5).
Employing Decision Support Tools
The previous subsections described how to set up a data and model infrastructure that enables
asset management information technology in both the immediate- and long-term and that
supports the application of decision support tools. In the Awakening phase of program
development, decision support tools are still in their infancy. But decision support tools become
much more important in the Organizing phase. The logical question is, how does this transition
occur?
Initially decision support tools are applied by individual innovators. Often they might be applied
to a critical problem for which traditional techniques have not been as effective as desired.
Nevertheless, because the tools are often very different than what has been used in the past, the
asset manager should not underestimate the difficulties in successful use.
Access to the data that is needed will often be a struggle. If the abovementioned data structures
are being implemented in the EAM system, the process will be easier, but it is still likely that
most information will be in a legacy system, a paper or microfiche file, or someones head.
Persistence and hard work will usually overcome these problems while an improved data system
is being developed. Lessons learned should be captured and shared with management.
But the real challenges lie elsewhere. The asset manager (and innovator) must focus on how to
communicate to management and peers, including in particular, those that are interested but
skeptical. The asset manager must be able to describe:
Describe where the information came from and why the input data is sufficiently accurate
and pertinent for the problem at hand
Describe the solution in terms compatible with the current approach to the problem
Describe what is the basis behind the decision support tools
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Describe why the proposed solution makes sense

Show that the solution can be practically implemented
The question about input data will be largely related to the garbage in, garbage out concern.
Because the decision support tool will largely be seen as a black box, suspicion in the data will
translate into suspicion in the result.
Probably the most important communication issue is to describe the problem in understandable
terms. Typically asset management decision support tools provide lots of numbers. While
numbers might be important, it is much better to describe the results in words. For example, an
asset replacement strategy might be to replace an underground cable after twenty years. The
decision support tool result should be described in a similar manner, e.g., to replace an
underground cable after two failures or thirty years whichever occurs first. The numerical basis
and value of the change can be explained subsequently. If the initial statement is not intuitive,
no amount of numbers will give management confidence.
The basis behind the decision support tools should be explained. If it is an economic calculation,
it should be explained simply. If it is an engineering tool, what design margins or design
weaknesses the tool assesses should be described.
Why the proposed solution makes sense should naturally follow from the simple description of
the result and the simple description of what the decision support tool evaluates. If it is not, the
result should probably have been thoroughly checked already.
Finally, a solution which cannot be practically implemented is not very useful. Management of a
Reacting or an Awakening company will probably be skeptical of change and will probably have
experience in which change will have failed in implementation. Having prior discussion with
those in the company who will have to implement the change and showing how the change will
be done will go a long way in encouraging management to take the risk associated with a new
approach.
The above discussion has little to do with information technology. Yet, gaining management
support for asset management has everything to do with gaining the organizational and financial
support to implement the information technology for asset management. A decision support tool
that does not make sense on its own will never be integrated into the information technology
infrastructure.
To conclude, the following steps should be considered when employing decision support tools:
Focus on explaining the results of asset management within the logical framework that
decisions are currently made in the company. If that includes traditional rules of thumb,
explain the change suggested by asset management in those terms.
Present numerical results, but primarily as justification for what should appear to be natural
conclusions.
Be prepared to address the garbage in garbage out concern about input data.
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Ensure that the suggested changes are not too complex to practically implement.
Collect and document lessons learned from the process of communicating results from these
early uses of asset management decision support tools. Factor the lessons learned into future
applications.
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4
BREAKING OUT TOWARD A MATURE ENTERPRISE
ASSET MANAGEMENT PROGRAM
This chapter describes some of the critical issues that need to be addressed for asset management
programs in the Organizing stage. The Organizing program is mature and stable, and it will be
showing significant benefits to the company for the effort and resources invested.
In the least mature asset management programs, collecting and using data is typically the single
greatest constraint on asset managers. Asset management data feeds models which in turn are
employed in decision support tools. Sometimes the models are part of performance indicator
programs, and sometimes they stand alone in the decision support tools. The maturing of an
asset management program requires growth to occur on all three topics in some organized and
integrated manner.
The company whose asset management program falls in the Organizing category has made and is
continuing to make significant improvements. One of the most important areas of ongoing
improvement is in the increasing sophistication of decision support tools and their use. As in the
last chapter, the emphasis is not only on the tool itself, but how the tool is effectively used and
how the tool contributes to the decision making process. Because project prioritization and
investment tools are often a keystone of the development of an asset management program, this
chapter discusses them in further detail.
Another important attribute of how the Organizing company is improving in the use of asset
management is what this report calls systems-level thinking. While treatment of individual
assets is important, often it is a collection of assets that must be acted upon. Systems-level
thinking looks at groups of assets and balances improving single assets against the operation of
the whole. Replacing one part of a system and causing a planned outage is an opportunity to
replace other parts of the system without the costs of an additional planned outage.
Improving the capability of a part of the system with new technology may not have significant
benefit if other weak points of the system control the systems overall functionality. On the
other hand, adding new technology to a power delivery system may add IED (Intelligent
Electronic Devices) that can be used to monitor older, un-instrumented portions of the circuit.
The IEDs might in turn enable a wide range of new asset management techniques, improving
what would otherwise have to be a run to failure strategy.
4-1
Breaking Out Toward a Mature Enterprise Asset Management Program
An Organizing company is also beginning to overcome the inertia of installing large information
technology systems and is making better use of not only EAM and ERP systems but also of other
important systems such as Graphical Information Systems (GIS), mobility systems, and Business
Information systems (BI). Implicit in this infrastructure of systems is an advanced data mining
capability which might be part of one of those systems, part of a real-time data system that also
supports operations, or a completely stand-alone system.
In the previous Chapter, the report described how to establish an asset inventory and data
structure that lays the foundation for continued growth in an asset management information
technology infrastructure. The Organizing company moves further to systematically improve
data quality and data integration. The latter could include the selective or comprehensive
adoption of information standards.
Finally the Organizing company should be taking steps to enable a smooth transition to higher
levels of asset management. In this regard, knowledge management tools are probably being
piloted. Business process modeling and documentation as well as benchmarking is also probably
growing in importance. While these topics are key subjects in Chapter 6, we note that the initial
steps are natural extensions of the topics we discuss in this chapter. Specifically, improving data
quality through audits and feedback is the same type of process that could be applied to a variety
of business processes and in the Organizing company, it probably is being applied.
Increasing Sophistication of Decision Support Tools
As decision support tools become more sophisticated, the resources needed to apply them
increase as well. Sometimes this is due to increasing need for data, either greater detail or
greater breath. With good data mining capabilities (described in the next subsection) and good
data (described in the previous chapter), these problems are often time consuming, but are
otherwise straightforward to solve. A good relationship between the IT group and the asset
manager is a critical enabling step. Good management support facilitates such a relationship.
Ranking and Screening
However, the more difficult stride for the Organizing company to undertake are the concepts of
screening and ranking. Screening is the process by which an asset management decision is
analyzed at a level of detail commensurate with the result and its importance. Ranking is a
process by which all actions are ordered in priority.
Ranking
Ranking is a process that has widespread benefit to asset management processes, but
nevertheless falls well short of financial analysis of all actions. The concept of ranking is not to
address the investment value of every action, but instead to rank the actions from highest to
lowest value. It is then assumed that limitations in budgets will eliminate the lowest value
actions and thereby prevent bad investments from being made.
4-2
Ranking is a natural decision support method for an Organizing company. Ranking is often
heavily dependent on data and in certain applications requires automated data access. An
Organizing company has typically progressed in its ability to provide accessible data of
reasonable quality. For example, being able to mine data from the EAM system and to automate
simple calculations is typically sufficient to develop a system to rank maintenance activities.
Because maintenance activities are typically the ones under the most financial pressure in a
company, a ranking process makes good economic sense for a company maturing in asset
management.
Ranking also has the advantage of easier organizational acceptance than more explicit financial
analysis. Once members of the organization accept the ranking criteria as appropriate, the
process and results become easier to accept. The ranking criteria can incorporate traditional
decision criteria as well as criteria more consistent with asset management principals. Using the
maintenance as an example, a traditional criteria might be the factor by which the PM activity
has been delayed beyond its traditionally scheduled date. The asset management criteria might
be a measure of the value of asset that the PM will be performed upon.
More sophisticated ranking processes might present the values of multiple criteria as well as the
value of some combined criteria. The company would then impose a decision logic that would
determine the final decision as to whether (in this example) to perform maintenance or not.
Employing ranking processes, particularly for maintenance, is recommended. Many vendors and
consultants offer them, and many utilities have used them. Consequently, the Organizing
company can implement the process, benefit from it, and also encourage organizational learning
from the those who perform work, to those who plan work, to those who approve and budget the
work.
The information technology requirements for ranking are not onerous, and the lessons learned
from automating a ranking process will be beneficial to future asset management information
technology infrastructure investments. In particular, ranking maintenance activities requires that
data be mined from EAM and other systems and that the resulting actions be implemented within
the EAM system. The latter process is not trivial, but it is crucial to the maturation of an asset
management program. If information technology struggles in the support of acting on asset
management recommendations, asset management programs will not mature further and may
even fall back.
However, for a company to mature beyond the Organizing stage, it is important to remember that
ranking processes are limited by their very nature. As mentioned above, a ranking process tends
to presume a certain budget level. Consequently, it avoids the concept of what budget makes
sense. Ranking systems which incorporate traditional decision processes often compromise the
effectiveness of the system. It is the weakness of traditional maintenance scheduling (e.g., time-
based rather than equipment-condition-based) that causes the stress on maintenance budgets and
allows imprecise methods to be used without much risk of degrading performance. Finally, the
ranking process is often not organizationally diverse. Ranking is useful for the maintenance
department, but it keeps separate and un-integrated the decision of whether new technology or
equipment replacement would help solve the maintenance resource problem ranking is intended
to address.
4-3
To conclude, the following steps should be considered when implementing ranking techniques:
Look for an opportunity to apply ranking techniques to maintenance planning or other
business processes in which resources are tight.
Understand the basic limitations of ranking and of the qualitative tools that the process often
depends on.
Find a co-owner in the business process of interest and work together to find domain experts
who can help define good ranking criteria that will gain employee acceptance and yet have
the fewest limitations.
Avoid using ranking criteria that are data intensive or beyond the capabilities of readily
available information technology capabilities. Get IT involved early.
Implement the ranking technology with a continuous improvement philosophy. Collect
lessons learned and success stories and communicate them to business process owners and
management.
Screening
Somewhat related to ranking is the concept of screening. An Organizing company recognizes

that a detailed analysis of all asset management decisions is counterproductive. In the ranking
process, this issue is addressed by holding all analyses at a lower level. In the screening process,
the level of analysis varies.
EPRI research has found that the asset management process can be applied with three levels of
increasing complexity, thereby conserving analysis resources. The following discussion
illustrates such a screening process with an example for project prioritization. Project
prioritization is one of the first decision support activities to be developed in a maturing asset
management program. It is also one that can involve a lot of analysis resources.
Many potential investments are not effective and can be quickly analyzed and eliminated.
Basically, the three level screening approach uses the same overall analysis thought process in
each level. The principal changes in analysis are the increasing degrees of sophistication for
inputs and/or for the calculation approach. Using a three level screening process, a project that
fails in either of the first two levels is screened out and the proposed action is not taken or not
funded. Projects that pass warrant the most detailed analysis, a level which in this example
addresses uncertainty explicitly.
This linear screening process can also be made slightly more sophisticated. First, if the second
level of analysis shows that the project is a clear winner regardless of uncertainty, no further
analysis may be needed and the third level of analysis can be avoided. Instead of avoiding
uncertainty analysis completely, its analysis might be simpler and focused instead on how to
reduce it or exploit its option value. Another process improvement is to send a screened project
back to its sponsors for improvement. The screening analysis will help expose a projects faults,
and the sponsors might develop alternatives that are valid investments.
4-4
Now we look at the three levels of analysis in further detail (see Table 4-1). The level 1 analysis
bounds benefits and operating costs, determining whether a proposed change is profitable under
the most optimistic conditions. The method/tool determines the most optimistic effect of the
proposed investment on reducing the present value of operating costs and increasing the present
value of revenues. Optimism in performance might be reflected by assuming an assets
reliability can be improved to perfection. The resulting benefit is then divided by an
optimistically low estimate of project cost (i.e., the investment). The project is screened out (or
revamped) if this benefit-to-cost ratio (also called Benefit Over Investment or BOI) is not
significantly greater than a certain hurdle value. If the project is not screened out by this
criterion, a level 2 analysis is performed.
Table 4-1
Comparative Characteristics of Asset Management Analysis Levels 1, 2, and 3
Level 1 Level 2 Level 3
A realistic point value An uncertainty analysis

An optimistic
assessment to reject to quantify up- and
Main feature assessment to rapidly
clear losers and accept down-side risks for
reject clear losers
clear winners decision makers
Expert judgment
Inputs probability distributions
Optimistic Point Values Realistic Point Values
for parameters that drive
the decision
Most sophisticated
Models Simple More sophisticated
Risk profiles
Best-estimate Point
Value = uncertainty
Main Outputs
Optimistic Point Value distributions and risk
(sensitivity studies can
measures (such as
provide point estimates
confidence intervals,
of high/low what-ifs)
probability of regret)
Accept project if very

beneficial (e.g. BOI>2)
Decision based on
Reject project if very bad
Reject if BOI<1 quantitative estimates of
(e.g. BOI<0.8)
Decision risk
Results can help revamp
Otherwise, perform level
proposed project Results can help revamp
3 analysis
proposed project
Results can help revamp
proposed project
4-5
Level 2 analysis employs best estimate assumptions of expected improvement effects for the
investment. This provides a realistic forecast of profitability, operating cost, and project cost,
recognizing that either an optimistic or pessimistic forecast can lead to a wrong decision. If the
point-value benefit-to-cost ratio is significantly less than one, the project is rejected (or
revamped). If the benefit-to-cost ratio is significantly greater than one, the project is selected. In
this case, further probabilistic analysis in level 3 would not be warranted unless a portfolio
evaluation considering uncertainty and optionality is desired. A level 3 analysis should be
performed if the level 2 point value analysis predicted a benefit-to-cost ratio near or somewhat
greater than one. An uncertainty analysis would alert the decision maker to the risk of a failed
project and the potential sources of that risk.
A level 3 analysis is a detailed analysis of distributions of benefit, costs, and profitability and
assists in facilitating risk management. The first step in a level 3 uncertainty analysis might be to
perform a sensitivity analysis using the level 2 model to examine the effect on project
profitability of varying one parameter at a time to its high and low values (or by plus and minus
ten percent of its best estimate). Results may be displayed in a conventional tornado diagram.
The two or more parameters that produce the widest range of variation in profitability (NPV
change or benefit-to-investment ratio) are identified as decision drivers.
In the level 3 analysis, these drivers would then be treated as uncertain parameters with estimated
probability distributions used as inputs to a random sampling stochastic analysis of profitability,
(Non-driver parameters would be kept at their best-estimate values.) Examination of the
resulting probability or cumulative probability distributions of profitability allows the
owner/investor to select projects that either minimize the risk of a loss or maximize the chances
of high returns. In a portfolio analysis, the distribution of profitability results allows an efficient
frontier to be used in selecting projects for investment (See Chapter 5 discussion of risk
management tools).
This three-level approach ensures that the cost of more sophisticated and accurate risk-informed
project evaluation is incurred only when there is a benefit in performing the asset management
analysis. The factor that often determines the level of overall sophistication that is cost effective
is project size, which can be characterized by investment cost. In general, only large projects
that cost at least millions of dollars warrant a probabilistic level 3 analysis. For intermediate-
sized projects costing tens or hundreds of thousand dollars, a level 2 point-value analysis will
likely suffice. It is reasonable to assume that only large and intermediate-sized projects would be
evaluated with the more sophisticated decision support tools. Table 4-1 summarizes the
characteristics of the three analysis levels.
Another important factor in deciding the level of analyses to be employed in asset management
decisions is the maturity of the asset management program. This report anticipates that only
companies with maturity levels of Organizing or greater would employ risk analysis of this type.
A significant education process may be required for management and business analysis staff to
facilitate meaningful interpretation of the results. However, as more and more managers are
trained in the principals and details of financial analysis techniques, there will be more and more
receptivity to the use of similar techniques for investments in the electric utility infrastructure.
At the Organizing level, it may be appropriate to keep risk analyses at a more qualitative level,
focusing on risk drivers and mitigating actions.
4-6
The challenge imposed by screening for asset management information technology is not trivial.
Different levels of analysis produce results with different levels of quality that cannot be directly
compared without qualification. If a screened project is returned to its sponsor, the action
expected must be clear. If the sponsor submits an alternative, a process may need to be
maintained to facilitate reanalysis. Changes in assumptions are often critical in an iterative
process, and these can be important and yet easily lost. We are aware of no easy solution to the
process, and to date it has been managed manually. A higher level asset management
information technology infrastructure with a Service Oriented Architecture and Workflow and
Knowledge Management capabilities could conceivably address this process. For an Organizing
company, it is important that the process be well documented. As the number of projects
analyzed increases, IT and asset management can look to possible solutions for the most analyst
intensive portions of the work.
To conclude, the following steps should be considered when implementing screening:

