Managing a population of aging equipment requires considering three distinct phenomena: 1) representing the dynamic processes of failure and replacement of the equipment; 2) projecting changing failure rates as equipment ages; 3) balancing the costs of equipment failure with replacement

This paper presents a general decision model that enables utilities to generate business cases for asset management policies, with a specific application to underground distribution cables. The model takes a life-cycle costing approach that enables corporate financial managers and regulators to assess the multiyear financial impacts of maintaining specific classes of power delivery infrastructure assets, such as underground cables. The model specifies the evolution of the condition of the asset population over time, the various decision alternatives that are available, including testing, and the basic data needed to support the decision model. The decision model represents the dynamic process of underground cable deterioration mathematically, using a set of equations that provide a forecast of future deterioration. The dynamic equations describe the evolution of cable condition probabilistically – given the current cable state, there will be a probability distribution of states in which the cable might be observed the next time it is inspected. The model represents the information obtainable from diagnostic tests and determines when it is cost-effective to use them. The model also specifies the data needed for decision-making. The model uses a dynamic programming formulation to solve for the optimal asset management strategy.