Slide 1: Distribution Unit Cost Vegetation Management Benchmark Study: Introduction and Framework
Appendix 3. Presentation Slides DISTRIBUTION UNIT COST VEGETATION MANAGEMENT BENCHMARK STUDY INTRODUCTION AND FRAMEWORK 22‐Oct‐2015 William Porter Director of Research, Development and Industry Intelligence
Slide 2: Purpose of Benchmarking Study
PURPOSE OF BENCHMARKING STUDY The objectives of this study by CN Utility Consulting (CNUC), enabled by peer and longitudinal comparisons, are: • To help Hydro One comply with Ontario Energy Board’s (OEB) directives (EB2013‐0416), • To identify best management practices, • To identify measurements to
Slide 3: The Vegetation Management Study Team
THE VEGETATION MANAGEMENT STUDY TEAM • Project team members: – William Porter: Director of Consulting of CNUC and Project Lead – Nina Cohn: Statistical Analyst [CNUC’s Senior Analyst] – Stephen Cieslewicz: President of CNUC and Project and Expert Witness Advisor and Witness • 60 years of experience
Slide 4: CNUC Background and Related Projects
CNUC BACKGROUND AND RELATED PROJECTS Projects relevant to the current Hydro One Benchmarking Study • CNUC has been performing comprehensive benchmarking of UVM programs since 2002 and has data dating back to 1997. • The team is comprised of the authors of the UVM Benchmark & Industry Intelligence pu
Slide 5: Benchmarking Study Framework
BENCHMARKING STUDY FRAMEWORK Hydro One Distribution UVM Benchmarking Study Survey Design, A Review of Participation, Data Recommendations Hydro One’s Data Analysis and Management and Conclusions Program Deployment Regulatory and Literature Review
Slide 6: Hydro One Program Review
HYDRO ONE PROGRAM REVIEW • Data is collected in five datasets, entire company and four zones: – Hydro One – Northern – Southern – Central – Eastern • Longitudinal internal study of the five datasets
Slide 7: 2009 Criteria for Choosing Appropriate Comparators
2009 CRITERIA FOR CHOOSING APPROPRIATE COMPARATORS • 2009 comparator locations based on climate conditions, growth, storm paths, and forest canopy cover: – Around Ontario – Northeastern North America – Western North America – Southeastern North America • 2009 customer density: – ≤ 30 customers per c
Slide 8: Choosing Current Study Comparators
CHOOSING CURRENT STUDY COMPARATORS • Peer comparators – 2009 criteria – Unit and categorical comparisons – Total productivity factors • General comparators – Policies and procedures – Best practices – Regulatory drivers – Workforce
Slide 9: Comparators for 2015-2016
COMPARATORS FOR 2015‐2016 The following two slides are select lists of North American companies that have participated in CNUC benchmark surveys and who are potential comparators for this study Additional companies may be invited
Slide 10: Recent Distribution Benchmarking Participants - 31 Companies
RECENT DISTRIBUTION BENCHMARKING PARTICIPANTS ‐ 31 COMPANIES Alabama Power Company [AL, USA] Northern Indiana Public Service Ameren Illinois Company (AIC) [IL, USA] Company [USA] Appalachian Power Company [VA/WV, USA] Northern States Power – MN [USA] Avista Utilities [WA/ID/OR, USA] Northern States
Slide 11: Additional Recent Benchmarking Participants - Special Topics
ADDITIONAL RECENT BENCHMARKING PARTICIPANTS ‐ SPECIAL TOPICS 17 ADDITIONAL COMPANIES ATCO Electric [AB, CAN] New Brunswick Power [NB, CAN] Con Edison Inc. [NY, USA] Nova Scotia Power Inc. [NS, CAN] Duke Energy Corporation [NC, USA] Puget Sound Energy Inc. [WA, USA] ENMAX Power Corporation [AB, CAN]
Slide 12: Survey Design and Strategy
SURVEY DESIGN AND STRATEGY Defining and Gathering Data: • Utility characteristics • Productivity Labour Hours, Work Types, Equipment, Costs, and Cycles • UVM Practices • Safety • Reliability • Workforce characteristics • Regulatory Policies
Slide 13: Methodology for Analysis
METHODOLOGY FOR ANALYSIS • Data Management and Analysis • Normalizing measurements to reflect total productivity factors • Identifying Trends and Best Management Practices • Modeling Efficiencies • Forecasting Workload
Slide 14: Total Productivity and Efficiency Factors
TOTAL PRODUCTIVITY AND EFFICIENCY FACTORS – Tree density – Customer density/customer service – Weather/catastrophic events – Cost of living indices – Reliability measurements – Terrain and site characteristics – Forest composition and health – Worker turnover – Safety – Environmental Quality
Slide 15: The State of the UVM Industry in North America
THE STATE OF THE UVM INDUSTRY IN NORTH AMERICA Is Reliability Centered Maintenance (RCM) a standard of care for UVM?