Understand that screening is a complex business process, even if it does reduce the need for
analysis resources.
Think carefully about screening criteria and be sure that they are robust and defensible with
management and process participants.
Manage information flows, retaining screened items and their bases. Provide feedback to
owners of screened investments so that they can see the benefit of the process and improve
subsequent investments.
Document the lessons learned from the business process and information flow and be
prepared to use them in future asset management applications.
Systems-Level Thinking
In the introduction to this chapter, we discussed the concept of systems-level thinking and
provided examples of its benefits. Systems-level thinking is a very important concept for asset
management and imposes significant challenges to asset management information technology.
Both company employees and software vendors are quite familiar with systems. The challenge
comes more when the asset manager (and the operator and the maintenance planner) has to
consider the logical groups of components below the traditionally rather large system designator.
A good example is an HVAC system. This often large and diverse set of components
performs many functions as it relates to important assets. A rather small branch of the system
may cool a very critical asset whose failure can cause a significant loss to the company. The
same is true of a power distribution system, whether it is serving components in a generating
plant or customers in an industrial park. Making the problem more complex is the fact that the
component may provide more than one function.
As asset management programs mature, they are able to better understand the often substantial
differences in value of individual functions within a system. The information technology system
must similarly mature. It may be important that the asset register include a list of functional
equipment groups that the component serves. It may be important that data mining tools have
hierarchical displays that allow one to see the performance of overall systems, their individual
4-7
functions, and the corresponding components. It may be important that project engineers can
easily identify and visualize the components that perform certain system functions so that
improvements can be done at a much lower expense than might occur by improving the system
as a whole.
Many EAM, GIS, and data mining systems have improved these types of capabilities in recent
years. Asset managers and IT professionals need to be sure that those capabilities are present
when they procure, implement, or enhance those systems.
To conclude, the following steps should be considered when employing systems-level thinking:
Wherever possible, use established system definitions and boundaries, but balance them
against the boundaries that are logical for analysis.
Incorporate system level thinking concepts in training and work processes for the asset
management group. Lead by example.
Save anecdotal experiences of situations where systems-level thinking points to the correct
solution, and use them in communication and training.
Understand how systems thinking can be visualized and exploited in the existing asset
management information technology systems.
Attempt to get hierarchical displays and processing in the requirements for systems in the
asset management infrastructure.
Project Prioritization and Investment Tools
Project prioritization and investment tools grow in sophistication as the asset management
program matures. Additionally, a more mature program has probably increased the number of
projects subject to the analysis. In the previous Chapter, we discussed how corporate value
models can be used to improve sophistication and consistency for this type of analysis. Earlier in
this Chapter we discussed how screening techniques can be used to control the analysis resources
applied to this problem.
Despite these efficiencies, project prioritization and investment tools are probably becoming time
consuming to use. Improved automation can possibly reduce the time it takes to feed the
project prioritization tool. Many have considered automating the links between project
prioritization software and EAM systems. However, this integration may be more difficult than
might be imagined. The key to the integration will be the degree to which the attributes of
project value are stored in the EAM system in a manner that can be translated into the project
prioritization software.
It is more likely that a process of educating project engineers on the corporate value model will
be the appropriate first step at this level of maturity. The give and take between those who have
to provide the information (project engineers) and those that must use it (asset managers) is best
done without an expensive software integration project in the middle. If indeed, as suggested in
the previous Chapter, the performance monitoring criteria and the corporate value model are in
synch, the process will be easier.
4-8
Perhaps more importantly, the project prioritization process will then not only estimate value of
completed projects, but it will also estimate changes in performance criteria that should be
expected. With impacts on performance monitoring estimated, it will be much easier to set up an
auditing process for measuring project performance, an attribute of the more mature level we call
Processing.
The remaining improvements in project prioritization and investment that occur at the
Organizing level of maturity revolve around improving the robustness of project definition and
expanding the scope of investments beyond capital to large O&M projects. Regarding the
robustness of project definition, the maturity of an asset management program is linked to the
companys ability to generate a robust set of meaningful and useful alternatives. Obviously,
alternatives that are lower in costs are useful since they allow progress on issues even when
available funds are limited. And of course, where repair or refurbish is an option to replacing an
asset, the more mature asset management processes include that option explicitly.
But it is also important that alternatives of different risk levels and alternatives with different
types of values be considered. An important organizational discipline is to avoid combining
projects (or issues) in a manner which results in gold plating. Combined projects should be an
alternative with a synergy that results in a benefit. If not, the larger project should be evaluated
as separate individual projects.
Finally, it is important that the timing of projects be addressed. A project might be able to be
delayed without significant increase in cost or loss in benefits, at least initially. This
characterization of the role of time is important as benefits may not change linearly, especially as
equipment ages.
An assessment of the probability of achieving the design level performance should be made.
Often, the models used to predict system or equipment performance or the companys historical
data can be used for this purpose. For alternatives employing new technologies, engineering
judgment may be all that is available. Nonetheless, quantifying in some fashion the risk of each
alternative not performing as expected is an important part of a fair evaluation in a maturing
asset management program.
An Organizing company has also begun to look at expenses outside of capital expenditures.
Large O&M expenses pose problems and opportunities. Trying to absorb large O&M expenses
in a maintenance budget without explicit consideration creates inefficiencies. If all such
expenses were uniformly levelized, separating out large O&M expenses would be less of a
concern. But the reality is that capital is often installed in boom-bust type cycles matching the
economy or local load growth. O&M expenses will usually follow this same cycle. By
attempting to levelize such costs, a large O&M expense might be deferred, when in fact, such an
expense may be a very good investment.
4-9
The following are key capabilities of project prioritization and investment tools:
Supports creation of a corporate value model, including the following:
supports qualitative and quantitative approaches
includes value attributes, scales and weights
o values can be represented hierarchically
o scales may be non-linear and also qualitative
o weights can be developed by comparison of projects with different attributes and not
just by top-level specification
specifies uncertainty/risk information
develops a user guide for project originators to input their projects
Supports project definition
specifies all values and scales for any project
includes life-cycle value and cost estimates
specifies a variety of alternatives, including mutually exclusive and contingent
alternatives
specifies job done and job not done values
supports input of uncertainty/risk information
Supports optimization and portfolio selection
selects a portfolio given a constraint (budget at a minimum and preferably other
constraints)
selects the best alternative for a portfolio
evaluates project deferral as an alternative
Supports a variety of visualizations for management and project originators for the purposes
of reviews and intermediate and final approvals
The capabilities mentioned above will allow a company to satisfy the criteria of the Organizing
level of maturity as well as progress to a higher level of maturity (see the Maturity Index Table
2-1). An increasing number of commercial products can be found with all or many of these
capabilities. Alternatively, some utilities have had success developing custom spreadsheets to
perform the calculations for evaluating and prioritizing investments. Although such spreadsheets
do not have the full capabilities mentioned above, they can be sufficient (but possibly
cumbersome) for an Organizing level of maturity.
But the real challenge for information technology is the amount of pertinent information that
needs to be retained, managed, and exposed to decision makers and reviewers. If the associated
business processes are well documented and described, it is possible that the IT group can
develop capability to help manage the information. For example, data mining tools might be
used to gather information that would determine or validate cost estimates and potential benefits.
4-10
Portals might be created to provide access to projects, alternatives, and their analysis of value.
Otherwise, it is better to focus on documenting the business process and improving it, then
looking for information technology that can aid the analysis and communicate more clearly the
results and their bases.
To conclude, the following steps should be considered when building or acquiring and when
implementing capability for project prioritization and investment:
Remember that project prioritization and investment is probably the central decision support
activity in asset management programs at the Organizing level or below. Be sure that asset
management concepts are included in the methods used and obtain some level of ownership
in this activity for the asset management group. Also be sure that management support exists
for process improvement.
Develop a good understanding of the investment process (explicit and implicit) before
focusing on acquiring a project prioritization tool.
Decide where improvements in the process are desirable. Be sure to focus improvements not
only on the value model but also on the process for generating and evaluating alternatives.
Also, determine a scope of application in terms of the degree to which large O&M projects
will be considered.
Develop a plan for increasing the quality of the process.
Education project sponsors on the importance of a good investment process.
Select a tool for assisting in the project investment analyses. Choose a tool that is either
technologically simple, e.g., Excel, or one that has the capability to grow in analysis
sophistication. The criteria above are a good guide.
Build a documentation process around to tool to ensure that the basis for the input, models,
and decisions is clear and reproducible during the next budget cycle.
In the next Chapter, the report describes a variety of ways that asset management information
can be visualized. Many of those visualization methods apply to the problems noted in this
subsection.
Improving Data Quality and Integration
The Organizing company is building upon its successes and lessons learned from creating an
asset inventory and developing and implementing an equipment data structure. Because that data
is part of the EAM system, it is growing in size and subject to some level of quality control. The
Organizing company is mature enough to expand the scope of asset management data programs
to include greater breadth, improved quality, and easier access as well as integration that allows
access to other applications.
The reader might wonder why the following discussion does not apply to the data work already
done on asset inventory and equipment data structure. In reality, it does. One difference
between the Awakening company and the Organizing company is the lessons learned from
developing an asset inventory and an equipment data structure. With these projects in hand, the
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Organizing company is ready to take on more data, in many more systems, and of many more
types.
The first step in this process is to develop what might be called a data strategy, which identifies
data available and data needed. Other steps include ensuring efficiency of data collection and
management, ensuring data quality, and providing for data access and integration.
Developing a Data Strategy
Developing a data strategy begins with a good data inventory. (A good starting point is the
inventory of data sources pertinent to the asset inventory.) The inventory of data is compared to
data needed by asset management decision support tools, including performance monitoring. If
data needs exceed data available, provision has to be made for acquiring additional data. The
data strategy should be developed with inputs from those business units who collect and use the
data and from the information technology group.
In practice, the data strategy is continuously evolving because there is a continuing iteration
between adding new decision support capability and identifying and integrating new data. This
report takes the position that a corporate value model that addresses both performance
monitoring and project prioritization and investment (see Chapter 3) will define much of the data
needs for decision support tools. Most of the remaining data needs will be specified in the
equipment data model described in Chapter 3 and the cost data model described in Chapter 5.
The equipment data model, because it is a degradation model, will represent most of the
equipment condition and monitoring information needed for maintenance applications and life-
cycle management decisions.
Much of the equipment data collected results from normal maintenance activities. However, it is
important that the history of these activities not be islanded in the maintenance system.
Rather, this information should be available to the larger asset management process, of which
maintenance is just a part. In addition to triggering maintenance, such information should be
used to determine how well past asset management decisions have been implemented and
whether the expected improvements have resulted. For example, maintenance is interested in
replacing worn contacts and restoring breaker functionality. The asset manager is interested in
knowing that the contacts from the new supplier are not performing up to expectations as well.
As mentioned before, this condition assessment information also can provide a starting point for
projecting future asset or system condition through the use of degradation models.
The following draws heavily upon Guidelines for Power Delivery Asset Management: A
Business Model for Program Implementation Expanded Version, 1010728. It also makes use
of applicable insights from the DOT work on information technology for asset management [1].
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Most companies already have many of the ingredients of an asset management information
system including various tools, models and databases. Some of the more common components
that are relevant to asset management include the following:
Enterprise Asset Management (EAM) System (which contains the Maintenance Management
System as a principal component). These systems typically include asset inventory, work
order management and history, and equipment failure and repair information. As described
in Chapter 3, the asset inventory is the critical source of basic asset information. The EAM
also has schedules of major maintenance activities that are useful for project prioritization
and investment.
Operations Data Historians and Condition Assessment Systems. Condition assessment
information, e.g., thermal monitoring, operation counts, run hours, etc., may be integrated
into the EAM system and used to trigger maintenance. Condition assessment and operations
data may also be mined or accessed by an operations data monitoring system available in
conjunction with a data historian.
Geographic Information Systems (GIS). Since much of a utility's asset information can be
tied to a geographic location, another significant element of an asset management system is a
CADD or GIS-based map of fixed assets and related data. The GIS may also identify
compatible units, or other logical groups of assets, that can or should be evaluated together.
Customer Information System. These systems commonly contain payment history, work
order history by customer location, and customer correspondence including compliance and
billing data.
Engineering and design tools. These tools may be a part of the EAM system. These tools, or
related project management tools, will contain project descriptions, costs, and schedules for
both projects and alternatives.
Operational excellence tools. Operator logs and tag-out records may identify outage times for
planned maintenance and forced outages. Outage times can be important for understanding
and managing planned exposure to risk, i.e., when a level of redundancy/contingency is
voluntarily removed and risk levels become much higher. Forced outage times are also an
indicator of possible need for action to improve operations, maintenance, or design of an
asset.
Finance Databases and Models. These databases may include billing, accounts receivable,
accounts payable, tax data, budgeting and forecasting, valuations, and debt management.
Often, because of security issues, special arrangements, such as data dumps, must be made in
order to provide this information to asset management.
Financial Models for Developing Customer Rates and Replacement Planning Models may
also exist in some utilities.
Human resource (HR) systems. These systems contain important resource and financial
information, including available human resources by qualification and category and wage
rates direct and indirect (e.g., benefits).
Capital Planning Data. Most utilities have some type of database related to their facility
capital improvement projects.
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Strategic and business planning tools. Corporate and possibly major business units will have
a tool or spreadsheet containing strategic initiatives and SWOT analyses as well as business
and financial forecasts.
Organizational excellence tools. Benchmarking and other continuous improvement processes
are an important capability that is further enabled by asset management. However formal
tool interfaces are not required.
Business Processes. Individual functional groups within a utility often maintain some
information related to their key business processes and standard operating procedures.
Sometimes performance measures or targets may also be included.
An audit of the existing information systems should be part of the data strategy development.
The audit should include:
Currently available data
Accessibility
o Cost to access
o Projected future availability
Location
Source
o Where and how obtained
o Update frequency
Data Base Structure
o Format
o Size
Quality
o Timeliness
o Accuracy
o Integrity
o Consistency
o Completeness
o Redundancy
Current uses of existing data
Business processes
Reports
Assumptions and definitions
Communications requirements
Applicable IT and data standards
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Caution should be exercised in specifying new data sources. Costs for collecting, storing, and
maintaining data must be considered, and only data for which there is a clearly defined use and
benefit should be included in the strategy. No data should be collected more than once. If
individual processes require the same kind of information, but in different formats, or at different
levels of detail, then automated methods should be established for deriving the necessary
information from the primary source.
It is quite likely that much of the data required will already exist somewhere in the organization.
In some cases, if the data is not directly available, then it may be possible to take advantage of an
existing data collection process to acquire it. It may also be possible to stage the migration of
data to provide near-term improvement while planning for longer-term redevelopment.
Regardless, the cost of data collection and maintenance needs to be considered in light of the
value of the data needed. Identifying a data point alone is not sufficient. The required accuracy,
timeliness, and integrity must also be determined from an understanding of how the data will be
used.
Ensuring Efficiency of Data Collection and Management
It is critical that the asset management program makes use of existing data collection processes.
Organizational implications of collecting asset equipment data are critical. Transition to the
Organizing level of maturity requires success in multi-organizational initiatives. Maintenance
and asset management organizations working together offer good opportunities for such an
initiative, the abovementioned approach being the best. Since maintenance is often the prime
user of the EAM installation, at least initially, early cooperation between maintenance and asset
management will improve the data that is stored in the EAM system. Good initiatives for
cooperative development include condition-based maintenance program development or
enhancements as well as maintenance planning program improvements designed to address
maintenance resource limitations.
Operations and asset management offers another. The above discussion mentions that asset
managers need to obtain records of planned and forced outages, information typically available
in operations logs. Other examples include collecting equipment operations counts or observing
equipment condition, information typically obtained during operations inspections. This
information is then used by others for asset management decisions.
In a multi-organizational initiative, one organization is collecting a portion of its data primarily

