A framework for maintenance and replacement of a network structured system

The asset management problem of a network owner operating in a regulatory climate is discussed in this paper. Typically, the networks of interest are water distribution systems, gas pipeline networks, and electricity supply networks. We look at how network investment projects, relating to refurbishment or replacement of existing assets and network expansion, may be prioritised under capital rationing. The objectives for prioritising such projects will be influenced by the regulator; the regulator may set future performance targets, and set caps on charges and capital expenditure. The implications of capital rationing and the relationship between capital investment and future performance and operating costs are considered through the notion of the marginal ‘cost’ of delaying projects. The effect of the uncertainty in the information that the owner currently possesses about the network is also addressed. An example is given to illustrate the framework presented.