The Road to Deployment – How to Create a Comprehensive Business Case for Distribution Management Systems

road

by Shannon Messer, Leidos Engineering

Utility management gets bombarded daily with the latest and greatest technology to make their businesses more effective and the grid more efficient.

With limited resources, many face difficult decision processes when trying to justify new systems.

Take, for example, a distribution management system (DMS) deployment.

Utility leaders are attracted by the promises to increase operational efficiency, minimize outage time, and have one point of access for operational data to support their decisions.

But do these benefits outweigh the cost?

A positive business case to justify DMS is unlikely if the business case focuses narrowly on benefits and costs directly attributable to DMS.

Without consideration of benefits provided to end-use customers, DMS costs easily can exceed tangible benefits in a business case used to justify a proposed DMS.

Some utilities justify their DMS deployments based on improved operating efficiencies and their providing end-use customers improved reliability and lower retail power costs.

All DMS costs, however, eventually must be justified and paid for using a combination of tangible benefit cash flows, debt service and higher retail rates.

Alternatively, utilities can apply concepts from project portfolio management to develop a DMS road map to prioritize and implement technologies and applications.

Developing a DMS road map is an integrated process of identifying, selecting, prioritizing and managing a portfolio of DMS applications and requirements that are aligned with the utility’s strategic business objectives.

A DMS road map process using project portfolio management and business case methods provides a much more comprehensive approach needed to justify a utility’s proposed DMS.

Define Drivers, Criteria

The first step in this approach is to define the DMS business drivers or project criteria.

These drivers or criteria should represent the common project selection factors shared across the proposed DMS applications.

They may include the desire to reduce costs, reduce outages, improve energy efficiency, leverage existing utility capacity or improve operations.

Each utility has its own drivers based on its overall objectives, but once the drivers have been defined, a utility can prioritize them and assign relative weights. (See an example of general business drivers and sample weights in Figure 1.)

fig 1

Develop Selection Scoring

Next, a utility should develop a project selection score and ranking to align the proposed DMS applications with the common project selection factors or considerations and project constraints.

Assign a generic qualitative score-low, medium or high-to illustrate how well each application aligns with each project criteria.

A low score means the DMS application is unlikely to satisfy the project criterion while a high score means the DMS application is likely to satisfy the project criterion.

Figure 1 illustrates this in the top right portion.

To quantify the generic scores, low scores earn zero points, medium scores earn five points, and high scores earn 10 points.

Calculate Multicriteria Score

Using the drivers and selection ranks, utilities then can prepare a composite multicriteria score to show how well each DMS application aligns with the utility’s overall goals.

Multiply the weighted business driver scores by the generic low, medium or high scores, and then add these together for a total score.

Utilities can rank all of the proposal DMS applications using this composite multicriteria score, which should illustrate their alignment with the utility’s project selection factors.

The higher the composite multicriteria score, the greater the alignment a proposed DMS application and its requirements have with the utility’s project selection factors.

Conversely, the lower the composite multicriteria score, the lower the alignment a proposed DMS application and its requirements have with the utility’s project selection factors.

This individual and multicriteria scoring system is illustrated in the bottom half of Figure 1 for two generic DMS applications labeled DMS App 1 and DMS App 2.

Calculate Overall Project Selection Score

Assign a second generic qualitative score-low, medium or high-to show how each proposed application conforms to project constraint attributes that influence a utility’s overall project selection.

For example, utilities do not have infinite budget, staff and technical resources and cannot select and implement every proposed project.

This second group of low, medium and high scores represents typical project constraints that influence DMS application selection, and it should provide a dampened composite multicriteria score that illustrates alignment with all the utility’s project selection factors and each project constraint attribute.

These project constraint attributes may include anticipated project cost, available staffing and asset resources, project dependencies and overall project risk.

Now, the sum of each multicriteria score multiplied by the second low, medium or high ranking should represent an overall project selection score and ranking that shows how well each DMS application aligns with all of the utility’s common project selection factors and project constraint attributes (see Figure 2).

fig 2

Similar to the multicriteria score, the higher the overall project selection score, the greater the alignment a proposed application has with the utility’s project selection factors and constraint attributes.

The lower the overall project selection score, the lower the alignment a proposed DMS application and its requirements have with the utility’s project selection factors and constraint attributes.

A utility may select any or all DMS applications for implementation, but the DMS portfolio typically consists of applications that meet DMS requirements, possess higher overall project selection scores and are within the overall DMS budget.

Figure 2 illustrates the selection of five out of 10 generic DMS applications that have the highest overall project selection scores and budget totaling $400,000.

Prioritize Selected Projects

The final step of creating the proposed DMS road map is prioritizing selected DMS applications and their requirements in the DMS project portfolio.

DMS applications in the proposed portfolio typically have higher overall project selection scores.

Any or all DMS applications may be selected for inclusion in the project portfolio, depending on the overall budget.

DMS applications in the portfolio are selected based on their overall project selection scores, reflecting their alignment with the utility’s overall strategy and anticipated benefits.

fig 3
fig 3

Figure 3 provides an example of this strategic alignment and anticipated benefits scoring system.

Higher-priority DMS applications in the project portfolio that have higher strategic alignment and anticipated benefit scores are plotted along with their overall project selection scores in the upper right quadrant of the proposed DMS project portfolio.

Conversely, lower-priority DMS applications with lower strategic alignment and anticipated benefit scores are plotted along with their overall project selection scores in the lower left quadrant.

Other DMS applications may be scattered elsewhere on the portfolio chart, depending on their individual strategic alignment and anticipated benefit scores.

DMS Road Map and Path Forward

Using these steps, project portfolio management can help utility management and staff develop a DMS road map and path forward while reducing background noise and uncertainty and providing greater clarity to decision-making.

After going through this process, the proposed DMS applications and requirements in the project portfolio are aligned with the utility’s selection factors and constraints.

The DMS applications also will be prioritized based on their alignment with the utility’s strategy and tangible and intangible benefits.

This process does not replace the traditional DMS business case analysis. Instead, it offers utilities greater focus of what they require in their DMS business case.

For example, a DMS business case analysis is useful to quantify financial and rate impacts, assess reduced costs or estimate energy efficiency savings to end-use customers as part of the multicriteria scoring process.

Proposed applications may still be selected as part of the DMS portfolio, but the business case provides useful input on final overall project selection scores and quantifying the low, medium or high benefits as part of the final project portfolio prioritization.

In addition, this project portfolio and prioritization with DMS business case support may be an iterative process that can be adapted to changing utility circumstances, revised DMS requirements, desired implementation schedules based on available budgets and resources, and DMS technology.

This road map should help utility management focus on applications that will make their businesses more effective and the grid more efficient.

Shannon Messer is a consultant and certified project management professional (PMP) with Leidos Engineering. He has three decades of experience in engineering, operations, financial, technology and management leadership roles. He works with electric utilities of all sizes to help them address business challenges. He earned a Bachelor of Science in Electrical Engineering from the University of Kentucky and an MBA from Eastern Kentucky University. He is working on a master’s degree in project management.

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