for another organizations use. If the two organizations work closely together to ensure there is
both immediate gain and mutual gain from the effort, the initiative will most often succeed. If
the collectors of data ignore the users, the users will have to spend a great deal of time reworking
or recollecting data. If the users of data ignore the needs of the collectors, the collectors will
often not collect high quality data.
Successful asset management almost always involves data or actions or both crossing
organizational boundaries. It is extremely important that successful multi-organizational
initiatives occur early in the development of asset management programs. If they do,
investments in information technology for asset management will be more successful and asset
management will progress faster and gain more management support.
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Other considerations for efficiency include making multiple uses of data collection equipment
and procedures, good training on data collection especially when users and collectors are
different people, and consideration of sampling techniques.
Ensuring Data Quality
Ensuring data quality can be done with standard quality assurance techniques. Data mining tools
can complement the data collection process by identifying patterns in poor or missing data.
Users should provide feedback regarding the value and timeliness of the data and suggestions for
data collection improvements, based on lessons learned from its use in decision support tools.
Another important consideration is to ensure collectors of data have proper incentives, especially
when they are in another organization. Often incentives can be as straightforward as finding
ways for the data collected to improve the collectors work processes.
Provision should also be made for data quality feedback that results from asset management
analysis. When an anomalous result is attributed to a data quality problem, rather than an asset
problem, the asset management business process should provide for a cause evaluation and
feedback to the data collection process.
Another important aspect of data quality is eliminating duplicate information. The data
inventory should identify multiple sources of information, from which a best source or
combination of sources should be identified. A plan for eliminating other sources should be
made, even if it is a long-term plan.
Opportunities for improving the timeliness of data should be considered if needed. Many times,
timeliness problems in data are the result of poorly planned data collection practices. That is, it
is rework of data that is costly and time consuming. If rework can be eliminated by collecting
the right data at the right level of detail, timeliness and cost of collection will both improve.
In all cases, improvements in data quality should be guided by the value of the data. The value
of the data should be related to its value in the asset management process. Plans for improving
the quality of data should be realistic. Organizational change takes time, feedback, process
improvement, and management support.
Providing For Data Access
The data strategy will define the important asset management information that is available and
where it is located. The data integration strategy will be the provision of the information
technology group and should fit with their overall information technology plan. However, it is
important for the IT group to be aware that the asset management group, because of its
dependency on data from multiple sources, will be limited in effectiveness and will not mature
without good data access. The following subsection describes items which have general
importance to asset management information technology and will also increase the capabilities of
data access and integration.
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To conclude, the following steps should be considered when improving data quality and
integration:
Start by understanding what asset management related data you do have. Identify the sources
within the company. Develop a corresponding Data Strategy by comparing data needs with
data available.
Be cautious in developing new data. Ensure that there is sufficient value for all new data.
Usually it is better to develop existing data sources, gain experience, and document lessons
learned before investing in acquisition of new data.
Look for opportunities for developing strong organizational ties with maintenance. Two of
the best opportunities are when condition-based maintenance is developed or enhanced and
when maintenance planning improvements are made to overcome maintenance resource
limitations.
Similarly, look for data collection and use opportunities with operations.
Identify and document lessons learned from multi-organizational initiatives in data collection
and communicate them to management. Consider them in future asset management
information technology investments.
Establish a formal quality process for data that addresses the data issues described above.
Ensure this process is a continuously improving process with continuously improving data.
Ensure that data access and data integration strategies are developed in conjunction with the
IT group.
Include the above strategies and processes in the asset management infrastructure plan
described below.
Employing Critical Systems in the Information Technology Infrastructure
In Chapter 6, this report examines some of the more advanced approaches to improving the asset
management infrastructure. In this subsection, the report identifies logical steps that the
Organizing company can take to exploit its existing information technology infrastructure as well
as to gain the lessons learned that will make the advanced techniques much more likely to
succeed.
Here we focus on two important topics. The first, establishing ownership for asset
management information technology improves the organizational aspects that allow the
maximum utilization of information technology. The second, providing data mining capability
improves the technology in the infrastructure.
It is worth mentioning that both these improvements build upon and add value to the other steps
that have come before. Active involvement by asset management in the development of an asset
inventory and equipment model for the EAM system establishes asset managers as an important
stakeholder for the IT group to be aware of. Those capabilities also allow data mining to be done
more easily and more effectively. The same is true for the steps taken to improve data quality
and integration. Finally, decision support tools will, in some cases, benefit from direct
integration with the information technology infrastructure, e.g., the EAM. In other cases, the
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best choice will be to provide the required data through an intermediary system using the data
mining capability described below.
Asset Management Technology Ownership
Asset management information technology should be owned by the Asset Manager. (Here we
use the term Asset Manager to be the manager identified by management as the leader of the
asset management program.) The Asset Managers information technology team should include
representatives from finance and each of the core business processes, e.g., maintenance,
operations, and engineering. Those representatives will be responsible for ensuring that the data
collectors within their groups provide good information that is timely, reliable, and accurate so
that the asset management business function can support decisions when they need to be made.
The Asset Manager should be ultimately responsible for the asset management information
technology; however, the Information Technology group should appoint a co-owner, or IT
Asset Management Lead. The IT AM Lead is responsible for ensuring the IT infrastructure is
effective in supporting the current AM tools and interfaces as well as the growth of the asset
management function. The IT Asset Management Lead should also receive the active support of
the corresponding IT owners of the systems in the asset management information technology
infrastructure, e.g., the IT owner of the EAM system. (A dedicated asset management program
with Executive sponsorship and support should also have similar sponsorship of the CIO).
The IT Asset Management Lead is responsible for defining the architecture for databases and
systems that support asset management and provide corresponding requirements for asset
management decision support tools and performance monitoring tools. This IT co-owner is
similarly responsible for developing an IT implementation plan that supports asset management
and aligns effectively with the implementation and update plans for the systems in the asset
management information technology infrastructure.
The Asset Manager and the IT Asset Management Lead must work effectively as a team to lay
out a phased approach for asset management automation. An as-is approach will likely
involve too many manual processes. Asset management will fail to produce timely information
at an acceptable cost. A well-integrated system is a longer term proposition, appropriate only as
the asset management program begins to mature from Processing to Continuously Improving
(see Chapter 6 discussion on information technology infrastructure). The key attribute of a
successful asset management automation approach for an Organizing company is to make
maximum use of existing infrastructure, while at the same time identifying weak points and gaps
and moving expeditiously to resolve them. The more aggressive the information technology plan
is, the more important it is to have executive sponsorship, including the CIO.
To conclude, the following steps should be considered when building or acquiring capability to
support long-range planning:
Some level of asset management ownership should be established for the asset management
information technology infrastructure. Perhaps it is a place at the table with maintenance and
the IT group, preferably more.
Develop a strong relationship and point of contact with IT.
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Gain management sponsorship from line and IT senior management.

Establish an asset management working group to assist in developing the consensus needed
to adequately manage the asset management information technology infrastructure.
Lay out a plan for development of the asset management information technology
infrastructure. Gain management approval. Implement the plan and improve the associated
business processes so that the asset management infrastructure continues to mature at a pace
corresponding to asset management business process improvement.
Data Mining Capability
This report uses the term data mining to describe an information technology some prefer to call
performance monitoring. In this report, the term performance monitoring represents the
discipline or overall technique, rather than the software tools. Often a performance monitoring
tool is a data mining tool. Equally often, an Organizing company will have a variety of other
data mining tools, including one used by finance, one used by operations, and of course
Microsoft Access, which will be used by a number of innovators and power users throughout the
company.
It is typically the purview of the IT group to decide how many data mining tools it wants to
support and the degree to which it puts limitations on Microsoft Access database applications.
However, asset management requires data mining tools with unique capabilities, and those
capabilities may not be present in one of the existing data mining tools.
This subsection describes those capabilities for an asset management data mining tool. It does
not however describe requirements for the information technology architecture. That is, we
leave it to the IT department to determine the degree to which the system is thin client, supports
web services, is .NET, etc. For the asset manager, it is much more critical that the system be
able to process real-time data and combine it with transactional data types, and it is much more
important that the data mining tool have convenient interfaces with a variety of condition
monitoring capabilities and EAM systems.
Asset management decision support tools and data mining tools often work hand in hand in a
well functioning asset management program. Data mining is used as a class of automated
analyses that involve acquiring data, processing it (often through calculations) and reporting it
(or storing it for further use). Data mining occurs across, among, and within different business
units, as does asset management.
As described below, a robust tool with good data acquisition and report capabilities may function
effectively for asset management provided it has good calculation capability that easily supports
algorithms and applications. A good operations performance monitoring tool often contains
excellent data interface capabilities for asset management because it must access real-time and a
wide variety of condition monitoring data. Further, an operations performance monitoring tool
often has the additional positive attribute of flexible reporting capability suitable for a wide
variety of users (many of whom are clients of asset management as well). Their reporting
capabilities are often robust and can support many or all of the visualization requirements
described in Chapter 6.
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Automated analyses can be done in a variety of ways. The capabilities below are articulated
using an information technology solution involving a three-tiered approach that separates
enterprise data acquisition from the algorithm/application and reporting layers (see figure 4-1).
Reporting
www charts reports
Layer
Algorithms and
Applications Retrieve data Analyze/graph data
Layer
Data Databases
Acquisition
Layer
Figure 4-1
Three Layer Architecture for Asset Management and Performance Monitoring
Data Acquisition Layer
The data acquisition layer must support access to a broad range of data. For asset management
applications, for example, data includes work management data, materials and services data,
component, circuit, and system reliability data, and financial data (fixed and variable costs) at a
minimum. Although all of this data resides in separate information silos, a robust underlying
data acquisition layer can facilitate the creation of a virtual data warehouse and provide a facility
for simple or complex query generation.
At a minimum, the data acquisition layer should comply with the following basic requirements:
Extracts source data from disparate enterprise or point solution databases, files, or application
output without duplicating the data (i.e., provides a facility for the creation of a virtual
warehouse)
Provides a facility for data transposition, allowing an end user to define dimensional
relationships or hierarchies within or among the data sources
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Offers data management capability (i.e., data merging, interpolation, correlation, and
cleansing)
Offers a library of standard connectors to enterprise systems (e.g., work management system,
financial systems, etc.) and condition assessment systems (e.g., thermography, oil analysis,
etc.)
The virtual warehouse is of considerable value to both the utility IT organization and the data
consumer because the input and output data are retrieved and derived directly from the source,
respectively, via data mapping and asset object models. This allows the data to remain in its
native environment, avoiding needless data duplication and long-term, costly database
maintenance, as well as alleviating potential data quality issues resulting from running analyses
against a non-production warehouse that is out of synchronization with the enterprise system
production data.
Since data should remain in its natural format and environment, the data integration platform
should provide the ability to map different calculated or monitored data values stored in multiple
data sources to a given asset via a simple interface that facilitates the creation of such
relationships.
In addition to the above requirements, the data integration platform should offer an intuitive user
interface for configuring desired data sources. At the same time, it should impose a
configuration model that exposes the mapping of assets to relevant data. A new trend in these
types of tools employs the meta-data configuration technique, which allows similar objects to
be created from existing objects as long as business rules such as the query parameter controls,
results, and interfaces are captured in the meta-data objects.
Algorithms and Applications Layer
In the context of asset management, the algorithms and applications layer takes on a variety of
important functions. Perhaps foremost, it is a knowledge capture element. That is, an assets
physical or financial performance can often be expressed as a set of rules or equations. The
algorithms and applications layer must have the capability to capture such rules or equations in
the form of the data available in the data acquisition layer and the values and performance
indicators visualized by the reporting layer. Further the capture process must be in a form
familiar to the experts from which the knowledge is being captured, allowing them to perform
the majority of the capture process themselves.
In many cases, the knowledge has already been captured in the form of a query, an algorithm, or
a program. In these instances, the algorithms and applications layer automates or delivers the
capability. Some of the more interesting applications of the algorithms and applications layer in
asset management are cases in which a tool or software application used by one department is
connected to current time data (real-time and/or transactional) and the resulting values become
available for use in another department. In this way, an engineering or planning tool run in that
department by manual input processes can be connected to current time data and publish
information that can be acted upon by maintenance and operations personnel. The engineering
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tool in turn becomes more valuable because engineering decisions can be based on an integrated
accumulation of real experience, rather than on discrete manually input approximations.
At a minimum, the algorithms and applications layer should offer the following capabilities:
Implement current industry standards. The tool should use standard database connectivity
protocols and support active data objects for use with extensible mark-up language (XML).
Offer extensible analysis capabilities. The calculation capabilities in a decision support tool
must be extensible. The tool must provide or support add-ins or other types of interface
hooks. Interface hooks allow for the usage of additional unique, specialized, or proprietary
analyses from third-party vendors. By being extensible, the tool expands its calculation
capabilities through the use of third-party industry-specific products, which provide
sophisticated analysis and predictive capabilities.
Offer data manipulation capabilities. Some analyses may require extensive desktop data
manipulation capabilities that include desktop joins, data merging, data jumps from one
system to another, drill downs between major and minor data sets, incorporation of
equations, incorporation of proprietary analyses, the incorporation of industry standards, and
the summarization of large data sets through the use of data binning.
Offer the use of templates. The tool should record the construction of an analysis. A user
should be able to access the record (i.e., a template) to repetitively perform the analysis using
different but related input parameters that can apply to a large set of related assets. The time-
series data should allow relative dates rather than actual dates so that repetitive analyses can
occur on a periodic basis without any user intervention. Finally, the templates should be
available via e-mail on a scheduled basis or available over the Web on-demand.
In an asset management process, there are several different calculations required to calculate the
net present value associated with the evaluation of alternatives. For instance, the following
calculations are certainly necessary to determine the financial effect of a given alternative:
Operations and maintenance costs
Spares analysis
Forced outages and overloads
Failure rates and repair times
To perform the above calculation types, the algorithms and applications layer should facilitate
the execution of standard and ad-hoc queries, perform simple and complex equation processing,
and perform probabilistic risk and Monte Carlo simulation-based analyses.
The tools that provide the necessary calculation and automation capabilities, while at the same
time providing integration of asset management decision support functionality, are the best
choice for meeting the analytical and automation challenge imposed on the typical utility
organization (i.e., to assess the health of and development of a long-range plan for a system or
component).
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Finally, in the overall context of an asset management decision support environment, the
algorithms and applications layer allows content associated with or knowledge of an asset to be
maintained separately from the enterprise system. For instance, content can reside in the form of
preventive maintenance or corrective maintenance queries by equipment type. The knowledge
management aspect of the algorithms and applications layer helps overcome well known
weaknesses in decision support capabilities of traditional enterprise asset management and
enterprise reporting systems. Of equal importance, this approach provides the evaluator all the
benefits that can be derived from maintaining content and knowledge separately, including easy
updating when the enterprise system is replaced and provision of a common access point when
the same knowledge is used in multiple enterprise systems.
In summary, the algorithms and applications layer facilitates knowledge capture, automation of
previously captured knowledge, common access to knowledge, and independence of knowledge
from enterprise systems. In this way, the algorithms and applications layer produces important
efficiencies for business operations.
Reporting Layer
The requirements of the reporting layer include the following:

Display content in a format consistent with key performance indicators and financial
reporting requirements, e.g., the general ledger
Display content in a format consistent with evaluations and forecasts
Several commercial off the shelf (COTS) products can satisfy these requirements, including
Business Objects, Cognos, Crystal Reports, ChartFX and others.
The user interface (UI) should offer the capability to manually select or specify several inputs,
including the type of analysis to be performed. A thin client UI is probably the best approach for
generic analyses, although some ad hoc analyses may need to be performed at the algorithms and
applications layer. The interface should be capable of displaying graphical output, tabular
output, or scalars, as discussed previously.
The following discussion provides some context into why these needs are important. To date,
many asset management applications have been limited to a single parameter because of the
capability of EAM systems. More sophisticated assessment algorithms utilize multiple
parameters to construct a multidimensional measure of asset condition that produces a more
comprehensive measure of an assets state, sometimes referred to as a health index. For a
circuit breaker such an index could be constructed with an algorithm that combines parameters
such as number of fault operations, average fault current level, elapsed time since last inspection,
etc.
The development of these kinds of complex assessment algorithms for power delivery and
generation equipment is the subject of on-going research at EPRI. But even today, these more
complex algorithms have been in use for system monitoring applications for nuclear plants and
condition monitoring applications for maintenance planning in both generation and power
delivery.
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Another set of evaluation algorithms for asset management concerns tracking costs or level of
effort in a way that the normal financial and payroll systems may not. An example would be
average labor hours expended to maintain one suppliers equipment versus the labor required for
another supplier of the same equipment type.
To predict future performance when the deterioration is not just a function of time but also of
stress levels, the future stresses must also be predicted. If loading were one of the stress factors,
then a load forecast could be used for this purpose, for example. Future performance may also
be affected by changes in operating or maintenance practices or by replacement of individual
components within a system. Consequently, these factors may also have to be accounted for in
projecting future performance. The data mining tools ability to access projections through the
use of models is therefore an important need.
Developing the proper assessment algorithms is the responsibility of the asset manager and
decision support tools for applying them are important requirements for EAM.
support data mining:
Start by understanding what data mining tools the company has.
Evaluate the tools against the requirements described in this chapter as well as the
infrastructure requirements, ensuring in particular that the tool works well with both real-
time and transactional data.
Select an important asset management application, e.g., condition-based maintenance
planning, and use the data mining tool to develop the application.
Collect lessons learned and improve the process. Select a different tool if necessary.
Expand the applications to other decision support needs and other decision support tools.
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5
ADVANCED INFORMATION TECHNOLOGY CONCEPTS
FOR ENTERPRISE ASSET MANAGEMENT
This chapter is written for those companies that have reached the Processing and Continuously
Improving maturity levels in their asset management programs. At these levels of maturity,
business capabilities are such that organizational transformation is possible. As the maturity
level names imply, business processes are well known, and process improvement is a way of life.
This chapter describes the information technology infrastructure that can facilitate advanced
enterprise asset management.
This chapter also describes advances in data and decision support tools that can be implemented
because of the advanced business capabilities of the Processing and Continuously Improving
company. Some of these advances depend on the advanced information technology
infrastructure. Others can be implemented, albeit somewhat less effectively, even with the
information technology infrastructure of the Organizing company. But those improvements still
require the business improvements characterized by the most mature asset management
companies.
Information Technology Infrastructure for Advanced EAM
Enterprise software and asset management business processes both pose unique challenges to the
information technology infrastructure. They are tightly coupled with business processes, which
are often poorly documented, and they cross organizational boundaries. Many requirements are
unclear and some are conflicting. It is for these reasons that a large fraction of enterprise
software initiatives have failed.
In the previous chapters, the report has recommended very measured developments in the asset
management information technology infrastructure. But for companies at the maturity level of
Processing and Continuously Improving, there is a maturity in management support, business
analysis, and business process documentation and modeling that provides additional assurance
that investments in the infrastructure will succeed. In addition, companies at these levels exhibit
improved business acumen, the ability to learn from investment and use of EAM, ERP, and other
major systems, and familiarity with asset management data and decision support tools.
In short, the Processing and Continuously Improving company is capable of exploiting advances
in business modeling and information technology that advanced asset management can
realistically build upon.
5-1
Advanced Information Technology Concepts for Enterprise Asset Management
Use of a Service Oriented Architecture in Enterprise Asset Management
Service Oriented Architecture (SOA) is a concept that is built upon the lessons learned of a
variety of information technology developments, including information standards like CIM and
the enterprise service bus (ESB). However, SOA is not technology per se, or even a technology
standard; rather, SOA is a technology-independent, high-level concept that provides the
architectural blueprint for enterprise system development and continued use.
SOA is based on the concept of business services. Business services mean business processes
and services integration technology. Business processes are described in terms of business data
and business logic. Services integration technology can be XML-based Web services, such as
SOAP and WSDL, but it could be other technology as well. SOA is not specific to any particular
integration or middleware strategy.
A Service Oriented Architecture is a software architecture based on the concepts of an

application front end, services, a service repository, and a service bus. An application front end
is the element of SOA that delivers value to the user. The services that the application front ends
use remain fixed. The front ends initiate and control system activity and provide the user
interface. It is presumed that front ends vary as users needs change. Services change less
frequently, although the number of services can expand as the number of processes are
automated.
Services are managed with a service repository. In subsequent chapters, the report describes how
some EPRI research could be incorporated into a services concept and repository. Similarly,
asset management algorithms, calculations, visualizations, and applications from vendors,
industry groups, and the utility would be accessible. By matching the services to a business
process and developing them through a front end, the enterprise asset management information
technology infrastructure could be enhanced and remain vibrant and consistent with current
industry and company practices.
The Natural Role of SOA in Asset Management
In this subsection, we use an example to illustrate how SOA might be used in an evolutionary
capacity for asset management applications.
Suppose you are building a portal to allow people within the company to view equipment
condition information for a wide variety of equipment types and from providers that are both
inside the company, but from many departments, as well as outside the company, e.g., OEMs,
diagnostic system specialists, outsourced maintenance specialists, etc.
The first thing that you do is to specify the services of interest. Those outside the company have
remotely accessible services. The various departments of the company have also specified
services and provide them in the service repository. Next, you build an application front end that
displays the results of various condition information available. The front end accesses
information by examining the type and manufacturer of the equipment, the available instruments
and other observables, and also the available condition assessment services inside and outside the
company.
5-2
After implementing the portal, you find that the portal is very effective in a variety of business
processes, from maintenance prioritization to equipment replacement strategies to operations
contingency planning. For maintenance prioritization, you find that you want more than just the
single input alert that is allowed by your current work management system.
Now you might construct another application front end that uses a workflow approach.
Workflow describes a set of activities in way that can be used to execute a business process. In
the case of maintenance prioritization, there are more factors you want to consider, including in
particular the importance of the equipment to overall systems performance. For equipment
replacement strategies, you want to consider the manufacturer and model of the equipment as
well as the inventory you have in stock. For operations contingency planning, you need to know
what other equipment can serve as a backup and what their condition is as well as their near-term
uses and expected service conditions.
Each of these types of users (maintenance, engineering, operations) probably prefers a different
user interface (UI), and each process has different approvals and possibly different regulatory
requirements to consider. In SOA, most of the technology would be reusable because it would
be available as services. The users would describe their business process, and the IT department
could develop the front end solely from that description.
The following discussion compares a typical asset management information technology

application with typical installed technology and then again with an SOA approach, illustrating
the point about how information technology inflexibility is a barrier to developing asset
management applications.
Work management systems have some capability to access equipment condition information, and
in fact, the capability has improved notably in recent years. But often the work management
system capability falls short of what a particular type of equipment requires, or the capability
does not facilitate data evaluation and documentation of actions taken.
For example, transformer maintenance might depend on real-time instrument readings, manual
inspections, and periodic predictive maintenance activities. Planning the timing and selection of
maintenance tasks could depend on multiple sources of equipment condition information and
could be combined into the evaluation process. Because this type of analysis is often not
supported by the work management system, many maintenance planning groups have developed
point solutions for maintenance prioritization that operate outside of, or very loosely coupled
with, the work management system.
As a consequence, condition information goes unused by operations or engineering staff because

they are unfamiliar with the maintenance point solution and its underlying basis, or they cannot
easily incorporate the information into their own decision processes and tools. Sometimes
operations or engineering develop completely separate tools with different technical bases for
equipment condition. Not only does this occasionally lead to confusion, but it leaves the utility
exposed to second guessing by regulators when a major event occurs and the departments
systems have provided differing equipment condition results.
5-3
Perhaps more importantly, a utilitys reliability improvement program can be held hostage to the
lack of business agility the current system offers. Because of the cost and delay times associated
with information technology, new evaluation processes and predictive maintenance techniques
may not be available to maintenance, operations, and engineering in a timely manner. In the
extreme case, inability to efficiently integrate with work management could result in a new
technology not being applied until the work management system is upgraded, a costly endeavor
that often gets delayed year after year.
Lets look at how SOA might change the capability of asset management in this case.
Equipment condition information becomes a hierarchical set of services. Standard adapters are
specified for equipment condition service providers. Again, the service provider could be an
OEM who offers the service as part of the equipment purchase or an outsourced maintenance
contract. The service provider could be the equipment engineering group internal to the
company. A service specification defines the type of information required and the contract for
providing it.
A workflow specifies how multiple sources of equipment information are combined when they
are available. As a result, there is a user interface and business process for performing the
evaluation. Another service provides the combined result.
Each of the equipment condition services is maintained in a service repository which also
includes the knowledge base upon which the evaluations or results are obtained and guidelines
on their accuracy and application. Because we are talking about flexible services and composite
applications, it becomes much easier to maintain and update the knowledge base in a separate
knowledge management tool if that is appropriate.
Service Oriented Architecture offers a lot of promise to advanced forms of asset management.
But for it to work effectively, there must be a business process modeling capability and there
must be a service repository of asset management calculation types. Perhaps more important,
there must also be a capability to automatically assign asset management services to the
hundreds of thousands of assets in an electric utility company. Otherwise, even though
applications are easier to write, we will still be limited by the engineering time it takes to
determine applicability of the application to the specific asset and information available for it.
The following sections describe how EPRI research and technology can facilitate the capability
of an asset management information technology infrastructure based on an SOA architecture.
Business Processes and Models
Business modeling provides an approach to improve productivity in a business. As businesses

advance their productivity, understanding and improving critical business processes eventually
become the best means to drive process improvement. The nuclear industry is a case in point.
To improve benchmarking effectiveness, the Nuclear Energy Institute (NEI), Electric Utility
Cost Group (EUCG), and Institute of Nuclear Power Operations (INPO) worked to define a
standard nuclear performance model (SNPM). This three-year effort resulted in closer
5-4
coordination of process descriptions, key business performance indicators (KPIs), and activity
based costing (ABC) definitions [8]. Supporting this overall business process are process
descriptions for key business processes, including Nuclear Asset Management [9] and
Equipment Reliability [10], to name a few.
Business process modeling comes in a variety of forms. The information technology