Slide 16: Understanding the UVM Industry
UNDERSTANDING THE UVM INDUSTRY UTILITY VEGETATION MANAGEMENT (UVM) PROGRAM DRIVERS Weighted Ranking of the Importance of Each UVM Objective 2002 2006 2012 2013 2014 1. Reliability 1.5 2.0 2. Safety 2.5 3. Comply with Specific Laws 3.0 3.5 4. Cost Effectiveness 4.0 4.5 5. Customer Service 5.0 6. Prev
Slide 17: Safety: How to Measure Success
SAFETY: HOW TO MEASURE SUCCESS •Electrocutions in the public sector •Average percent of trees in contact at time of maintenance •The frequency and costs of fires caused by trees and power lines •incident reporting is not a true measure of line clearance safety •Tree and power line contacts are an un
Slide 18: Risk Tolerance: Percent of Trees in Contact
RISK TOLERANCE Trees in Contact at Time of Maintenance Sample Size: 17 Average: 40% Q1: 15% Median: 35% Q3: 60% 90% 80% 75% 80% 70% 70% Percent of Trees in Contact 70% 60% 60% 60% 60% 50% 50% 35% 35% 35% 40% 30% 15% 15% 20% 10% 8% 10% 1% 0% 0% BB BD AH AA AP AZ AF AO BE AN AE AW AR AG AI AD AJ Compa
Slide 19: Cost: What Is the Value of Effective Utility Vegetation Management?
COST: WHAT IS THE VALUE OF EFFECTIVE UTILITY VEGETATION MANAGEMENT? • The risk of electrical • Electric reliability has gained the contacts, accidents, most attention by regulators fires and increased customer interruptions has been significant enough to make a case for adopting best management prac
Slide 20: Preferred vs. Deferred Maintenance
PREFERRED VS. DEFERRED MAINTENANCE If a property owner, private tree company or worst of all, a child enters a tree that obscures the presence of a single phase primary tap and there is an injury or fatality, then the utility has suddenly lost all of the gain from taking a risk with trees that have
Slide 21: Getting to Know the Customer
GETTING TO KNOW THE CUSTOMER Recorded Data about Customers Who Own Properties That Require UVM The UVM dept knows percent of overhead customers have trees that routinely require 10% UVM A record is kept on customers that have vegetation near overhead lines on their 25% property Vegetation data and p
Slide 22: Industry Perception of Workload
INDUSTRY PERCEPTION OF WORKLOAD • The UVM customer base is a subset of the utility customer population • How many customers (meters) have UVM performed on their property? Question asked in survey • 45% of utilities perceive their workload as 100% of their electric customers • Is UVM is viewed as a s
Slide 23: System Reliability
SYSTEM RELIABILITY The efficacy of a program isn’t just measured by how long it has gone without an outage but rather how well it can prove the conditions that cause an outage won’t happen in the future.
Slide 24: Reliability: A Change in UVM Practices
RELIABILITY: A CHANGE IN UVM PRACTICES • In the past, the UVM goal was to create enduring airspace between trees and conductors • Current UVM objectives have been realigned to fit budget constraints, realistic schedules and greater tolerance for tree/wire conflicts • Reliability metrics have been us
Slide 25: Reliability Centered UVM Challenges
RELIABILITY CENTERED (RC) UVM CHALLENGES • What causes the system to fail the most often? • What kind of outages have the longest duration? • Which outages impact the most customers? • Which outages interrupt the most load?
