Application of Risk Analysis in Prioritizing Investments in Terms of Value-Based Management and Power Quality

This paper presents a theoretical model for the prioritization process of investments for electric system expansion and improvement of quality levels for the supply of electricity from a distribution utility. Such model is based on the criteria of economic valued added (EVA) and the analysis in the risk-return plane. In this project a market model called tariff optimization (TAROT) was adopted, which allows the representation and calculation of the economic value added by the agents (consumers, companies, government, and society), as opposed to the classical methods that rely on the calculation of net profit. It presents an example of application of the model considering the real data of a power distribution company, where, from a candidate set of investments, whose risks and returns are known, a computer program is developed for computation of the prioritization according to a methodology and criteria based on a frontier of risk-return threshold (risk-return hurdle rates) resulting in an optimized sequence of executions.