professional is familiar with the use case. It is a description of a business process designed to
guide the implementation of one or more software applications. With the advent of Service
Oriented Architecture, it will be important that business process descriptions are understandable
to technology users like asset managers and that those process descriptions also conform to a
standard compatible with the needs of information technology to support SOA.
As we all know from our daily lives, business processes are complex. They are difficult to
visualize. As such, business process modeling begins with a visual representation of how the
process works, often in a flow chart comprised of activities in the business process together with
inputs and outputs and key process interfaces. The visual representation is accompanied by
descriptions of each box. Grouping of these activities sequentially and describing the business
rules that apply to them is the essence of a business process.
This type of generic business process is useful for many business improvement purposes,
including benchmarking and process improvement. But to take the business process to a level
where it can be a specification for information technology services, the specific role of people,
places, time, and information may need to be specified.
One company, Business Genetics, bases its xBML approach [11] on familiar questions:
What activities must the business unit perform to achieve its purpose?
Who performs each activity?
Where are the activities performed?
When are they performed?
Which information is used to perform each activity?
How do all the above interrelate to yield a business processes?
In their approach to business modeling, once activities are identified, the business process
analyst can then capture who is responsible for the completion of the activity, where the activity
is performed, when it is performed, and which information is used and produced by the activity.
Models for each of these questions are developed and then combined into an overall how model.
Regardless of the approach taken for business modeling, it is a critical step in the mature asset
management program. Process must lead technology, or else productivity growth will have to
follow technology. Large software development projects have taught us the difficulties in
attempting to capture business processes in software.
5-5
In the Processing company, descriptions of processes facilitate the ability to capture cost
information by activity. The role of decision support tools and the asset management technology
infrastructure in those processes can be well defined and more easily understood by management
and employees. In the Continuously Improving company, process improvement becomes
ongoing. Asset management provides the metrics by which company goals and objectives can
be measured. Business process descriptions become the means by which improvement can be
described and implemented.
If the promise of SOA is realized, those business process descriptions also become the means by
which information technology services are described. Large software development and
application integration and implementation projects for asset management become incremental
improvement efforts as opposed to disruptive events.
Business process modeling is therefore an important enabler for advanced asset management
information technology capabilities. To conclude, the following steps should be considered
when building the capability for business modeling:
Identify the various models that exist explicitly and implicitly in procedures and other
business documents.
Acquire and understand generic electric power process models, even if they originate in a
different business unit or are constructed to a variety of different standards.
Work together with the IT department to understand their use of business process modeling,
including use cases that may have been developed for implementation of EAM, GIS, or other
systems in the asset management information technology infrastructure.
Develop an asset management business process model for your company and use it to
communicate how asset management works to management and employees in interfacing
organizations.
Understand standards for business process modeling, and work with the IT department on
any SOA pilot activities, even if they are outside of asset management.
Participate in a pilot process for process modeling of a key business process which uses asset
management business processes. Help describe asset managements role in that business
process.
Continue to participate in the development and improvement of business process models that
are related to asset management or the asset management information technology
infrastructure.
Enterprise Asset Management Repository of Services
EPRIs strong contribution to the development of the Common Information Model has naturally
led to the development of a variety of capabilities that are compatible with the SOA concept of
services. These capabilities are beneficial at most levels of asset management program maturity.
Indeed, using libraries of algorithms is a critical efficiency that should be exploited even at the
Awakening level. But a repository of services can be even more effectively exploited when the
asset management information technology infrastructure has matured to a high level.
5-6
This subsection describes three types of EPRI research which naturally support the concept of a
repository of services. The first example describes continuing efforts in EPRIs Power Delivery
Sector to develop improved maintenance management and asset management capabilities. Those
capabilities developed from the use of specific EPRI software, but the resulting utility and
software implementation of specific algorithms and calculations have been and continue to be
stored with the intention of more widespread use.
The second example describes an effort to think about asset management decision support tools
using a concept of modules. The work is inspired by some cooperative efforts between the EPRI
and EdF nuclear business units. As described below, the concept is intuitively similar to the
SOA concept of services, and the work done to date may lay a foundation for certain aspects of
asset management service description.
The final example relates to another critical concept in the maturity of an asset management
program. EPRI research and work with many utilities has clearly indicated that one of the
difficulties asset management faces is the development of techniques that can help visualize the
results of more sophisticated decision support tools. The concepts of risk and uncertainty, as
well as alternatives and portfolios, are difficult to convey even to decision makers receptive to
the concepts of asset management. The final portion of this subsection describes a set of
visualizations that have proven useful to EPRI members in communicating asset management
results. These visualizations focus on project prioritization and investment because much of the
early asset management research has been on those techniques. These visualizations represent
experience from both the power delivery and nuclear sectors.
Library of Algorithms and Calculations
In Distribution Applications of the Asset and Risk Management (ARM) Workstation, 1008565,
EPRI described a series of asset management applications for distribution that could be carried
out with a particular data mining tool known as MMW. In the language of SOA, the applications
were a combination of front ends and services. The services most often where specific
algorithms or calculations which would process mined data and produce a result useful for asset
management. In one case, the service processed data so that it could be used in EPRIs Project
Prioritization decision support tool. The front ends were typically web page reports which
provided the results in a form which allowed further interpretation and use, e.g., predefined drill
downs.
EPRI has continued the process of developing and describing algorithms that can provide useful
asset management calculations. These algorithms can be applied with data mining tools that
have the capabilities described in the previous chapter. They also form the basis for a potential
set of services that could be provided via a Service Oriented Architecture.
Modular Approach to Asset Management
The concept of a Service Oriented Architecture is compatible with a concept proposed recently
based on research by EPRI. The concept is called a modular approach to asset management
and is part of an overall concept called the Asset Management Toolkit (AMT) [12]. The concept
has been discussed in EPRI reports for power delivery and nuclear generation. It has also been
5-7
informally tested in fossil generation by EdF. It appears the modular approach is really a
description of a service, while the overall AMT approach is more related to the creation of a
front end based on a series of connected services. The following discussion provides further
details on the modular approach.
A fundamental premise of the asset management methodology is that decisions affecting the
design, operation, and maintenance of components and systems (assuming that they are not
constrained by local, state, or national regulatory requirements) will not only impact reliability
and power quality from an engineering perspective, but will also affect the economic
performance of the asset through their impact on expected costs and revenues. The asset
management application will enable evaluation of these costs and revenues via several key
business functions that can be represented in the form of modules (or services in the parlance of
SOA). Figure 5-1 represents how these modules (services) combine to perform the basic asset
management analysis of the value of a project or investment.
PM Cost
Calculator
Component
O&M Data
Provider
(CMMS)
Total Economic
CM Cost Cost Calculator
Calculator Calculator (Profitability)
Failure &
Maintainability
Rate Non-
Provider Maintenance
Cost
Calculator Asset
Improvement
Optimizer
(Portfolio)
Recovery/
Repair Time Reliability
Provider Calculator
Delivered
Power Revenue
Calculator Calculator
Power
Quality
Calculator
Power Externality
Price Value
Forecaster Provider
Figure 5-1
Asset Management Module Interaction
Meeting the information requirements of asset management business objectives and processes
can involve a complex series of economic calculations. A modular approach and framework of
these economic calculations promotes understanding of the many functions involved in
performing asset management, regardless of the tools employed. The approach allows a
prospective asset management user to build elements from existing capabilities in their software
and information technology portfolio. Eventually this dissection of functionality can lead to the
5-8
specification of a toolkit of methods and tools (i.e., the Asset Management Toolkit) for improved
and consistent asset management for all types of power industry facilities.
The goal of functional modules as applied to asset management is to benefit from the
commonality of functional modules and their combinations to address a wide range of asset
management applications. These can include component reliability diagnostics, performance
reports, probabilistic risk assessments, net present value evaluation of projects, specific
component repair/replacement strategy, reliability trend impact analysis, economic asset
durability assessments, project evaluation and ranking, etc.
Modularization clearly establishes functions that can reside in differing areas of expertise,
ranging from economics/finance to reliability to structural/fracture mechanics. The modules
clearly define the role, inputs, and outputs for which each area is responsible. The same
functionality can provide input data for several applications, and the same functionality can
provide intermediate results used in several processes.
In a calculation chain, the input data for downstream modules are provided by outputs from
upstream modules, such as the failure rate of a component, the replacement cost of a component,
or corrective maintenance direct costs (see Figure 5-2). At the module boundaries, the data
exchanged are either inputs or outputs. Of course, some of these data can differ for different
issues, and they can be obtained from different modules. Any of these values can also have
uncertainty distributions, which are propagated through the calculation chain.
Reliability Calculator
Inputs Output
Failure rate Unplanned
Repair rate outages
System logic Economic Calculator
Recovery times
Inputs Outputs
Discount rate Change in
Inflation rate NPV
Failure Rate Updater Tax rules BOI
from experience data CM Cost Calculator End of operation IRR
date Cash flow
Inputs Output Inputs Output Power price Discounted
Initial failure rate New Time to failure CM direct Reliability cash flow
New failure date failure Material & labor cost Fuel costs
New exposure rate cost of failure Direct CM costs
time Direct PM costs
Other costs
(insurance,
safety-related
costs, etc.)
PM Cost Calculator
Inputs
Output
Implementation PM direct
dates cost
Material & labor
cost of PM task
Figure 5-2
Example Calculation Chain Decomposition
5-9
The modularization and its associated description provide the following benefits:
Modularization clearly differentiates the functionalities that use given data from those that
create these data. The data flow can then be more easily understood and shown, including the
global inputs and outputs of the approach.
Development of new modules benefit from the past developments, avoiding the rebuilding of
existing functionalities, especially when a new tool is under investigation. The efforts can be
focused on the specific part of the new approach, or on the assembling of the different
elements to answer the new issue. For the modules that are implemented as software, the
computer connection can be envisaged.
When a new approach is proposed, modularization can show the elements that are already
mastered and the difficult issues that will need to be addressed. The R&D effort can then be
focused on the new elements.
Modularization can improve information exchange between experts of the different
functionalities, especially in the step addressing validation of the consistency of exchanged
data in the process or the calculation chain.
Modularization can open other perspectives on the use of a module, either downstream (using
its outputs) or upstream (seeking better assessments of its input data). This shows more
clearly to other experts the potential interfaces, providing access to the objective of the
functionality.
Modularization can help to clarify the black boxes of tools or processes by revealing their
component parts.
Modularization can enable more robust tool evolutions and improve tool compatibility.
The modular approach to asset management offers significant potential for describing asset
management services that can be stored in an asset management service repository and combined
within a front end to perform basic asset management analyses. This approach offers the
potential to replace legacy decision support tools which have often been cumbersome to use and
integrate with the asset management infrastructure of EAM, ERP, GIS, etc.
Visualization Services
Useful visualization of the results of asset management analyses is a critical requirement in the
asset management process. Illustration of results must consolidate views in various forms to
address the key criteria of a wide range of decision makers, including executives, upper
management, engineering management, engineers, financial analysts, and others. Hence, the
results must address various financial indicators, performance indicators, cash flow projections,
expenditure projections, and various ways of displaying uncertainties and risk. Decision makers
must also be able to use the results across a control area, corporation, or region as applicable.
This chapter provides examples using hypothetical results of various ways of effectively
displaying the results of asset management analyses in the power delivery industry.
5-10
Phase Plane Graph
Figure 5-3 illustrates a phase plane graph. This type of illustration is particularly useful when
two important stakeholder values (in this case, reliability and profitability) involve trade-off
decisions. Plotting one value against the other in this manner can produce some useful insights.
For example, projects in the upper right quadrant (e.g., tree trimming) improve both values,
while projects on the left side decrease one of the values.
Plot of Cumulative Benefit versus Investment
A plot of cumulative benefit versus investment (the funding curve, often mistakenly called an
efficient frontier) is useful for illustrating the effect of a constraint (e.g., a fixed budget) on the
incremental value of a ranked ordered list of investments. In Figure 5-4, the projects are shown
in ranked order from left to right along the curve. The budget constraint is shown as a vertical
dotted line. In this case, the first three projects (substation transformer replacement, tree
trimming, and relay upgrades) could be implemented and remain under the budget constraint. A
scaled-back version of the capacitor bank addition project or some other highly ranked, lower
cost project, could also be implemented. Alternatively, if the budget constraint could be relaxed
somewhat, this next project could also be implemented. Note that even though the pole
inspection project cannot be implemented, since the slope of the curve has flattened out in this
region, the incremental benefit of that project is less than that of the previous projects.
Figure 5-3
Example Reliability-Profitability Phase Plane Graph
5-11
Figure 5-4
Example Cumulative Benefit NPV Versus Cumulative Investment NPV Graph
Project Uncertainty Comparison
Figure 5-5 illustrates a case in which two investment options have the same mean net present
value (NPV) of $300,000, but different levels of risk. This visualization enables the decision
maker to evaluate the probability of loss as well as potentially higher gains. In this example,
option A is a safer investment, because its probability of loss is zero (no part of the curve crosses
the vertical line at zero). Conversely, option B presents a 6 percent chance of loss, and a 7
percent chance of a higher NPV than option A. Hence, option B is riskier. Of course, this
presentation technique also provides useful information when the two investments have different
mean NPVs and less extreme differences in the shape of the probability distribution.
5-12
Figure 5-5
Example Project Uncertainty Comparison Graph
Probability of Loss for Multiple Projects
Probability of loss is a key concern for many decision makers. Figure 5-6 shows a convenient
way to illustrate results of multiple projects that displays probability of loss. By comparing this
loss probability to internal rate of return (IRR), decision makers can quickly see at a glance
which projects are more favorable than others. In the example, substation transformer
replacement offers a favorable IRR with no loss probability. The relay upgrade project provides
a much higher IRR, but with a significant loss probability. By these measures, a clear project to
avoid in this example is pole inspection, which shows a very high loss probability and very low
IRR.
5-13
Figure 5-6
Example IRR Versus Risk of Loss Graph
Project Specific Uncertainty Histogram
The visualization illustrated in Figure 5-7 focuses on the uncertainty in IRR for a particular
project. The histogram (cluster of bar charts) shows the probability distribution across IRR. The
histogram is generated by making numerous simulation runs using a Monte Carlo simulation.
The curve represents the cumulative probability in percent. Hence, there is about a 50 percent
chance that the IRR will be lower than about 21 percent.
In addition to helping decision makers understand the risks of a project, this representation also
allows consideration of the value of information that might help to reduce this risk. For example,
the decision maker could commission an engineering study of uncertain parameters in this
project that caused the tails of the histogram. Such a study could reduce the uncertainty or
help identify changes to the project to reduce uncertainty. Similarly, the study could find ways
of increasing the likelihood of attaining a high IRR by emphasizing those factors that led to the
highest IRR. In one such study, the analyst could change the value of one of the parameters
preferably one that has the largest impact on cost as identified in a tornado diagram such as
Figure 5-13 (e.g., price of power). By obtaining a better evaluation of the market price of power
or investing in a hedge to eliminate this risk, the projects IRR can be increased.
5-14
Substation Upgrade Option A New Substation
45 100%
40 90%
80%
35
70% Cumulative Per Cent

30
Population 60%
25
50%
20
40%
15
30%
10
20%
5 10%
0 0%
0.81% 9.53% 18.25% 26.96% 35.68% 44.40% 53.11% 61.83 70.54% 79.26% 87.98%
%
IRR
Figure 5-7
Example IRR Uncertainty Histogram
(Note: histogram refers to left vertical axis; curve refers to right vertical axis)
To conclude, the following steps should be considered when building the capability for
repository of asset management services:
Identify the various algorithms, calculations, and visualizations available from EPRI
research.
Identify similar services in your own company, including those you have purchased from
vendors or obtained from industry groups.
Consider using the modularization approach to help decompose your own asset management
calculations and decision support tools (including elements and applications of EAM, ERP,
and GIS systems) into a set of services.
Describe the services in your company. Strongly consider the use of knowledge management
techniques to ensure you capture the background, context, basis, and use experience for these
services. Work with the IT department to jointly develop the service descriptions so that the
goals and objectives of SOA are anticipated.
Formulate a repository for general use in the company, whether it be with existing
applications, manually as part of asset management business processes or in the SOA
environment.
5-15
Automating Service Implementation Re-usable Analytics
In the abovementioned development and implementation of a library of algorithms and

calculations, EPRI research found that one of the principal barriers to implementation of asset
management calculations was the requirement for substantial engineering resources. The
algorithms tie available information to actions. Both information and actions vary not only by
company but also by instrumentation and other sources of information.
EPRI has initiated a pilot project [13] to develop and prove a prototype re-usable analytical
platform, a plug and play module, capable of data acquisition, analysis, and publishing the
result. The following discussion draws heavily from the pilot project report.
One challenge to making this content plug and play is that the scope and quality of available
data varies from asset to asset depending on the asset-specific availability of instruments, tests,
inspections and nameplate data. This project lays the groundwork for creating re-usable
platforms by creating a proof-of-concept analytical module that demonstrates the potential to
create generic applications such as those listed in the Asset and Risk Management Applications
Library [14]. The prototype calculates circuit breaker operation counts, a simple analysis that
demonstrates the capabilities of a re-usable analytic platform. As such, this groundwork could be
used as the foundation for future EPRI application development or modifications of existing
applications to use re-usable analytics.
Included in this body of work is an analysis of the functionality of a re-usable analytical platform
used within a Common Information Model (CIM) [7] model-driven environment. The project
built a simple application inside the commercial software platform known as OSIsofts Real-time
Performance Management (RtPM) platform, commonly known in the electric utility industry as
the PI Historian. The application developed is for demonstration of the concept only.
Acquisition of the data, upon which the analytics will be executed, is typically not shared
between business applications. However, this is changing. As the Common Information Model
and semantics become more widely adopted, it is becoming possible to create an acquisition
component interface that can be re-used by multiple business applications and users. The
constraint on the creation of such a re-usable and distributable acquisition platform is the
agreement of the Common Information Model that is shared between the acquisition platform
and the business semantics.
The successful completion of this project has resulted in a CIM-based application which can
invoke a data acquisition engine that knows where the data resides. This type of technology can
be applied to asset management applications to vastly reduce configuration time and setup time
while increasing accuracy and providing advanced capability in data acquisition.
The purpose of this project is to:

Develop the proof-of-concept CIM compliant analytical platform. This platform has been
developed within the simplified business application development environment provided by
the OSIsoft Real-time Performance Management (RtPM) platform.
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Populate the analytical framework with a set of analytics that demonstrate a simplified
model, which determines the number of breaker operations.
Provide breaker operation data so that this information can be utilized as part of the testing.
Verify the analytical model based upon the calculation of number of breaker operations.
Methodology
Business and utility applications have a need to execute various kinds of calculations that recur
frequently in different contexts. The following example demonstrates the process to calculate a
count of circuit breaker operations.
1. An application (e.g. Schedule Circuit Breaker Maintenance) determines that a Circuit
Breaker (CB) operations count is needed to determine if the CB needs to be operated to
lubricate the mechanism. The determination of the requirement for such a calculation could
be pre-scheduled, periodically scheduled, or upon the demand of the user or application.
2. The application or user determines the range(s) of time over which to count the number of
CB operations. Ranges could be based upon a previous time period like one year or a
variable time period like since the last lubrication.
3. The data is grouped with its associated time period (ts te).
4. The CB Operations Count calculation is actually executed.
5. The results are returned, typically as an array of values, to the application or user and would
include the start time, stop time and CB operation count between those intervals.
6. The application then decides what to do with the returned results (e.g. display, archive, etc.)
and what time-stamp to associate with the returned results. The time-stamp is important to
see when the calculation occurred. A recent operation, just past the stop time, would obviate
the need to operate the CB for maintenance purposes.
(2)Trigger
Specific Application Analysis
(1) Need to execute (3) Determine semantic,

a specific objects, and other parameter
analysis needed for analysis
(4) Gather information/data

based upon (3) needed
for analysis
(5) Execute analysis

for data gathered in (4).
(6) Return results and errors
Figure 5-8
General Analysis Flow of a Calculation
5-17
Regardless of whether a user or application uses Excel, MatLab, OSIsoft, or some other
analytical platform, the conceptual steps shown are the same, as illustrated in Figure 5-8. All of
these analytical platforms have the following in common:
1. There is a trigger for the execution for an analysis.
2. The trigger is applied to an application that has some configuration knowledge in regards to
the analysis being triggered.
3. The configured knowledge (e.g. semantics 4, objects, and other parameters) are gathered.
4. The actual data required for the actual instance of analysis is located and gathered.
5. The actual calculation or analysis is executed.
6. The results and/or errors are returned.
7. The triggered application stores or acts upon the returned results.
The typical analytical platforms inherently include all aspects of the general flow. However,
depending upon the implementation, analysis can be monolithic, partially or fully distributed, or
model-driven.
Architecture for Re-usable Analytics
There are several simplifying assumptions and insights that can be made that allow the creation
of a re-usable analytical platform:
(1) Each application or user will have its own mechanism to provide a trigger for the
analytics (e.g. scheduled, user requested, etc.). It is acknowledged that analytics need to
be triggered, and this functionality must be provided within a deployment. However, each
trigger implementation needs to be specific to the application environment, but it would
not be wise to constrain the trigger mechanism in any fashion via specification.
(2) In general, each computer-based business application has its own mechanism to configure
and maintain the semantic relationships that are needed in order to create the appropriate
inputs for the analytics. Examples of such semantic relationships can be maintained
through proprietary configuration mechanisms (e.g. backend databases) or through some
standardized mechanism (e.g. such as IEC 61968/61970 extensions). It is acknowledged
that semantics knowledge is needed, but this information varies on a deployment-by-
deployment basis. Thus constraining the mechanism of gathering the semantics could
potentially decrease the applicability of a re-usable analytical platform.
(3) If there is an agreed upon Common Information Model and agreed upon access
methodologies, then the re-usable analytical architecture can support a data acquisition
component. A simple representation of such a component might be expressed as Figure
5-9 shows:
4
In this context, semantics means the naming convention used to identify specific pieces of equipment.
Mismatches in naming conventions are a major barrier to integrating equipment data across multiple sources.
5-18
Semantic
Semantic Data
Semantic Data
Semantic Re-usable Data
Data
Analytic
Parameters (3)
and
Constraints
Acquisition
interfaces
(1) Inputs based
upon application (2) Acquisition
knowledge of actual data
based upon
semantics
Informational
Data sources
Figure 5-9
General Architecture of Re-Usable Acquisition Component
A re-usable acquisition layer depends upon: (1) the mechanism through which the inputs
are provided; (2) the ability to invoke the appropriate acquisition interface to obtain the
required information and (3) the ability to output the data and/or errors that would be
used within the actual analysis.
The ability to create such an acquisition component is greatly aided through the use of
standardized and/or industry accepted client interface (e.g. ODBC, OPC, and IEC 61970
GID). It is conceivable that additional deployment-based interfaces could also be
included (e.g. MatLab and OSIsoft) without impacting the architecture.
(4) The actual analytic/calculation portion can easily be designed for distributed re-use.
Generated by
acquisition
Data
Data Result
Data Result
Data Result
Analytic Result
Result
Calculator
Parameters
and
Constraints
Figure 5-10
General Analytic/Calculation
The generalized analytic can be remotely invoked with: (1) Data and additional
parameters passed into an established interface; and (2) results and errors being produced
for return to the invoking entity (Figure 5-10).
5-19
Of particular interest to a successful architecture is the establishment of:

