Slide 1: Stakeholder Consultation Distribution Custom Rate Application 2015-2019
Stakeholder Consultation Distribution Custom Rate Application 2015‐2019 Stakeholder Session #3 October 16, 2013
Slide 2: Agenda
Agenda 1:00 p.m. Registration Allan Cowan, Director Major Applications 1:05 p.m. Welcome Hydro One Networks 1:10 p.m. Introductions and Agenda Bob Betts, Facilitator, OPTIMUS|SBR Allan Cowan, Director Major Applications 1:20 p.m. 2015‐19 Distribution Application Hydro One Networks Glenn Scott, Direc
Slide 3: Facilitator's Remarks
Facilitator’s Remarks Introductions Facilitator, Bob Betts & OPTIMUS | SBR support team Meeting Facilities Safety Review Note taking process Participant Introductions 3
Slide 4: Meeting Process
Meeting Process Mobile phones “Off” or “Silenced” Avoid side discussions while others speaking All questions are good ones All comments are appreciated Materials and notes will be posted on Hydro One’s Regulatory Website: www.HydroOne.com/RegulatoryAffairs 4
Slide 5: 2015-19 Distribution Application
2015‐19 Distribution Application 5 year Custom Cost of Service application, including: Annual Adjustments / Adjustments outside of normal course of business, Rate Smoothing, and Annual Reporting Metrics Study Inputs into Plan: Rate Class Review, Seasonal Rate Initiative, Line Loss Study
Slide 6: Business Planning Process
Business Planning Process October 16, 2013 Glenn Scott Director, Corporate Planning & Finance 6
Slide 7: Overview
Overview Hydro One undertakes a rigorous planning process on an annual basis For 2013 the planning process will produce a 2014 budget and 2015‐2019 Business Plan Provides the foundation for our 2015 to 2019 distribution rate application It is a detailed bottom up planning exercise with execu
Slide 8: Business Planning Process
Business Planning Process Strategic Direction & Goals Established by Senior Management Investment Plan Prioritization Planning Assumption, Economic Outlook Developed Consolidated 2014 2015 – 2019 Budget and 2015‐ Board of Directors Corporate Distribution 2019 Business Plan Approve Distribution Suppo
Slide 9: Planning Inputs
Planning Inputs Business Safety Customers Values & Reliability Objectives Environment Employees Shareholder Value Productivity Capital Programs Operational External / Risk Investment Market Factors Plans Influences Condition Market Rules Performance Customer Feedback Utilizat
Slide 10: Business Model
Business Model Debt Equity Capital Structure 60/40 Rate Base X Cost of Capital Return on Capital + OM&A + Depreciation + Taxes = Revenue Requirement 5
Slide 11: Planning Assumptions
Planning Assumptions Economic forecast Asset condition Customer and supply growth projections Government initiatives Regulatory requirements 6
Slide 12: What is Different?
What is Different? Historically each year Hydro One’s Board would approve a 1 year budget and 2 year outlook based on a 5 year business plan For this year’s process Hydro One’s Board will approve a 1 year budget and a 5 year business plan to support the 5 year custom filing New Tools and Capab
Slide 13: How has Hydro One reflected the OEB's enhanced requirements?
How has Hydro One reflected the OEB’s enhanced requirements? Customer Voice Customers want Hydro One to: − Maintain or reduce their total bill − Meet commitments and timelines for planned outages; ensure accurate and timely ETR for unplanned outages − Maintain reliability for residential custome
Slide 14: Investment Planning Process
Investment Planning Process Identifies the best timing and level of investment to minimize risk, maximize savings, and meet our corporate values and targets Applies pre‐determined constraints and uses data analytics to prioritize investments Strikes a strategic balance between Capital (replace
Slide 15: Investment Levels
Investment Levels Incremental Investment Funding Levels Relative Increasing Risk Funding Lower Asset Optimal Intermediate Higher Vulnerable 10
Slide 16: Measuring Risk
Measuring Risk Below shows residual (left‐over) risk of each investment alternative Consequence Very Likely P Likely r o b Medium a b Unlikely i l Remote i t y Unexpected Minor Moderate Major Severe Worst Case Risk Level Low Medium High 11
Slide 17: Business Plan Finalization and Approval
Business Plan Finalization and Approval Senior management reviews results, including the impact on customer rates and approves the final investment plan and corporate support costs Consolidated Business Plan reviewed and approved by the Hydro One Board of Directors 12
Slide 18: Asset Investment Planning & Asset Analytics Demo
Asset Investment Planning & Asset Analytics Demo October 16, 2013 Lyla Garzouzi Manager, Distribution Development 18
Slide 19: Electricity Utility of the Future
cn H Consumers Electricity Utility of the Future aaa i new information and applications (Smart meters, TOU Portal, Outage App, CIS, IHDs) Distribution Modernization é + Initial roll-out of smart grid technology in Bruce and Grey Counties to remotely diagnose problems and . prlasveeburee asada increa
Slide 20: Asset Analytics
Asset Analytics A suite of tools to… Make corporate data accessible Analyze based on consistent risk factors Visualize analysis and assets 3
Slide 21: Why?
Why? Benefits Ability to make more effective investment decisions and invest in the highest impact highest criticality areas Rationalization of work programs Universally accessible visualizations of asset priority and status 4
Slide 22: How?
How? Overall Rating or Asset Risk is determined by assessing the following risk factors: Demographics Conditions Performance Criticality Utilization Economics 5
Slide 23: Asset Analytics Demonstration
Asset Analytics Demonstration Lower Risk Higher Risk 0 50 100 6
Slide 24: Compensation Cost Benchmarking Study
Compensation Cost Benchmarking Study Allan Cowan October 16, 2013 Director, Major Applications Iain Morris Consultant, Mercer 24
Slide 25: Overview
Overview In the 1st Stakeholder Session for the 2015‐19 Custom Distribution Rate Application held on April 29th, 2013; stakeholders inquired if the compensation study would be updated over the period? Hydro One listened and undertook a new Compensation Study in preparation for the 5 year Custom
Slide 26: Compensation Cost Benchmarking Study Hydro One Networks Inc.
