Benefit and risk analysis of an automatic meter reading system for Électricité du Liban

This paper summarizes the benefit and risk analysis of a study for modernizing the electricity metering, billing and revenue collection systems for Électricité du Liban, the national power company of Lebanon. A cost/benefit analysis of the modernized system shows that the system has a payback period of 3.05 years. Like all economic evaluations, there are uncertainties associated with the estimated costs and benefits which could increase the value of the payback period. The purpose of this paper is to identify the important risks and other uncertainties that could affect the economic feasibility of the project and assess the potential impacts of these uncertainties. To achieve this objective, a Monte-Carlo type analysis is employed and a distribution of the expected payback period is determined. The benefits are modelled in two ways, using triangular and uniform distributions, while the costs are modelled using uniform distributions only. The choice of triangular distribution shows confidence in the initial estimates whereas using a uniform distribution implies that the variables could deviate substantially from the initial estimates. The payback period determined from both models is around 3 years (3.18 years when all input variables are modelled using uniform distributions, and 3.12 years when uniform distributions are used for costs and triangular distributions are used for benefits) with a maximum range of 2.2-4.7 years. The results of the risk analysis also indicate that the benefits from an aggressive revenue recovery process (identifying and reducing fraud and theft) have the most influence on reducing the project payback period. In summary, this paper shows that the proposed modernization project is economically feasible.