Well-known and specified, but generalized, input and output interfaces for each re-usable
component. It is important that the specified interface not be specific to any particular
analytic (e.g. equation or asset). Any component that is designed to be so specific that it can
only work when in conjunction with a particular asset would have limited value. The concept
is to create generalized components that can work in any situation. The generalization allows
for more applications to make use of similar analytics provided by multiple suppliers.
A specification of a standardized remote invocation interface that is supportable across
multiple platforms. Given todays technology, the most likely candidate is Web Services or
Service Oriented Architecture (SOA) architecture.
A mechanism that eases configuration and parameter validation.
A mechanism that allows individual debug of each re-usable component.
Applicability to Asset Management
Asset management represents a potential business domain into which the generalized/re-usable
calculation architecture could be applicable. The asset management environment has all of the
key attributes that lend the domain to the re-usable calculation environment. The application of
the architecture should be extensible to transmission, distribution, and generation assets.
Asset management applications are intended to display asset performance, display asset
condition, trend asset condition to predict maintenance requirements, define the work associated
with assets, define the effectiveness of repairs, and define operational aspects of assets.
Asset management is particularly well suited as an environment for re-usable analytics in that the
current implementations have defined many requirements of the re-usable calculator.
The definition of asset and the relationship to other assets and operational characteristics is
typically well understood. The semantics and modeling aspects are well understood. The
applications that monitor assets have defined the data required to support the application.
The sources of the needed information are available for the acquisition component. The
monitored data is typically maintained in several identified disparate databases.
Most asset management applications have a set of well-defined algorithms. This facilitates
the re-casting of the analytics into the re-usable and distributable architecture format.
Proof-of-Concept
The prototype re-usable analytical tool provides circuit breaker operation counts as determined
from the acquisition of a PI Historian circuit breaker record utilizing the re-usable analytical
platform.
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I
V1 V2
Open
Closed
Figure 5-11
Circuit Breaker Measurements
Most counting of breaker operations is based upon the SCADA monitoring of the status of a
breaker (e.g. OPEN or CLOSED). However, given an ampere (I) measurement, the operation
counting algorithm could be augmented to calculate not only the number of total operations, but
additionally the number of operations where current was interrupted (e.g. OPENED).
Augmenting the model with voltage measurements can allow a determination if an operation
occurred under service conditions or during a maintenance test when the circuit breaker was de-
energized. The bushing potential device (BPD) would be the determining factor in this case as
the bus and line voltage may be at normal values when maintenance occurs due to circuit
configuration.
The current interruption/re-establishment plays a major role in the serviceable lifetime of the
breaker contacts. Therefore, more accurate information can be calculated given more
measurements. If the fault current can be determined from an Intelligent Electronic Device
(IED), then the correlation of Fault Interruption Counts can be added to the array.
Table 5-1
Information Available from Circuit Breaker Counts and Related Parameter Data
CB CB Fault
CB Total CB In Service CB Load Break
Maintenance Interruption
Counts Counts Counts
Counts Counts
CB Status +
CB Status + CB Status + CB Status + time-
Data CB Status + time-stamp + CB
time-stamp + time-stamp + stamp + CB
Source time-stamp IED Current
BPD Value BPD Value Current Value
Value
Sum of Status
Sum of Status Sum of Status Sum of Status
Changes where
Sum of status Changes Changes where Changes coincident
Algorithm IED Current >
changes where BPD BPD Value = with CB Current
CB Rated
Value =0 normal Value to 0 change
current value
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The proof-of-concept developed a representative model that allows the re-usable analytical tool
for counting breaker operations to be created. As part of the prototype, the design was further
refined, a data acquisition component was created, as well as the re-usable analytics.
This report includes the above description of this pilot project because technology advances in
the near to mid-term could dramatically change the capability and implementation costs of asset
management systems. Those changes in turn will make the Continuously Improving maturity
level much more practical to achieve by a larger fraction of electric utilities. Driving down the
engineering cost of implementation will be critical to the advancement of asset management,
especially in an aging workforce constrained business environment. Equally important,
approaches like these foster knowledge management and capture, another critical enabling
technology for advanced asset management.
To conclude, the following steps should be considered when building the capability for the
reusability of a repository of asset management services:
Identify the various algorithms and calculations, visualizations, and applications in the
service repository that will involve large numbers of instances, in particular those requiring
significant engineering and information technology resources to implement.
Pilot those applications and compile and evaluate lessons learned on the implementation and
use of those services.
Follow EPRI research on this topic, developments in SOA, and progress in industry
standards that bear on creating plug and play applications. Monitor related advancements
made by vendors of systems in your asset management information technology infrastructure
who are sponsoring and investing in this type of work.
Pilot an activity of this type when the technology is sufficiently robust. Gather lessons
learned and develop plans for broader implementation.
Plan for this technology advancement, and implement it when appropriate based on the needs
of asset management.
Knowledge Management
Previously, the report discusses a significant number of critical situations where capturing
knowledge is important. The success and therefore the maturity of asset management programs
are based on the ability to explain and justify data, models, and results. In most cases the
information necessary to explain and justify is in dispersed reports and data or in peoples heads.
This concern is particularly true of models, whether it is the corporate value model upon which
numerous decisions are based or the equipment model for a critical asset type.
The knowledge management challenge for asset management is particularly acute because of the
integrated nature of asset management. Asset management crosses business unit boundaries,
therefore it is the combined knowledge of a disparate groups of employees that needs to be
captured.
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Asset management also brings together information from a wide variety of disciplines to make
critical decisions. A repair replace decision requires hands-on knowledge of:
past performance and current condition,
replacement technology, including what is available in the near-, mid- and long-term,
project management and engineering experience on project implementation challenges and
opportunities,
terms of financing for O&M and capital, and
regulatory requirements.
A typical justification for knowledge management, namely the aging workforce, hits asset
management particularly hard because so many decisions today are made on the basis of
undocumented experience. Many business processes require training from experienced
personnel to work efficiently. Even when decisions and processes are documented to our own
satisfaction at the time, we often find them hard to explain later, because few of us are trained
with the discipline to capture what we actually do.
The following are a representative range of examples of information important to asset

management in which documentation is usually found wanting in certain respects, even in an
asset management program with a high level of maturity:
The translation of a stakeholder goal to a particular element in the corporate value model
based on information elicited from management;
A set of assumptions about load growth that drive the long-range plan;
A project funding decision based on a particular visualization of risk or a certain set of
assumptions for predicted performance;
A wear model of equipment based on the experience of maintenance and engineering
personnel who have been responsible for the equipment for decades;
A code restricts operating in certain regions for a particular piece of equipment;
A business process for making a decision on budgeting.
Potential opportunities for knowledge management to support asset management have been
mentioned frequently throughout this report. The report emphasizes capturing the bases of the
corporate value model, and this case is a good example. The best decision support software is
often good at capturing the results of a process that lead to the development of a model, e.g., at
what outage length threshold does the value of preventing an outage start to disproportionately
drive customer satisfaction.
But when implementing the software, we are often left scrambling to write down the basis. The
exact thought process is sometimes lost, and the customer survey that is the basis might be
poorly referenced. For sure, we have not referenced the basis sufficiently to be notified if a new
customer survey shows a change, e.g., as electricity use more and more serves digital equipment,
or as a new corporate client with unique power quality requirements moves into a service
territory.
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We are often happy when a decision support tool provides a notes field for capturing such
information. But, we then find it difficult to capture and disseminate that note field to others. Or
we find that the note field is too small or does not accept hyperlinks. We need only reach back
and think through how we as asset managers do our work for different types of problems to write
the requirements for knowledge management.
To conclude, the following steps should be considered when building incorporating knowledge
management technology into asset management processes:
Start by understanding what basis information you have for a critical and representative set of
models. The criteria for project funding or the basis for selecting key performance indicators
(hopefully a corporate value model) are both excellent places to start.
Revisit the information and test it for completeness of assumptions and basis. Identify
organizing principals upon which to improve it and do so. Develop lessons learned for
capturing the basis of the next model developed for asset management.
Seek out the IT group. Participate in or have asset management be the focus of a knowledge
management pilot. Use the pilot as an opportunity to improve an important asset
management model that you know is reasonable, and yet its basis is poorly documented. Use
your previously generated lessons learned and update them.
Begin to use formal knowledge management techniques every time expert opinion is elicited
and every time a model or critical assumption is updated.
Apply the same approach described above to the asset management business process model.
Develop a guideline for when to use knowledge capture techniques during routine asset
management work. Develop another guideline for managing the captured knowledge and
include a process for notification when updates to bases are needed.
With this or a similar approach and the supporting technology that the IT group provides, the
results of asset management decision support tools will be more robust and easier to explain.
Also, the process of explaining them will not be as manually intensive as it had been.
Advanced Concepts in Data and Decision Support Tools
In addition to the advancements possible in the information technology infrastructure, important

improvements are possible in data and decision support tools for the Processing and
Continuously Improving company.
On the data side of the ledger, good cost information has to date been largely out of reach.
Substantial organization change is required to obtain substantial improvements in cost data, but
management support, other organizational factors, and good data access technology make
improvement realistically attainable.
Advances in decision support tools are also possible, particularly in long-range planning and risk
management of investments. Truly mature companies can also make progress by combining
simulation and equipment degradation models with observable condition data to create near-real-
time, quantitative models of assets and systems. Such models can be applied to business critical
5-24
risks of an operational nature or other critical risks that merit an increasing level of analysis
accuracy.
Processing and Continuously Improving companies are sufficiently mature organizationally to

incorporate the type of information into their business processes and to automate them using the
advanced information technology infrastructure described above.
Accurate and Useful Cost Data
Cost information often is the biggest challenge for data standardization. Activity Based Costing
(ABC) methods, if used, are often incomplete or not at the level of activities that are of interest to
asset managers. The EAM and ERP systems are often the best sources of cost information since
maintenance is often nearly half of the non-capital budget related to assets.
However, often only maintenance workers charge to work orders. Other costs which are not
charged, e.g., contract workers and employees such as engineers and managers, cannot be evenly
apportioned to maintenance worker charges. For example, a corrective maintenance activity may
require much more planning and management involvement than a preventative maintenance
activity. A contracted refurbishment is often much more costly than the associated employee
labor. Because of these variations in cost, use of uniform overheads and indirect charges can
easily mislead asset managers regarding the opportunities to create value.
As a result, the initial challenge in developing a cost standard is to decide what charging policies
will be used and enforced within the company. If all work is not charged, then analysis will have
to be done to estimate appropriate costs as they relate to an activity or to maintenance labor
charges for an activity.
Other considerations for collecting cost data include:

Cost information in different systems may also have to be rectified based on type of
accounting, namely depreciated costs or operating costs.
Cost information should be collected and stored so that it can be related to the general ledger.
A standard with a data map and hierarchy will help.
Costs should be categorized so that they can be compared to projects, activities, and assets.
Similarly, they should be categorized so that they can be evaluated from a life-cycle
perspective.
Improving on the limitations in cost data will require a concerted effort. If the interest is
primarily from the asset management group, asset managers will have to identify and develop
workarounds. Asset managers should perform analyses to understand patterns in variations in
costs that are not detailed, including indirects, against investments and cost drivers that are the
leading focus of the asset management program.
If the interest is broader, then more fundamental change can be considered. Besides
implementation of an ABC approach, the Processing company should consider changes in
employee time charging and contractor cost reporting. Because of the costs involved in such a
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change, management support and interest in using the cost information for business improvement
will have to be gauged. Accurate and useful cost information can be used with benchmarking
and process improvement techniques, independent of asset management, to drive profitability
improvements. Management interest in these types of business improvements is one of the
indications that a company is at the Processing or Continuously Improving level of maturity.
To conclude, the following steps should be considered when building the capability to obtain
accurate and useful cost data:
Start by understanding what cost information you do have. Identify the sources of cost
information within the company. Much of this information should be available from the
Data Strategy described in the previous chapter.
Focus on one system and try to drill down on the costs attributable to individual assets, recent
and ongoing project investments, and activities. For assets, use the asset registry. For
project investments, use the list of capital and O&M projects in the corresponding asset
management decision support tool. For activities, use a process model such as that produced
by the nuclear industry [10].
Document the lessons learned as to limitations in the data obtained. In particular, consider
the issues described above.
Perform analysis to understand how variations in costs can be properly attributed to the types
of investments and cost drivers asset management is evaluating.
Work with business analysts to determine the feasibility of improving cost data collection.
Engage management. If the effort moves forward, asset managers should participate so that
the process changes related to cost data meet the needs of asset management decision support
capabilities.
Advanced Decision Support Tools
The Processing and Continuously Improving company has had enough experience with decision
support tools that they can consider new types of approaches. The most important of the
developments discussed here is improving the capability of long-range planning. Usually this
process starts with the most important assets. In fact, advanced decision support tools are
initially practical only for critical business risks. Such tools are complex, but the lessons learned
from previous successes with decision support tools allow the implementation of complex tools
to remain within reason.
Use of simulation capabilities and developing real-time failure rates are truly advanced
applications. The examples envisioned below require excellent data integration. Other, more
limited applications can also be envisioned, but the quality of the result produced by the tool is
then reduced.
The following includes a substantial chapter on risk management. Risk management techniques,
like asset management techniques, can be qualitative as well as quantitative. Quantitative risk
management techniques for the asset manager, like long-range planning, can result in a
substantial improvement in investment analysis capability.
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Long-Range Planning
Long-Range Planning is a developing discipline (see [16]). A single repository of planning

information extending out to the end of life of key assets exists at very few electric utilities. 5
Existing EAM and ERP systems, as well as scheduling systems, often focus on work and
projects within a near-term time horizon. Hence, there are few commercial products that support
long-range planning for the electric utility industry. Consequently, in the near term, LRP
decision support tools may be developed in-house by IT or by engineers using spreadsheets and
simple scheduling tools. Such tools will involve a significant amount of user action, in particular
for iterations required to balance needs and constraints.
The following are key capabilities of Long-range Planning Tools:

