ABSTRACT
As was stated previously, reliability and service quality are very important, but “cost is king” in almost all-electric distribution decisions, both those made by consumers and by utilities. Every decision contains or implies certain costs: equipment, installation labor, operating, maintenance, losses, and many others. Regardless what type of paradigm is being used, and whether traditional or new technologies are being considered, planners and decisionmakers must deal with cost as a major element of their evaluation. Many planning decisions revolve around selecting from alternatives on the basis of when they call for money to be spent. Two plans might be equal with respect to capacity and reliability, but different in both when and how much they require to be spent: one might eventually spend a lot, but only in the long run; the other might spend less, but call for more initial investment. At what point is the planner justified in picking the larger total expense because most of it lies far into the future? This chapter provides a brief tutorial on engineering economics for planning to provide a basis for the methods applied later in the book. Section 5.2 reviews the major elements of cost. Section 5.3 looks at the time value of money and future-cost discount methods. Benefit cost analysis is covered in section 5.4, and marginal benefit cost analysis, a cornerstone of aging infrastructure planning, in section 5.5. Only a quick review is given here. More comprehensive treatment is available in books listed at the end of this chapter.
