Analyzing Transformer Replacement Policies: A Simulation Approach to Reducing Failure Risk

Abstract

PSE&G and utilities nationwide face a considerable amount of operational and financial risk from the possibility of widespread transformer failure. The current policy that PSE&G uses for transformer replacement does not replace transformers until they are close to failure and is not sufficient to protect PSE&G from significant failure risk. This paper implements several replacement policies to reduce failure risk. It focuses on policies that utilize both chronological age and the number of faults experienced as criteria for replacement. The results show that these policies are effective at reducing failure risk while incurring significant opportunity costs. The final part of this paper explores the trade-off between failure risk and opportunity cost in order to inform the future decisions of the utility.