produce output in a form compatible with needs of key stakeholders, including regulators
(e.g., capital and O&M budgets for rate cases and environmental impacts), customers (e.g.,
reliability and power quality), and investors (e.g., revenue, net present value, and investment
risk).
organize information by major asset types, e.g., transformers, by location, e.g., operating
regions, and by time, e.g., budget years
allow for high level representations for management as well as more detailed representatives
for asset owners, regional managers, etc.
forecast needs (or accept forecasts from other tools):
load
asset condition, e.g., failure rates based on equipment models 6 and degradation factors as
current measured asset condition
end-of-life (EOL) criteria for major assets, based on asset condition and economic criteria
costs of maintenance and replacement
work force needs for critical staff
critical resources, especially resources with high demand in a limited time period
key performance indicators (and correspondingly the needs of key stakeholders)
develop project proposals and alternatives according to a standard template consistent with
other tools (see below)
using forecasted needs and available resource constraints, translate options for replacement
and life extension into a schedule of projects and activities and associated capital and O&M
budgets and key performance indicators
5
The planning horizon for many regulatory agencies was three to five years. Planning for assets has often been
done asset type by asset type rather than in an integrated manner. Most importantly, in the past asset replacement
could be accomplished through new capacity additions. Today, the large inventory of aging assets as well as lower
load growth has created the need for asset replacement to be a fundamental part of the planning function.
6
The concept of equipment models are explained under the topic of Data and Information Standards.
5-27
To conclude, the following steps should be considered when building or acquiring and when
implementing capability for long-range planning:
Remember that just as project prioritization and investment is central to decision support
activities in asset management programs at the Organizing level or below, long-range
planning is central to Processing and Continuously Improving programs. Be sure that asset
management concepts are included in the methods used and obtain some level of ownership
in this activity for the asset management group. Also be sure that management support exists
for process improvement.
Develop a good understanding of the strategic planning and long-range planning processes
(explicit and implicit) before focusing on any technology decisions.
Decide where improvements in the process are desirable. Be sure to focus improvements on
how investment ideas flow through the entire process.
Focus first on the most significant assets based on either total asset value or risk of business
loss. For example, start with the top twenty most significant assets, develop life-cycle plans
for each, integrate them and examine impacts on the planned capital and O&M budgets.
Develop a plan for increasing the quality of the process.
Educate project sponsors and business analysts on the importance of a good long-range
planning process.
Select technology for assisting in the long-range planning process. Choose simple
technology until you are sure of the planning capabilities you want to emphasize. The
criteria above are a good guide.
Build a documentation process around to tool to ensure that the basis for the input, models,
and decisions is clear and reproducible during the next budget cycle.
Use of Simulation in Asset Management
Simulation capability can have a special place in advanced asset management. Because a
simulation model is in effect a predictive model, it can be used to project future performance
under a variety of strategic plans and investment strategies. Typically, simulation models also
support systems-level thinking, meaning that prediction can occur at a level that is consistent
with many of the most important performance indicators, e.g., delivery system or power plant
reliability.
When simulation is combined with observed condition information, two types of benefits result.
First, when simulation is used as a planning tool, it is often used with average data. Using a
simulation with observed condition data allows the planner to see a better characterization of
future performance and whether or not it meets planning objectives.
Second, simulation combined with observed condition information can be used as an operations
risk management aid. A range of deterministic outcomes can be predicted. Those outcomes can
also be combined with probabilistic outcomes such as are discussed in the subsection below on
risk management to provide a very robust operations risk modeling tool. Such a tool can then be
used to provide added defense against low probability, high consequence events.
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To conclude, the following steps should be considered when simulation capabilities are
considered for use in asset management:
Start by understanding what high risk operational or planning situations might benefit from a
simulation model combined with observed condition data.
Determine the ability to integrate the simulation model with observed data. If the integration
of data cannot be automated without significant difficulty, approach such a use of simulation
cautiously.
If the simulation modeling capability can be integrated through an integration standard or
through robust and available data, discuss with planners and risk managers the benefits of
providing the type of information a predictive model can provide.
Develop a plan for using simulation capability and implement it if benefits to planners and
risk managers justify it.
Opportunities for Estimating Failure Rates in Real Time
Many maintenance management strategies rely upon an implicit and unstated probability of
equipment failure. Some strategies might go so far as to rely explicitly on generic data. What is
gaining in popularity is the concept of performing maintenance according to equipment health.
The health of equipment can be inferred from the condition of its various components. The
current state of the art is to qualitatively monitor health, usually with a stop light or alarm panel
red/yellow/green approach. The basis for health is often predictive and diagnostic techniques,
inspections and sometimes real-time data. Despite these recent improvements in maintenance
planning, only rarely is maintenance planned and executed with a clear understanding of risk of
equipment failure.
Recent EPRI research addresses the possibility of determining the probability of equipment
failure based on equipment condition as measured by specific real-time or near-real-time
methods. By producing such probabilities, we can use them to perform near-real-time
quantitative equipment health assessments. We can extend this philosophy to groups of systems
by building system health from equipment health and integrating up to the next level, i.e. by
using systems-level thinking. Conceptually, this philosophy can extend to the generating station
switchyard or substation or even the grid. Such system-level health assessments can be used to
proactively affect not only maintenance, but also operations and contingency planning.
The philosophy used to generate a near-real-time failure rate begins with monitoring the
equipment parameters currently available through an IED or SCADA. Field inspections and
diagnostic test results from predictive maintenance programs will improve accuracy and
complete missing information. EPRI equipment applications use algorithms to simulate
component wear and pass that information on to a cause-and-effect model of how equipment
performs. This cause-and-effect model is contained in the EPRI PM Basis (see the discussion on
equipment models in Chapter 3). PM Basis can take component wear information (from duty
cycles and environmental conditions and other algorithms from the repository of services
described elsewhere in this chapter) and generate a failure rate. The ability to generate a failure
rate and the validation exercises that have been done to date can be found in EPRI TR-1009633,
Nuclear Asset Management Database. Since the component wear information can be monitored
5-29
(or inferred) in real-time or near real-time, connecting the PM Basis with an equipment health
monitoring program can also generate a real-time or near-real-time failure rate.
support estimating real-time failure rates:
It is important that asset management applications have as a foundation an equipment model
such as the one described in Chapter 3. The ability to link degradation mechanisms to
condition monitoring is critical to calculating failure rates.
A repository of services of asset algorithms is required for practical application of this
method.
A re-usable analytics approach will need to be implemented to perform the calculations for a
large number of components at a reasonable cost.
A model that can turn failure rates into triggers for action is important for implementation. A
risk management model for operations such as the one described below will allow the
greatest possible application of this capability.
Use of Risk Management
One of the more sophisticated asset management techniques is the risk management decision
support technique. This level of sophistication in turn implies the need for management
understanding and support. While simple approaches to risk management are expected to be
undertaken at lesser maturity levels, this report anticipates the more sophisticated risk
management techniques to be implemented only by the most mature asset management
programs.
Risk is defined as a combination of the probability of an event and the consequence of an

outcome of that event; both higher probability and larger consequence yield more risk. Risk
management is the process of managing the probability or the consequence to manage the risk.
Management may involve reducing the probability or consequence to reduce the risk if the
consequence is bad. An example of a bad consequence would be a system failure resulting in
loss of power to a customer. Risk management in this case often focuses on asset operation,
including allowable maintenance. Such a risk management approach is often used in addition
to, rather than in replacement of, a traditional operations strategy, e.g., N-1 contingency analysis.
Risk management for the asset manager involves selecting the level of acceptable risk for
stakeholders and ensuring the corresponding maximum return for that level of risk. Here risk
management techniques are used to support the asset manager in deciding on the appropriate
investment in assets, including both capital and O&M. While the primary role of the asset
manager is to increase returns and create value, a secondary role is to protect against unexpected
events and avoid large losses.
Successful risk management depends on accurate models of stakeholder value and accurate data
that supports the characteristic needs of the asset manager. Often companies do not have good
models of what they value, and the process for creating value is ad hoc, often depending on the
best presenter, most persistent advocate, or management override. Additionally, application of
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risk management techniques often suffers from poor asset data, whether that data be
reliability/performance data or cost data. Such data is often not collected and when collected,
done so with little consistency.
This following elaborates on the two applications and then describes an example for risk
management use by an asset manager. Following the example, a synopsis of recommendations is
presented for the use of risk management decision support tools.
Risk Management for the Asset Manager
Risk management for the asset manager involves developing an understanding of uncertainty of
the outcome of an investment. Probability in this case is the likelihood of a certain value being
achieved. Consequence is the value returned from the investment. The risk manager
characterizes the uncertainty, understands if further investigation can cost effectively reduce the
uncertainty, and then decides whether to make the investment based of whether the return
justifies the risk.
The process is very similar to how we as individuals decide to invest in stocks and bonds,
namely we establish a risk level we can tolerate and then evaluate the investment returns
achievable among the available choices at that risk level. Carrying the investment analogy one
step further, the asset manager also selects a portfolio of investments to maximize return,
diversified so that the common sources of risk, e.g., fuel price, do not affect all investment
options.
Below, the report provides an example that illustrates the usefulness of risk management
decision support capability as part of the asset managers toolkit.
Risk Management for Asset Operator
The asset operators typically use administrative requirements to control the risk of operating
their system. An administrative requirement would be one that would ensure that system
operation succeeds even if a transmission line or major generating station went out of service.
As operations have become more complex, expectations of reliability have increased along with
desires for reduced O&M costs, so operators are giving more consideration to using risk
management in operations.
The first applications of risk management in operations occurred in the nuclear industry, but the
principals apply to power delivery. Risk management in this case involves identifying a
spectrum of scenarios, including N-2 scenarios, that can cause system failure. Then probabilities
of failure are applied to contingencies and the most likely risks are identified. Such a risk
management approach helps the operator know which portions of the system that are out of
service are most important to return to service and which portions of the system are most
important to defend. It also helps the operator (or planner) identify common contributors to N-2
scenarios, such as a tree-trimming program, that could affect multiple contingencies. This type
of management becomes particularly important when the risk management system indicates that
risk levels of system failure have increased, even when all administrative controls are met.
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Information Technology Requirements for Risk Management
The information technology requirements vary depending on the nature of the risk management
application. Risk management use by the asset manager can often be done with the asset
management information technology infrastructure corresponding to the higher levels of
maturity. The principal increase in technology revolves around the ability to identify and
measure variabilities in performance, which in turn can help characterize risk. Often those
variabilities are obtained from industry-wide data as the amount of experience in any one electric
utility does not sufficiently characterize risk. Regardless, these types of capabilities are not
particularly demanding on information technology systems.
However, when risk management moves into operations, information technology challenges
increase, primarily that changes associate with a greater need for understanding current operating
conditions, including what equipment is in service and what equipment is out of service. The
need for current equipment condition information (and its implied risk of failure) also increases
(see previous subsection on real-time failure rates). But the greatest influence on risk is most
often what equipment is being taken out of service or is already out of service.
The need for this information comes for the most part from maintenance planning and operator
logs. These information system integrations must be live for operator logs. Live information
means that logs must not be solely in the form of text, but instead must be in the form of asset
inventory data. Accomplishing this change for logs is difficult, but historically it has been
accomplished in the nuclear industry, and commercial operator log products are available to meet
this need.
For maintenance planning, risk can be evaluated in advance of maintenance activity and
incorporated into the planning process. Risk management in maintenance planning means
equipment is not removed for maintenance if it causes high risk and maintenance plans are
adjusted in advance to prevent these conditions. Maintenance schedules can be downloaded
periodically, evaluated for risks, and adjusted to mitigate them. When the time comes for
maintenance, operations reviews the current conditions to ensure the risk is still acceptable. The
information technology requirements for operator logs are all that is required in this case.
support risk management:
Start by understanding what stakeholders and management think are the principal risks that
the company faces.
Consider how those risks can be addressed by the existing asset management infrastructure
with the addition of risk management capabilities and tools. That is, see what can be done
exploiting existing asset management data sources and models.
Determine if operational risks are an important concern for any key company assets. If so,
examine what level of benefit might result from an active risk management program. If the
company has a nuclear risk management program, consider adapting the business processes
and the technology to other risk problems that need to be addressed.
5-32
For risk management for the asset manager, determine management interest in assessing
internal investment risks associated with capital projects.
If management interest exists, pursue risk management strategies such as are described in the
illustrative example below.
Illustrative Example for Risk Management
The EPRI program on risk management is built upon the strengths of all our business sectors and
exploits data and models for application to many decision makers, including operators and asset
managers. Our decision tools support key decisions such as capital project prioritization and
budgeting, fleet asset repair and replacement, and systems operation.
This chapter illustrates portfolio evaluation and risk assessment in an asset management context
via an example that is of interest to both distribution and transmission system owners: tree
trimming. In this example, the decision posed is whether to trim trees this year, or wait until a
future year. A preliminary analysis without considering risk determined that the total cost of not
trimming the trees (considering outage costs, etc.) was $10,425, and that the total cost of
trimming was $13,543, indicating that not trimming is the lower cost option. These results,
called expected values, flow from a purely deterministic analysis (i.e., an analysis that does not
7
consider uncertainty or probability). However, considering risks could lead to a different
conclusion.
A brief review of the principles of risk assessment provides useful background information for
another way of looking at this example. Risk means uncertainty, and good decision-making
requires consideration of risk. When considering risk, a good decision does not necessarily
guarantee a good outcome. However, consideration of risk does increase the likelihood that the
outcome will be a good one.
The key steps in assessing risk include the following:

Pose the decision
Identify influencing factors
Identify sources of risk
Perform sensitivity analyses
Use judgment in decision making
Use historical data
Apply an analytical model
Evaluate portfolio risk
7
This section is based on an EPRI presentation by Jeremy Bloom [9]
5-33
Influencing Factors and Risk Sources
It is essential in risk analysis to precisely pose the decision problem. Otherwise, ambiguities in
the problem definition will obscure the uncertainties that create the risks.
To pose the decision in this example, the issue is whether to trim trees along a substation feeder
this year or wait until later to reconsider trimming. Two situations need to be examined: 1)
ordinary (isolated) faults occur on the feeder, and 2) a major storm results in multiple faults on
the feeder. Factors that influence the decision include the following:
The fault rate under ordinary and storm conditions
The decrease in fault rate when trees are trimmed
The length of time required for service restoration after a fault under ordinary and storm
conditions
The number and type of customers affected
The cost of customer outages
The utilitys cost of service restoration
The tree trimming cost
Others
To clarify how these factors influence the decision, it is helpful to construct a conceptual model
(see Figure 5-12) that represents their interrelationships. Note that the top five elements lead
directly to cost. Also, note that the right side of the diagram addresses ordinary conditions, while
the left side of the diagram addresses storm conditions.
The next step in the process involves identifying the sources of risk or uncertainty in the
decision, which can include the following:
The number of interruptions due to ordinary and storm conditions per year
The duration of interruptions due to ordinary and storm conditions
The storm probability
The customer outage cost
5-34
Cost
Customer Customer
outage Tree outage
cost Trimming cost
(storm) Cost (ordinary)
Utility Utility
# restoration restoration #
Customers cost cost Customers
interrupted (storm) (ordinary) interrupted
(storm) (ordinary)
Restoration Restoration
# Faults # Faults
time time
(storm) (ordinary)
(storm) (ordinary)
Tree
Trimming
Figure 5-12
Influence Diagram for Tree Trimming Example
Sensitivity Analysis
In the next step in the process, the factors that have the most influence on the results are
identified. This is done by quantifying the influence diagram (Figure 5-12), then varying each
parameter (e.g., tree trimming cost, customer outage cost, storm probability, etc.) independently.
The same percentage change is applied to each parameter in each sensitivity run. The funnel
shaped set of results shown in Figure 5-13 is called a tornado diagram. The diagram shows,
for example, that for a given percentage change in a parameter (e.g., the tree trimming cost), the
impact on study results was an increase or decrease of $2500 (delta cost).
This sensitivity analysis does not consider probability or risk; its results pertain to the
deterministic results indicated at the beginning of this chapter. Hence, variation in the tree
trimming cost can vary the cost of trimming from about $11,000 to $16,000.
5-35
Tornado Diagram - Trimming
Trimming Cost $/mi
Customer Cost (Ordinary) $/hr
Fault Rate (Ordinary)
Restoration Rate (Ordinary)
Storm Probability
Restoration Rate (Storm)
Fault Rate (Storm)
-$3,000 -$2,000 -$1,000 $0 $1,000 $2,000 $3,000

Delta Cost
Figure 5-13
Tornado Diagram Displaying the Sensitivity Analysis for Tree Trimming Example
Judgment and Historical Data
Probability is the means of measuring risk. Because assigning probabilities can be quite
difficult, judgment can be an important part of risk assessment. Judgment is a perfectly
legitimate way to assess risks because people often act on their judgments. Furthermore, when
risk factors are subjective, hard to measure, or hard to model, or if limited data is available,
judgment may be the only reasonable way to assess risks. For example, customer outage costs
are often determined based on judgment because available outage cost data are inconsistent
among various studies; the cost varies by customer sector, customer end-uses, the advance
warning time of the outage (if any), and many other factors. In many cases, customers do not
even know what an outage costs them. Ultimately, assigning customer outage costs is a
judgment utility management needs to make because they have to trade-off costs customers incur
against costs the utility incurs.
Historical data can also be used to assess uncertainties. For example, the overall duration of
outages is captured by various measures such as SAIDI (System Average Interruption Duration
Index). A measure of customer reliability, this index indicates the system average number of
minutes each year that customers power is interrupted (excluding major events). Figure 5-14
illustrates this type of historical data for a 10-year period for 65 utilities in the United States [15].
Notice the range of variation both within a given year and also from year to year. This variation
indicates the uncertainty inherent in the occurrence of outages.
5-36
700
600
SAID I (W itho u t M a jo r Eve
500
400
M ea n (107 m inutes)
300
200
100
0
1992 1993 1994 19 9 5 1996 1997 1998 1999 2 0 00 2001
Year
Figure 5-14
Ten-Year SAIDI Scatter Plot Illustrates Useful Historical Data for Risk Assessment
Analysis
In addition to judgment and historical data, analytical risk models are very useful in risk
assessment because the uncertainties involved are often quite difficult to gauge. Figure 5-15
illustrates the results derived from such a model, applied to one particular feeder. The diagram
shows the expected values from the deterministic analysis as the two dotted vertical lines the
total cost of trimming on the right, and the total cost of not trimming on the left. The two curves
represent the plot of the analytical risk model for the two scenarios. While the expected cost of
not trimming is lower than that of trimming (the two vertical lines), the range of possible costs
for the trimming case is much narrower than the no-trim case; that is, trimming has much less
risk (i.e., uncertainty) than not trimming. Furthermore, the two curves cross at the 75 percent
probability point. According to this analytical model, there is a one in four chance (from 75-100
percent) that not trimming will cost more than trimming. Whether a utilitys management
considers such a risk to be prudent is a matter for their judgment.
5-37
0.9
0.8
0.7
Probability Cost < X
No Trimming
0.6
Trimming
0.5 No Trimming
0.4 Trimming
0.3
0.2
0.1
0
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000
Total Cost
Figure 5-15
An Analytical Risk Model (Curves) Shows the Results of a Probabilistic Analysis,
Compared with the Deterministic Expected Values (Vertical Lines)
In addition to the risk assessment for one project (i.e., a particular feeder), risk assessment
techniques can be applied to examine a portfolio (i.e., multiple feeders). For example, if ten
feeders are being considered for tree trimming, but the budget only allows for tree trimming to
be performed on five feeders, then various portfolios can be defined, each consisting of a
different combination of five feeders. For each portfolio, the expected total cost and risk
(measured by the standard deviation of this cost) can be calculated. Figure 5-16 illustrates a plot
on which each data point represents a portfolio. The line connecting the lower-most data points,
for a given expected total cost, is called the efficient frontier. For a given expected total cost,
this line represents the best portfolio because it yields the smallest risk (standard deviation) in
the total cost. This means that any portfolio above the line would not be selected, because a
portfolio with a lower standard deviation at that cost is a better option. Note that the shape of the
efficient frontier reflects the fact that the various risk factors involved in this problem are not
independent.
The decision then becomes which portfolio on the efficient frontier to select. The portfolios at
the right end of the diagram reflect the lower standard deviation, and hence less risk, albeit at a
higher cost. Highly risk averse managers would tend to select a portfolio at this end of the
frontier. Conversely, the portfolios at the left end of the diagram reflect the higher standard
deviation, and hence more risk, albeit at a lower cost. Highly risk tolerant managers would tend
to select a portfolio at this end of the frontier.
5-38
$20,000
$18,000
Standard Deviation Total Cost

