Ernst & Young report: risk-informed investment strategy critical
New York, 23 October 2012 — Power and utility companies should prioritize investment in aging pipelines and other critical assets using a risk-based assessment that considers the relative likelihood and consequence of catastrophic failure, according to a new report released today by Ernst & Young LLP.
The report, Managing the Risk of Catastrophic Failure: Developing a Risk-informed Strategy for Critical Assets, says asset management must be guided by more than mere compliance with state and federal regulations. A change in approach is critical, the authors say, given that many pipelines are past their intended service lives and significant increases in capital investments over an extended period of time will be needed to update these assets.
“It’s time for utilities to make the shift beyond compliance to a more proactive risk management approach,” said Roy Ellis, Executive Director, Ernst & Young LLP Power & Utilities practice and a co-author of the report. “Used correctly, Critical Asset Risk and Investment Planning (CARIP) can help utilities effectively manage risk and develop a compelling regulatory case that can accelerate the replacement of high-risk assets and lead to a more balanced risk sharing approach.”
Failure to act carries sizable risk, the paper says. A number of serious incidents in natural gas distribution systems have occurred in recent years, including an explosion in a populated area that could ultimately cost pipeline owners $2 billion to cover restitution and rebuilding.
Click here to download the paper.
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