Slide 26: Trends in the UVM Industry
TRENDS IN THE UVM INDUSTRY VEGETATION‐RELATED SAIDI/SAIFI TO MEASURE UVM EFFICACY Reliability Metrics Used for Utility Vegetation Management Planning and Evaluation Sample Size: 27 MAIFI 4% CAIFI 4% CAIDI 48% SAIDI 59% SAIFI 70% 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of Companies that Use Each M
Slide 27: Problems with UVM Reliability Centered Management
PROBLEMS WITH UVM RELIABILITY CENTERED MANAGEMENT • Less emphasis on safety • Increased cost of reactive maintenance • Unpredictable reliability once trees are in contact with conductors • Down stream customers experience more tree‐related outages • Inadequate emphasis on grid resiliency to high int
Slide 28: Designating Major Event Days
DESIGNATING MAJOR EVENT DAYS Major versus Non‐Major Event Tree‐Related Outages: Average Annual Percent in Each Category for Years 2010 ‐ 2013 Sample Size: 19 Averages: Non‐Major Event: 69% , Major Event: 31% Median: 72% 100% 7% 11% 15% 16% 18% 20% 22% 90% 25% 27% 28% 31% 32% 32% Percent of Tree‐Rela
Slide 29: Are Industry Reliability Metrics a Good Measure of Vegetation Conditions?
ARE INDUSTRY RELIABILITY METRICS A GOOD MEASURE OF VEGETATION CONDITIONS? A COMPARISON OF COMPANIES X, Y AND Z • X is a large UVM reliability‐centered maintenance company with best‐in‐class electric reliability performance • Y is a large compliance‐centered, multiple objectives performance company w
Slide 30: Tree-Related SAIFI Comparison
TREE‐RELATED SAIFI COMPARISON Tree‐Related Non‐Major Event Day SAIFI Five‐Year Average 2009 ‐ 2013 Average: 0.258 Q1: 0.110 Median: 0.165 Q3: 0.314 1 Tree‐Related Non‐MED SAIFI 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.112 0.110 0.110 0.2 0.1 0 J C T S Y Z X O R E Q N K G H A I B L M Company Code
Slide 31: Tree Related SAIDI
TREE RELATED SAIDI Tree‐Related Non‐Major Event SAIDI Five Year Average 2009 ‐ 2013 Average: 51.3 Q1: 14.0 Median: 24.9 A3: 60.0 250 Tree‐Related Non‐MED SAIDI in Minutes 200 150 100 50 17.3 11.6 10.7 0 J C S Z X O Y R T Q H E K N G I A B L M Company Code
Slide 32: Total Number of Tree-Related Outages
TOTAL NUMBER OF TREE‐RELATED OUTAGES 0.291 (0.168/mile) Non‐MED Tree‐Related Outages per Distribution Pole Kilometre Five Year Average 2009 ‐ 2013 Average: 0.111 Q1: 0.068 Median: 0.089 Q3: 0.134 Non‐MED Tree‐Related Outages 0.30 Per Pole Kilometre 0.25 0.081 (0.131/mile) 0.20 0.15 0.015 (0.024 /mil
Slide 33: Reliability Can Improve While Tree-Related Outages Increase
RELIABILITY CAN IMPROVE WHILE THE NUMBER OF TREE‐RELATED OUTAGES INCREASE Comparison of Non‐Major Event Outages and SAIFI for Company X 2006 ‐ 2010 18,000 0.14 16,000 Number of Non‐Major Event Outages 0.12 14,000 0.1 Non‐Major Event SAIFI 12,000 10,000 0.08 8,000 0.06 6,000 0.04 4,000 0.02 2,000 0 0
Slide 34: An Effective UVM Program Has to Look Beyond Current Reliability
AN EFFECTIVE UVM PROGRAM HAS TO LOOK BEYOND THE CURRENT RELIABILITY PICTURE Average Number of Tree‐Related Outages per Circuit versus Number of Years Since Vegetation Was Managed 6 Average Number of Outages per Circuit 5 4 Rural: r = 0.960, p < 0.001 3 2 1 Suburban: r = 0.868, p < 0.001 0 0 2 4 6 8
Slide 35: What Do Customers Pay for UVM?