$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
$104,000 $106,000 $108,000 $110,000 $112,000 $114,000 $116,000 $118,000 $120,000
Expected Total Cost
Efficient Frontier
Figure 5-16
Portfolio Risk Trade-Off (Efficient Frontier)
Note: Each Data Point Reflects a Different Portfolio of Projects. Managers Select a
Portfolio on the Efficient Frontier Based on Their Risk Tolerance.
Conclusion
This example illustrates use of a rational basis for decision-making that incorporates risk. It
shows that decisions made with consideration of risk are more likely to result in desired
outcomes, compared to decisions that are made purely based on expected values. In addition to
risk management, this example also illustrates use of portfolio evaluation to determine the
combination of projects that are most likely to lead to desired outcomes.
5-39
6
CONCLUSIONS AND RECOMMENDATIONS
The report discusses critical topics for the development of an information technology
infrastructure to support utility asset management at the enterprise level, which are equally
applicable to major business units of a utility such as its power delivery unit. Because the IT
needs and capabilities of an enterprise depend strongly on the state of development of its asset
management program, the report begins with a self-assessment method to help either an IT
professional or an asset manager determine the current maturity level of their program. The
method classifies AM programs in five different levels of maturity and seven asset management
program attributes with six sub-attributes to create a table of over 130 criteria for measuring
development of an asset management program.
The report then discusses over twenty critical topics for asset management information
technology infrastructure grouped by maturity level into three sections. Many of the topics
contain either a wide spectrum of examples or a single in-depth example to illustrate the point.
Each topic also contains a set of recommended steps for improving the asset management
information technology infrastructure and program which, when combined with the criteria,
allow the reader to develop a roadmap for program improvement based on the results of the self-
assessment.
The report draws upon the work of EPRI program managers for asset management in both the
power delivery and nuclear sectors. It also takes advantage of the experience and work done by
the rather large Nuclear Asset Management community of practice in nuclear power as well as
the significant number of funding participants in the power delivery asset management program.
Because of this breadth and depth of participation and experience, this report is believed to
substantially represent the corresponding breadth and depth of asset management issues in an
enterprise program.
Finally, the report gives highlights important current advances in information technology,
especially related to the topic of Service Oriented Architecture, which seems particularly
amenable to the advanced forms of enterprise asset management. The importance of this
evolving information technology discipline is demonstrated by the substantial investment made
by vendors of Enterprise Asset Management and Enterprise Resource Planning systems. The
report shows how EPRIs asset management technology can facilitate such an architecture and
how ongoing EPRI research can lead to even further possibilities for advancement in asset
management.
Despite the significant amount of information provided in this report, there is still further work to
do. Although comprehensive in its nature, this report falls short of a true information technology
guidance document. Further enhancement and the addition of specific roadmaps or plans for
development could yield a guidance document of that kind.
6-1
Conclusions and Recommendations
A significant research opportunity also exists in developing enabling capabilities for asset
management implementation within a Service Oriented Architecture. Describing and developing
EPRI research content on such topics as equipment condition assessment, maintenance, and
decision support in the form of services would enable much wider use of asset management
automation and could facilitate adoption of EPRIs technology advances by utilities. Taking the
next step to incorporate EPRI equipment failure models into potential information standards
would help ensure that early investments in asset management capabilities could be continually
expanded as services become more sophisticated. And perhaps the most critical step for asset
management automation would be continuing the development and testing of re-usable analytics,
a technique that offers the potential of significant productivity gains by freeing asset
management application implementation from the repetitive expense of engineering resources.
In the area of purely decision support capability improvement, it would be useful to test the
concept of a corporate value model sufficient for enterprise application. Similar testing could be
done of risk management techniques and protocols for use at the enterprise level. Finally, it
would be useful to pilot the use of knowledge management techniques for the specific purpose of
capturing and explaining the basis for asset management models and thereby learning if indeed
meaningful improvements could be made in this area.
Much has been accomplished in asset management in the last ten years in terms of improved
equipment reliability, reductions in cost, and increases in business process productivity.
Advances have been made across the board in data, decision support, and results visualization.
Asset management lessons learned abound in the area of information integration and application.
The collective experience of the industry is substantial, and as the reports self-assessment
method asserts, such experience lays the foundation for raising the bar for asset management to a
new and even more effective level.
6-2
7
REFERENCES
1. Asset Management Primer, US Department of Transportation; Federal Highway

Administrations Office of Asset Management, NCHRP Project 20-24(11), 2001.
2. Carnegie Mellon Software Engineering Institute, Capability Maturity Model (SW-CMM) for
Software, summary description from the URL
http://www.sei.cmu.edu/activities/cmm/cmm.sum.html, March 2000.
3. Watts, Humphrey, Characterizing the Software Process: A Maturity Framework, Technical

Report CMU/SEI-87-TR-11, Carnegie Mellon University Software Engineering Institute
(1987).
4. Mark C. Paulk, ed., The Capability Maturity Model: Guidelines for Improving the Software
Process, Carnegie Mellon University Software Engineering Institute (1994).
5. Crosby, Phillip B., Quality is Free: The Art of Making Quality Certain, McGraw-Hill
(1979).
6. Guidelines for Power Delivery Asset Management: A Business Model for Program
Implementation Expanded Version, EPRI, Palo Alto, CA: 2005, 1010728.
7. Common Information Model (CIM): CIM 10 Version, EPRI, Palo Alto, CA: 2001. 1001976.
8. The Standard Nuclear Performance Model, A Process Management Approach, Revision 4,

Nuclear Energy Institute, Nuclear Asset Management Community of Practice, 2004.
9. Nuclear Asset Management Process Description and Guideline, Nuclear Energy Institute,
NEI AP-940, 2005.
10. Equipment Reliability Process Description, Institute of Nuclear Power Operations Report
AP-913, Revision 1, 2001.
11. Cedric Tyler and Steve Baker, Business Modeling using xBML, BusinessGenetics, 2004.
12. Asset Management Toolkit Modules: An Approach for Risk-Informed Performance-Focused

Asset Management in the Power Delivery Industry, EPRI, Palo Alto, CA: 2005. 1011365.
13. Re-Usable Analytical Platform for Asset and Risk Management Applications. EPRI, Palo
Alto, CA: 2005. 1010548.
14. Distribution Applications of the Asset and Risk Management (ARM) Workstation. EPRI,
Palo Alto, CA: 2004. 1008565
7-1
References
15. Distribution Reliability Indices Tracking Within the United States. EPRI, Palo Alto, CA.
2003. 1008459.
16. Guidelines for Power Delivery Asset Management Long-Range and Strategic Planning:
EPRI, Palo Alto, CA: 2006. 1012496.
7-2
A
SURVEY OF EXISTING ASSET MANAGEMENT
CAPABILITY
List of Asset Management Capabilities
The tools described in the following EPRI reports can be applied now to practice asset
management:
Equipment Failure Model and Data for Underground Distribution Cables: A PM Basis
Application, Report 1008560 December 2004 [P3 and P4]
Equipment Failure Model and Data for Wood Utility Poles, Report 1008561 December
2004 [P3 and P4]
Distribution Applications of the Asset and Risk Management (ARM) Workstation, Report
1008565 December 2004 [P3, 4 and 8]
Guidelines for Intelligent Asset Replacement: Volume 2 - Wood Poles, Report 1002087
December 2004 [P 8 and 9]
Living RCM: First Steps at Integration of Transformer IM&D Algorithms and MMW,
Report 1002126 - March 2004 [P 3 and P4]
Utility Vegetation Management: Use of Reliability-Centered Maintenance Concepts to
Improve Performance, Report 1008859 April 2004 [P8]
The tools and methodologies described in the following EPRI reports can be used to help
develop a PDAM implementation:
Asset Management Toolkit Modules: An Approach for Risk-Informed Performance-
Focused Asset Management in the Power Delivery Industry, Report 1011365 June 2005
Asset Performance Database: A Recommended Approach for Data Modeling to Facilitate
Power Delivery Asset Management, Report 1008553 May 2005
Common Information Model for Transmission and Distribution Maintenance Data, Report
1008557 December 2004
Guidelines for Power Delivery Asset Management: A Business Model for Program
Implementations, Report 1008550 November 2004
Wood Pole Management Issue Assessment, Report 1002093 December 2004
Planning and Research Optimizer Version 3.0: Theory Manual, Research Report 1011345
December 2004
A-1
Survey of Existing Asset management Capability
AMT - Transformer Aging Effects and Fleet Requirements: Power Transformer Fleet
Management and Sustainability, Report 1009785 March 2004
Asset Performance Database: Industry Database Design for Transmission Cables and
Components, Report 1002133 December 2003
Guidelines for Intelligent Asset Replacement, Volume 1, Report 1002086 December
2003
Reliability Centered Maintenance (RCM) Technical Reference for Power Delivery, Report
1002125 December 2003
Specification for Enhanced Ranking Module in Maintenance Management Workstation,
Report 1002064 December 2003
Maintenance Ranking and Diagnostic Algorithms for Circuit Breakers Most Suitable for
Field Installation, Report 1002063 December 2003
Measuring and Valuing Reliability for Distribution Asset Management, Report 1001707
September 2003
Project Prioritization System, Methodology Summary, Report 1001877, December 2001
The concepts described in the following reports have value in developing a PDAM
implementation but requires either up dating or modification to accommodate power delivery
business aspects:
Guidelines for Applying Risk Based Tools to Maintenance Decision Needs, Report
1009842, November 2004.
Assessing Nuclear Power Plant Risk Management Effectiveness, Report 1008242 July
2004
A Dynamical Systems Model for Nuclear Power Plant Risk Management, Report 1007969
October 2003
Transformer Expert System, XVisor: A Practical Statistical Evaluation of Transformer
Failure Predictions, Report 1001772 November 2002
Risk Based Maintenance Guideline, Report 1004382 November 2002
Life-Cycle Decision Making, Report 1007563 December 2002
Turbine-Generator Maintenance Interval Optimization Using a Financial Risk Assessment
Technique, Report 1000820 November 2000
A-2
Export Control Restrictions The Electric Power Research Institute (EPRI), with major
Access to and use of EPRI Intellectual Property is granted with the locations in Palo Alto, California, and Charlotte, North Carolina, was
specific understanding and requirement that responsibility for ensur- established in 1973 as an independent, nonprofit center for public
ing full compliance with all applicable U.S. and foreign export laws interest energy and environmental research. EPRI brings together
and regulations is being undertaken by you and your company. This members, participants, the Institutes scientists and engineers, and
includes an obligation to ensure that any individual receiving access other leading experts to work collaboratively on solutions to the
hereunder who is not a U.S. citizen or permanent U.S. resident is challenges of electric power. These solutions span nearly every area
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regulations. In the event you are uncertain whether you or your com- and environment. EPRIs members represent over 90% of the electricity
pany may lawfully obtain access to this EPRI Intellectual Property, you generated in the United States. International participation represents
acknowledge that it is your obligation to consult with your companys nearly 15% of EPRIs total research, development, and demonstration
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Together...Shaping the Future of Electricity
sessment of the applicable U.S. export classification for specific EPRI
Intellectual Property, you and your company acknowledge that this
assessment is solely for informational purposes and not for reliance
purposes. You and your company acknowledge that it is still the ob-
ligation of you and your company to make your own assessment
of the applicable U.S. export classification and ensure compliance
accordingly. You and your company understand and acknowledge
your obligations to make a prompt report to EPRI and the appropriate
authorities regarding any access to or use of EPRI Intellectual Prop-
erty hereunder that may be in violation of applicable U.S. or foreign
export laws or regulations.
Program:
Enterprise Asset Management
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Research Institute, EPRI, and TOGETHER...SHAPING THE FUTURE OF ELECTRICITY are
registered service marks of the Electric Power Research Institute, Inc.
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available in accordance with Section 734.3(b)(3) and published in

Information Technology for Enterprise

Final Report, March 2007

EPRI Project Manager

ELECTRIC POWER RESEARCH INSTITUTE

(A) MAKES ANY WARRANTY OR REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, (I)

(B) ASSUMES RESPONSIBILITY FOR ANY DAMAGES OR OTHER LIABILITY WHATSOEVER

ORGANIZATION(S) THAT PREPARED THIS DOCUMENT

This report was prepared by

2 ASSESSING MATURITY OF INFORMATION TECHNOLOGY FOR ENTERPRISE

3 FIRST STEPS FOR NEWCOMERS TO ENTERPRISE ASSET MANAGEMENT .................3-1

5 ADVANCED INFORMATION TECHNOLOGY CONCEPTS FOR ENTERPRISE

6 CONCLUSIONS AND RECOMMENDATIONS ......................................................................6-1

A SURVEY OF EXISTING ASSET MANAGEMENT CAPABILITY ......................................... A-1

Figure 3-1 EPRI PM Basis Database: Equipment Model Example............................................3-7

Table 2-1 The Maturity Index Table .........................................................................................2-15

However, there are two important changes:

Asset Management Program Maturity Levels

The Attributes of an Enterprise Asset Management Program

The seven attributes and their corresponding sub-attributes are:

Data Collection and Use

Decision Support Capability General

to the importance of the role played by gaining widespread understanding to achieving

Decision Support Capability Investments

Another characteristic of a maturing asset management program is the increasing precision of

Decision Support Capability Risk Management

Business Process Documentation and Modeling

Information Technology Infrastructure General

Information Technology Infrastructure Knowledge Management

Business Analysis Role

Consequently, management support is a natural outcome as well as a natural precondition to

The Maturity Index Table of Criteria

Maturity Index Reacting Awakening Organizing Processing Continuously

Table 2-1 (continued)

Table 2-1 (continued)

Indicators of risk are

Table 2-1 (continued)

Table 2-1 (continued)

Alternatives are Optimization

All major assets and

Table 2-1 (continued)

Risk mitigation and

Table 2-1 (continued)

Table 2-1 (continued)

Table 2-1 (continued)

In this chapter, we will examine the following topics:

Developing a Good Asset Inventory

Collecting Asset Equipment Data

What can fail? What determines rate?

Asset Performance Database, A Recommended Approach for Data Modeling to Facilitate

Developing and Employing Analytical Models

In general, a value model consists of three major components:

Employing Decision Support Tools

Describe why the proposed solution makes sense

Increasing Sophistication of Decision Support Tools

Ranking and Screening

Somewhat related to ranking is the concept of screening. An Organizing company recognizes

Level 1 Level 2 Level 3

A realistic point value An uncertainty analysis

Accept project if very

To conclude, the following steps should be considered when implementing screening:

Project Prioritization and Investment Tools