Slide 1: Transmission Cost Benchmarking Study Work Plan and Peer Selection
Transmission Cost Benchmarking Study Work Plan and Peer Selection Stakeholder Engagement Meeting August 6, 2015 D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G Confidential and proprietary. Do not distribute
Slide 2: Agenda
Agenda Section 1 » Overview Section 2 » Approach Section 3 » Peer Group Selection Section 4 » Performance Metrics Section 5 » Next Steps Confidential and proprietary. Do not distribute or copy. 2
Slide 3: Overview: Navigant
Overview Navigant » A global and independent consulting firm, Navigant’s reputation is for assisting our clients across core industries to address the critical opportunities and challenges of new markets, evolving customer demands, regulation and business model changes, new technologies, risk, and d
Slide 4: Overview: First Quartile Consulting
Overview First Quartile Consulting » First Quartile Consulting is the leading provider of benchmarking services in the transmission and distribution and customer service areas for utilities » Established in 2007, the leadership team has was together for 20 years prior to founding of 1QC › The 1QC te
Slide 5: Study Objectives
Overview Study Objectives Design and implement a robust and replicable benchmarking study of Hydro One’s transmission costs » The benchmarking study will: › Include an appropriate group of businesses to use as comparators/peers to Hydro One, taking into account a number of characteristics, including
Slide 6: Work Plan
Approach Work Plan » Introductions, scope, logistics Project Kickoff » Finalise timeline and work plan » Roles, responsibilities, assignments » Metrics and considerations for identifying peer group Project Structure Setup » Formalise preliminary study design, e.g., peer group, and Stakeholder compar
Slide 7: Benchmarking Experience
Approach Benchmarking Experience Significant experience conducting T&D benchmark studies » Refined approaches over time to improve data accuracy and validity › Introduced data validation comparisons › Began comparing results of different questions to identify outliers › Introduced a “data steward” f
Slide 8: Data Validation
Approach Data Validation Multiple activities ensure accurate data for comparisons » Detailed questionnaire asking for cost data in specific categories – FERC-based data and Questionnaire activity-based data Glossary & » Instructions defining significant terms, and describing what to include in vario
Slide 9: Selection Criteria
Peer Group Selection Selection Criteria Approaches to creating a pool of companies for a benchmarking study Approach 1: Concentrate only on comparing overall performance outcomes Panel 1: Select a homogeneous panel Approach 2: Investigate operating practices in order to find the best practices Panel
Slide 10: Companies Under Consideration
Peer Group Selection Companies Under Consideration Customers Service Territory Length of Lines Throughput Company (‘000) (sq. km) (km) (TWh) Austin Energy 440 700 1,000 12.6 B.C. Hydro 1,950 42,370 18,500 54.6 CenterPoint Energy – Electric (Houston, TX) 2,300 8,050 6,000 101.7 CPS Energy (San Antoni
Slide 11: Companies Under Consideration
Peer Group Selection Companies Under Consideration Retail Open Susceptible to Susceptible to Company Ownership Access Winter Storms Summer Storms Austin Energy Municipal Yes T B.C. Hydro Provincial S, I CenterPoint Energy – Electric (Houston, TX) IOU Yes T, H CPS Energy (San Antonio, TX) Municipal Y
Slide 12: Companies Under Consideration
Peer Group Selection Companies Under Consideration B.C. Hydro Manitoba Hydro New SaskPower Hydro-Québec Brunswick Hydro One Power Networks Central Maine Power New York State E&G Rochester G&E ComEd PECO Energy PSE&G PPL Electric Utilities BGE KCP&L Southern Westar Energy EKPC California Edison Tucso
Slide 13: Approach to Metric Selection
Performance Metrics Approach to Metric Selection Navigant and First Quartile recommend a balanced approach to metric selection » Selection Criteria › Balanced metrics (i.e. multi-dimensional) › Few enough to be manageable › Comparable across utilities » Level at which to track › Total transmission o
Slide 14: Metrics to Consider
Performance Metrics Metrics to Consider Four categories of performance to investigate » Costs › Capital › Operating, Maintenance, and Administrative (OM&A) » Reliability › Transmission lines › Substations » Safety » Staffing Confidential and proprietary. Do not distribute or copy. 14
Slide 15: Cost Metrics
Performance Metrics Cost Metrics Navigant and First Quartile recommend analysing the following cost metrics Per Per Cost Category Per Asset Kilometre Per MVA Substation Total Capital X Lines Total Capital X X Substation Total Capital X X Total Sustaining Capital X Lines Sustaining Capital X X Substa
Slide 16: Reliability Metrics
Performance Metrics Reliability Metrics Reliability metrics Transmission Lines Substations » Element total outage frequency (TOF) » Contribution To SAIFI » Element sustained outage frequency (SOF) » Contribution to SAIDI » Element Momentary outage frequency (MOF) » Transformer Failures per 1000 Tran
Slide 17: Safety and Staffing
Performance Metrics Safety and Staffing Safety and staffing metrics Safety Staffing » Recordable injury rate - combined for Substations » Wage rates for key jobs -- Journey-level line-worker, and Transmission lines substation electrician » Recordable injury rate - for Substations » Span of control -
Slide 18: Practice Area Investigation
Performance Metrics Practice Area Investigation The study objectives include identification of best practices for analysis » Decisions to be made › Level of depth to investigate ‒ Broad topics/processes at corporate level (e.g. Strategic Planning, Asset Management) ‒ Very localized practices (e.g. c
Slide 19: Practice Areas to Consider
Performance Metrics Practice Areas to Consider Seven categories to consider » Asset management » Capital project and portfolio management » System maintenance » Emergency response » Safety » Staffing » Support Confidential and proprietary. Do not distribute or copy. 19
Slide 20: Asset Management and Capital Project Portfolio Management
Performance Metrics Asset Management and Capital Project Portfolio Management Asset management and capital project portfolio management Asset Management Capital Project and Portfolio Management » Roles and responsibilities » Work plan development » Analytic approaches › Project identification » Repl
Slide 21: Operations and Maintenance
Performance Metrics Operations and Maintenance Operating practices Maintenance Staffing approaches › Planning › Outsourcing › Work management › Crew size / structure › Inspections › ROW management Safety programs › Outage planning Support functions Emergency response › Fleet management › Plans and p
Slide 22: Next Steps
Next Steps Several short-term and some long-term activities to prepare the comparisons » Follow-up from the stakeholder session › Respond to inputs › Modify the metrics and practice areas as necessary » Data gathering › Hydro One internal data gathering ‒ Interviews ‒ Complete a questionnaire › Supp