WHAT DO CUSTOMERS PAY FOR UVM? RESIDENTIAL 38% AND INDUSTRIAL/COMMERCIAL 62% OF ELECTRICITY SALES Average Annual Cost of UVM per Customer Sample Size: 30 Average: $35.88 Q1: $17.01 Median: $26.98 Q3: $54.60 $160 $140 Cost per Customer in CAD $120 $100 $80 $39.00 $37.14 $60 $16.38 $40 $20 $0 C U R O
Slide 36: UVM Funding: A Perennial Problem
UVM FUNDING: A PERENNIAL PROBLEM Percent of Companies with Highly Adequate, Somewhat Adequate or Inadequate Budgets in 2014 31% Adequate 59% Not Adequate 10% Somewhat Adequate Inadequate budgets were characterized as follows: •Significant annual fluctuations •Lower than the needs of the approved pro
Slide 37: Industry Reliability Indices Are Inadequate for Assessing Program Efficiency
INDUSTRY RELIABILITY INDICES ARE INADEQUATE FOR ACCESSING THE RELATIVE EFFICIENCY OF A PROGRAM • Outages per kilometre is a better indicator of vegetation conditions • Measurement of program efficiency should not rely primarily on reliability • Program efficiency should include other stated objectiv
Slide 38: Key to a Successful UVM Program: Adequate Funding and Customer Acceptance
KEY TO A SUCCESSFUL UVM PROGRAM, ADEQUATE FUNDING AND CUSTOMER ACCEPTANCE Utilities can facilitate the relationship between the utility, the regulator and the customer by improving the data they collect and by providing clear analysis that proves compliance to UVM regulations and shows improvements
Slide 39: Hydro One Study Horizons
HYDRO ONE STUDY HORIZONS • Best management practices and opportunities for gaining efficiency • Balanced objectives and risk tolerances • Measurable performance against industry trends • Modeling the system for various scenarios • Forecasting costs, including cost of deferred maintenance • Opportuni
Slide 40: Questions?
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Slide 41: Distribution Total Factor Productivity Study
Distribution Total Factor Productivity Study Stakeholder Engagement Meeting STEVE FENRICK FENRICKS@POWERSYSTEM.ORG WWW.POWERSYSTEM.ORG OCTOBER 22, 2015
Slide 42: PSE Services
PSE Services 2 Utility Automation Economics & Research Rates & Financial • Technology Work Plans • Load Forecasting Planning • Integration, Testing, Training and • Statistical Performance • Revenue Requirement Studies Support Measurement (Productivity & • Class Cost of Service Studies • Cyber Securi
Slide 43: My Experience
My Experience 3 Steve Fenrick (Leader, Economics & Market Research) Worked on empirical TFP and benchmarking research for 3rd Generation IR (while at Pacific Economics Group) Engaged by the Ontario Energy Board to produce the OM&A annual stretch factor updates (2010-2013) Peer group benchmarki
Slide 44: Agenda
Agenda 4 Section 1: Project Overview Section 2: Empirical Approach Section 3: Incorporating TFP Drivers into the TFP Measure Section 4: Project Next Steps
Slide 45: Project Overview
Project Overview 5 Board’s March 12, 2015 Decision in EB-2013-0416, page 17: “The OEB sees value in Hydro One measuring its own total factor productivity over time to be able to demonstrate improvement in productivity to its customers and the OEB. The OEB leaves it to Hydro One to determine its pr
Slide 46: Project Overview
Project Overview 6 In 4th Generation IR, the Board Staff’s expert developed industry TFP trends The Board’s method was based on developing an X-factor for rate adjustments, not for providing a comprehensive view of performance Board’s November 21, 2013 Decision in EB-2010-0379 stated on page 17:
Slide 47: Project Overview
Project Overview 7 Project Objectives include: 1. Provide the Board and stakeholders with Hydro One’s own TFP trends starting in 2002 through 2022 Variable projections estimated by Hydro One will be used to calculate TFP projections from 2015 and beyond 2. Build upon the 4th Generation IR TFP meth
Slide 48: Empirical Approach
Empirical Approach 8 From the Staff’s consultant PEG in 4th Generation IR proceeding: ∆ ∆ ∆ Outputs = customers, total kWh deliveries, system capacity peak demand Inputs = Capital & OM&A Output choice was logical when setting a TFP trend for a rate setting application, because revenues are p
Slide 49: Empirical Approach
Empirical Approach 9 Other possible TFP drivers that the TFP study will investigate: Changes in reliability (SAIFI & SAIDI) during the 2002-2022 period Changes in customer service levels Environmental output Regulatory outputs and costs Input price inflation of Hydro One Other drivers as
Slide 50: Incorporating TFP Drivers
