Slide 1: Hydro One Density Study (2011) Stakeholder Presentation
Hydro One Density Study (2011) Stakeholder Presentation Prepared by London Economics International LLC & PowerNex Associates, Inc. March 22, 2011
Slide 2: Objective of stakeholder session
Objective of stakeholder session To determine whether stakeholders are in general agreement with the proposed methodology and to gather specific feedback Hydro One Density Study (2011): Stakeholder Presentation FACILITATOR PRESENTERS Andrew Poray Benjamin Grunfeld (LEI) ben@londoneconomics.com
Slide 3: Plan of presentation
Plan of presentation 1 Introduction Summary of Proposed Methodology Hydro One Density Study (2011): Stakeholder Presentation 3 Details of Proposed Methodology 4 Additional Discussion & Questions Introduction 3
Slide 4: LEI and PNXA were engaged by HONI to evaluate customer density and costs
LEI and PNXA were engaged by HONI to evaluate the relationship between customer density and distribution service costs The objectives of the engagement closely follow the Ontario Energy Board‟s (OEB‟s or the Board‟s) direction London Economics International LLC (LEI) and PowerNex Associates, Inc
Slide 5: Under HONI's current methodology a higher proportion of costs are allocated to rural classes
Under HONI‟s current methodology a higher proportion of costs are allocated to „rural‟ classes, relative to the number of customers Current density weighting factors are based on the apportionment of lengths of distribution feeders and the net book value of transformers to individual sub-classes I
Slide 6: The study will consider a number of specific questions
The study will consider a number of specific questions Is the observed cost Is there evidence Should HONI‟s of service difference showing a existing cost between high and relationship allocation low density between customer Yes No methodology and/or customers density and rate classifications compara
Slide 7: Plan of presentation
Plan of presentation 1 Introduction 2 Summary of Proposed Methodology Hydro One Density Study (2011): Stakeholder Presentation 3 Details of Proposed Methodology 4 Additional Discussion & Questions Introduction >> Summary of Proposed Methodology 7
Slide 8: The proposed methodology consists of two separate but complementary analyses
The proposed methodology consists of two separate but complementary analyses Econometric Analysis Engineering Analysis Hydro One Density Study (2011): Stakeholder Presentation Econometric analysis Direct assignment of using HONI operating HONI annual OM&A area data (OM&A and CAPEX cost data costs On
Slide 9: The econometric analysis will isolate the impact of customer density
The econometric analysis will isolate the impact of customer density on HONI‟s distribution service costs The analysis will focus Steps in Econometric Analysis specifically on HONI‟s operating areas Identify a utility cost function that includes inputs, outputs, and The econometric operating cha
Slide 10: The engineering analysis will identify the cost of serving specific groups of customers
The engineering analysis will identify the cost associated with serving specific groups of customers across HONI service territory The focus is to identify how Steps in Engineering Analysis HONI‟s costs vary across groups of customers with Select sample areas and different densities corresponding
Slide 11: Question: Other considerations
Question Hydro One Density Study (2011): Stakeholder Presentation Are there other considerations that should be included with these two approaches? Introduction >> Summary of Proposed Methodology 11
Slide 12: Plan of presentation
Plan of presentation 1 Introduction 2 Summary of Proposed Methodology Hydro One Density Study (2011): Stakeholder Presentation 3 Details of Proposed Methodology 4 Additional Discussions & Questions Introduction >> Summary of Proposed Methodology >> Details of Proposed Methodology 12
Slide 13: The econometric analysis will consider distinct inputs, outputs, and operating characteristics
The econometric analysis will consider a number of distinct inputs, outputs, and operating characteristics The analysis will look at two separate cost functions (OM&A only, and OM&A and capital) In most jurisdictions, including Ontario, data availability has restricted economists‟ ability to ana
Slide 14: Question: Other variables
Question Hydro One Density Study (2011): Stakeholder Presentation Are there other variables (inputs, outputs, operating characteristics) that should be considered in the econometric analysis? Introduction >> Summary of Proposed Methodology >> Details of Proposed Methodology 14
Slide 15: HONI's operating areas cover the entire province
HONI‟s operating areas cover the entire province Hydro One Density Study (2011): Stakeholder Presentation Source: HONI Introduction >> Summary of Proposed Methodology >> Details of Proposed Methodology 15
Slide 16: Customers per km2 by operating area
Hydro One Density Study (2011): Stakeholder Presentation 5 - - 50 10 20 30 40 10 15 20 Dryden Dryden Thunder Bay Walkerton Kapuskasing Kent Kirkland Lake Alliston Timmins Strathroy Customers per km2 Nipissing Listowel Kenora Beachville Customers per Line-km Algoma Cobden Lowest Quartile Cobden Nip
Slide 17: The engineering analysis will directly assign the majority of HONI's costs
The engineering analysis will directly assign the majority of HONI‟s costs The engineering analysis will utilize a “top-down” approach to assign costs The top-down approach starts with the highest level of costs, (i.e. the total aggregated OM&A and CAPEX related costs), and systematically works
Slide 18: Operational and customer/asset characteristics will define the assignment factors
A number of operational and customer/asset characteristics will be used to define the assignment factors Range of Assignment Factors Being Considered Assignment Factor Full Name Definition Replacement cost of assets in sample area (SA) / replacement AIR Asset Intensity Ratio cost of assets in operat
Slide 19: Assignment factors will be applied to each cost category
Assignment factors will be applied to each cost category Costs are generally tracked at one of three levels: provincial (e.g. engineering services); operating area (trouble calls); or feeder level (vegetation management) Assignment factors will be applied to operating area level costs Provinci
Slide 20: Question: Additional factors
Question Hydro One Density Study (2011): Stakeholder Presentation Are there any additional factors that should be considered and/or should any of the proposed factors be adjusted or enhanced? Introduction >> Summary of Proposed Methodology >> Details of Proposed Methodology 20
Slide 21: Data will be compiled from a number of HONI databases
Data will be compiled from a number of HONI databases HONI will assist in compiling the required data Four databases will be used: SAP Enterprise Resource Planning System Annual operating, maintenance, and administrative (OM&A) expenses as well as annual capital expenditures (CAPEX) and info
Slide 22: Selection and number of sample areas is critical
Selection and number of sample areas is critical in assuring statistical significance and confidence Sample areas will be selected such that they represent a range of high, medium, and low density customer groups The size and boundaries of sample areas will be chosen to ensure that they represen
Slide 23: Maps illustrating density of customers across the province
Using HONI‟s GIS system, it is possible to create maps which illustrate the density of customers across the province Hydro One Density Study (2011): Stakeholder Presentation Introduction >> Summary of Proposed Methodology >> Details of Proposed Methodology 23
Slide 24: Specific conclusions can be made from econometric and engineering analyses
Specific conclusions can be made based on the results of econometric and engineering analyses Results of the econometric analysis will: Identify to what extent differences in costs across HONI’s operating areas are explained by differences in customer density Determine whether one measure of c
Slide 25: Plan of presentation
Plan of presentation 1 Introduction 2 Summary of Proposed Methodology Hydro One Density Study (2011): Stakeholder Presentation 3 Details of Proposed Methodology 4 Additional Discussion & Questions Introduction >> Summary of Proposed Methodology >> Details of Proposed Methodology >> Additional Discus