COMPENSATION COST BENCHMARKING STUDY Hydro One Network Inc. 16 October 2013 Preliminary Findings
Slide 27: Agenda
Agenda • Features • Determining Benchmark Positions • Determining the Peer Group • Total Compensation – Elements – Methodology • Preliminary Results (Hydro One P50 relative to Market P50) • Preliminary Results (Hydro One P50 relative to Market Average - Overall) MERCER 1 Preliminary Findings
Slide 28: 2013 Compensation Cost Benchmark Study Features
2013 Compensation Cost Benchmark Study Features • Below are some of the major features of this year’s study: – Assesses regulated Transmission and Distribution utilities’ compensation costs benchmarks across Canada – Conforms to best industry standards for independence, testability and repeatable ma
Slide 29: 2013 Compensation Cost Benchmark Study Features (cont'd)
2013 Compensation Cost Benchmark Study Features (cont’d) • Enables reasonable comparison to the 2011 and 2008 studies and provides trending analysis for Hydro One’s next application • To balance the repeatability and durability of results obtained, the scope of the 2013 study was enhanced by targeti
Slide 30: Determining the Benchmark Positions
Determining the Benchmark Positions Need to represent different functions and organization levels • Individual jobs – Stable job content that is well understood – Large number of incumbents – Found in other organizations • Benchmark jobs or classes in aggregate – Represent all major functions – Repr
Slide 31: Benchmark Positions
Benchmark Positions Hydro One Group Job # Benchmark Survey Title 1 Financial Director 2 Top Rates and Regulatory Affairs Executive 3 Senior Legal Counsel 4 Engineer F Non-Represented 5 Area Superintendent 6 Human Resource Manager / Consultant 7 Field Service Coordinator 8 Administrative Assistant 9
Slide 32: Determining the Peer Group
Determining the Peer Group • Similar approach to the 2011 study: Considered annual revenues or total assets between 33% and 300% of Hydro One’s 2012 annual revenue or total assets, from the following areas: Selection Criteria Type of Organizations Located in Canada • All Canadian Companies Closely r
Slide 33: Peer Group
Peer Group • Summarized below are the companies that were included in the compensation benchmarking: Company Name Revenue # of Employees 1 1,2 Hydro-Québec $12,228.0 21,000 BC Hydro Power & Authority $4,898.0 5,862 Ontario Power Generation $4,732.0 10,691 EPCOR Utilities* $4,036.0 4,036 ENMAX Corpor
Slide 34: Elements of Total Compensation
Elements of Total Compensation Focus on items that can be monetized • Base wages or salaries • Short-term incentives – Annual incentive plans – Productivity incentives • Long-term incentives – Various forms – Mostly at senior management level • Insured Benefits – Health, Dental, Life, Disability – C
Slide 35: Total Compensation Methodology
Total Compensation Methodology • Definitions and methodology: – Base Salary / Wage - Effective date: July 1st, 2013 – Total Cash Compensation - Base salary plus most recent short-term incentive or bonus paid – Benefits and Pensions - Applied relative value process to determine standard “employer pai
Slide 36: Total Compensation Methodology (Continued)
Total Compensation Methodology (Continued) • Definitions and methodology (Continued): – P50 - 50th percentile the middle point in a rank listing of data for a particular variable – Avg. or Average - Arithmetic mean the sum of data for a particular variable divided by the number of observations MERCE
Slide 37: Overall Total Compensation (P50) Weighted Average
Legend Preliminary Results 2013 Hydro One Position Relative to Market Overall – Total Compensation (P50) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the overall, preliminary results comparing Hydro One P50 to Market P50, by employe
Slide 38: Non-Represented Total Compensation (P50)
Legend Preliminary Results 2013 Hydro One Position Relative to Market Non Represented - Total Compensation (P50) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the preliminary results for the Non-Represented group comparing Hydro One
Slide 39: Professionals Total Compensation (P50)
Legend Preliminary Results 2013 Hydro One Position Relative to Market Professionals - Total Compensation (P50) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the preliminary results for the Professionals group comparing Hydro One P50
Slide 40: Power Workers Total Compensation (P50)
Legend Preliminary Results 2013 Hydro One Position Relative to Market Power Workers - Total Compensation (P50) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the preliminary results for the Power Workers group comparing Hydro One P50
Slide 41: Power Workers Total Compensation (P50) (cont'd)
Legend Preliminary Results 2013 Hydro One Position Relative to Market Power Workers - Total Compensation (P50) (cont’d) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the preliminary results for the Power Workers group comparing Hydro
Slide 42: Power Workers Total Compensation (P50) (cont'd)
Legend Preliminary Results 2013 Hydro One Position Relative to Market Power Workers - Total Compensation (P50) (cont’d) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the preliminary results for the Power Workers group comparing Hydro
Slide 43: Overall Total Compensation (Average) Weighted Average
Legend Preliminary Results 2013 Hydro One Position Relative to Market Overall – Total Compensation (Average) X 2011 Hydro One Position Relative to Market O 2008 Hydro One Position Relative to Market • Summarized below are the overall, preliminary results comparing Hydro One P50 to Market average, by
Slide 44: Mercer (Canada) Limited
Mercer (Canada) Limited
Slide 45: Thank you for attending!
Thank you for attending! Check our website for further information: www.HydroOne.com/RegulatoryAffairs Any questions or comments can be directed to: Regulatory@HydroOne.com