Incorporating TFP Drivers 10 Two possible approaches: 1. Empirical modeling 2. Hydro One internal “added cost” estimates Wherever possible, PSE will prefer empirical modeling based on externally-derived evidence in incorporating TFP drivers If no model can be developed, Hydro One “added cost” es
Slide 51: Incorporating TFP Drivers
Incorporating TFP Drivers 11 Working Assumptions: 1. Reliability is an “output” of an electric distributor and is positively correlated with cost (i.e., if reliability improves then cost is likely to increase) 2. Customer service is an “output” and is positively correlated with cost 3. Meeting more
Slide 52: Project Next Steps
Project Next Steps 12 1. Modify TFP study plan based on feedback 2. Data and information gathering Hydro One interviews on possible TFP drivers Hydro One data and information gathering Industry sample data gathering 3. Analysis on incorporating TFP variables Reliability, customer service, en
Slide 53: Thank You
13 Steve Fenrick Leader, Economics & Market Research Group 608-268-3549 Thank You: 608-334-5994 (mobile) fenricks@powersystem.org
Slide 54: Distribution Pole Replacement and Station Refurbishment Unit Cost Benchmarking Studies
Distribution Pole Replacement and Station Refurbishment Unit Cost Benchmarking Studies Stakeholder Session #1 October 22, 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
Slide 55: Agenda
Agenda Section 1 » Overview Section 2 » Approach Section 3 » Process and Metrics Section 4 » Next Steps Section 5 » 2
Slide 56: 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 57: 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 58: Goals and Objectives
Overview Goals and Objectives Design and implement a robust benchmarking study of Hydro One’s distribution 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 asset demogr
Slide 59: Project Plan
Approach Project Plan » Introductions, sccpe, logistics Project Kickeff » Finalise timeline and work plen » Roles, responsibilities, assignments » Metrics and considerations for identifying peer group wr » Formalise preliminary study design, e g , peergroup, Project Structure Setup | comparator char
Slide 60: Panel Design
Approach Panel Design 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 2: Select a panel
Slide 61: Peer Group Selection
Approach Peer Group Selection Step 1: Identify demographics (e.g., volume, type and age of Dx poles, number and type of Dx substation projects, climate, geography, customer density.) Step 2: Establish appropriate sample size Step 3: Filter Existing Step 4: Identify and Benchmarking Community Recruit
Slide 62: Targeted Companies
Approach Targeted Companies B.C. Hydro Manitoba Hydro 8 Ontario Distribution SaskPower Hydro-Québec Nova Scotia Companies: Power • PowerStream (GTA) • Veridian (GTA) Central Maine Power • Horizon (Niagara Peninsula) • Greater Sudbury and/or Thunder New York State E&G Bay (Northern Ontario) DTE Roche
Slide 63: Process and Metrics: Pole Replacement
Process and Metrics Pole Replacement Evaluation Information Documentation Strategy Improvement Develop Pole Execute Document / Perform Follow Archive Infrastructure Inspection Archive Up Or Treatment Program Routine Inspection Emergency Results Results Treatment › # Of poles › % inspected › Rotation
Slide 64: Process and Metrics: Substation Refurbishment
Process and Metrics Substation Refurbishment Evaluation Information Preparation Documentation Strategy Improvement Develop the Execute Document / Design The Perform Record new program substation archive solution construction asset evaluation inspection information routines and evaluation results › #
Slide 65: 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 process and metrics as necessary » Data gathering › Hydro One internal data gathering ‒ Interviews ‒ Complete a questionnaire › Peer group
Slide 66: Appendix
Appendix NAVIGANT
Slide 67: Glossary: Pole Replacement
Glossary Pole Replacement Term Definition Pole replacement Pertains to all the activates related to managing the wood pole assets # of poles Approximate number of poles, in thousands, owned by the utility Pole demographics Segmentation of the population of poles based on age (in service) Begin inspe
Slide 68: Glossary: Substation Refurbishment
Glossary Substation Refurbishment Term Definition Distribution substation Projects that result in the replacement of multiple substation equipment components at an existing refurbishments distribution substation site # of stations Number of distribution substations in service at the company Substati