Optimal allocation of resources to distribution investments using the analytic hierarchy process to balance the impacts of investments on safety, customer interruption costs, levelized annual revenue requirement, contribution to margin and other considerations

In least cost planning, investment alternatives are evaluated in terms of their impacts on levelized annual revenue requirement (LARR). This approach assumes impacts of investment alternatives on safety, reliability, profitability and other factors are equal for all alternatives. The limitations of this approach in utility planning are obvious. This paper describes an approach to allocating utility assets using an economic metric, the analytic hierarchy process (AHP) and linear programming (LP). This process is called value based budgeting (VBB). It simultaneously considers the impacts of distribution investments on safety, LARR, customer interruption costs, contribution to margin and other factors. AHP is used to quantify the benefits of investments. Next, a linear programming model selects a subset of projects that maximize total benefit while meeting a budget constraint. This paper describes the AHP including the process to identify the weights that are applied to each factor in the decision-making hierarchy.