Risk and Spare Parts Inventory in Electric Utilities

With deregulation, utilities in the electric power sector face a much more urgent imperative to emphasize cost efficiencies as compared to the days of regulation. One major opportunity for cost savings is through reductions in spare parts inventory. Most utilities are used to carrying large volumes of expensive, relatively slow-moving units because of a high degree of risk-averseness. In this paper we discuss risk in the context of utilities, with a focus on nuclear power, and overview an ongoing research project that is aimed at incorporating risk and costs into a quantitative decision analysis framework for controlling spare parts inventories