ON BEHALF OF. respect to how Service Quality will be regulated as part of their Multi-Year Performance Based Ratemaking Plan (PBRPlan).

Transcription

1 C BEFORE THE BRITISH COLUMBIA UTILITIES COMMISSION OPENING STATEMENT OF BARBARA R. ALEXANDER CONSUMER AFFAIRS CONSULTANT ON BEHALF OF CANADIAN OFFICE AND PROFESSIONAL EMPLOYEES' UNION LOCAL 378 COPE) FORTISBC ENERGY FEI) AND FORTISBC FBC) APPLICATIONS FOR APPROVAL OF MULTI-YEAR PERFORMANCE BASED RATEMAKING PLANS FOR I. INTRODUCTION AND QUALIFICATIONS II. PURPOSE OF TESTIMONY: I evaluated the FBC/FEI's proposal with respect to how Service Quality will be regulated as part of their Multi-Year Performance Based Ratemaking Plan PBRPlan). I offer no opinion on whether PBR overall should be approved or its design other than the SQI; My opinion about design of the SQI is based on assumption that a multiyear PBR will be approved. III. THE SQI AS PROPOSED BY FEIIFBC SHOULD BE REJECTED DUE TO THE FOLLOWING DEFECTS: A. FBC/FEIhas not designed an SOl that reflects the "proper incentives." Rather, their proposal does not reflect any incentives for performance since the risk of non-performance is entirely borne by customers. Shareholders suffer no losses if service quality deteriorates during the PBR: Review process for an undefined significant level of deterioration shifts burden to stakeholders and consumers to document deterioration and establish entitlement to some unspecified remedy or regime adjustment during the mid-term review The extreme "off-ramp" remedy to end the PBR, or any move to impose significant changes or impose penalties once approved would be highly

2 2 controversial, litigious, and there would be no compulsion on the utilities to remedy the deficiencies while that process was pending; consumers would continue to suffer the deterioration and shareholders would continue to receive their earnings. B. FBC/FEI proposed Indicators eliminate actual performance standards for CAID!, SAIF!, Public Contact with Pipelines, and AIFR, thus eliminating any objective measurement of performance for these crucial indicators. This defect is particularly troubling since these are the areas in which one or more of the indicators have not been met in the past. The allegation that these indicators vary too much or their performance is outside the utility's control is not sustainable: o o o o CAIDI and SAIFI already exclude major storm events AIFR is a measure of the workplace safety culture and policies of management All of them have been and should continue to reflect an average of several year performance to eliminate short term" signals" It is typical to include such indicators in PBR plans in Canada and the us. C. FBC/FEIfails to include meaningful performance indicators in several areas: Use of the "index" approach that melds various data would tend to dilute the impact of any particular indicator and result in a "mushy" measurement that combines too many variables [see, e.g., the proposed Customer Satisfaction Index and the Billing Index] The First Contact Resolution indicator is flawed and should not be used Continuing to measure performance in areas that are routine and without any indication of adverse performance do not need to be included [e.g., Meter Reading, esp. with advent of AMI for electric] FBC/FEI do not measure whether they keep customer appointments for field work of any kind repair, meter exchange, etc.) and should do so

3 3 D. FBC/FEI fail to reflect any improvement in performance over the five year plan The elimination of benchmark performance requirements is particularly inappropriate None of the performance indicators require improved performance over the five year plan even though the Company promotes its "customer service" orientation and has invested in many projects and expenditures in the recent past that are designed to improve customer service quality and reliability of service The Telephone Service Factor for gas customers would deteriorate with a lower performance than what has actually occurred in the last several years [75%+ performance with a proposed 70% performance standard] and the Company has admitted that it manages the FBC call center so as to not obtain a higher performance level than 70%. IV. THE SQI SHOULD BE SIGNIFICANTLY REFORMED TO ENSURE THE "BALANCE" THAT FBC/FEI CLAIM IS INHERENT IN A PBR PLAN The Plan should include predetermined consequences for the failure to meet any performance standard in any year and the consequences should be calculated based on the degree or percentage of deterioration that occurred: Purpose should be to shift risk of non-performance from customers to shareholders 1% of retail revenues is a defensible amount and far less than the risk associated with some of the SQls that I have identified as precedent in my testimony My recommendation of the dollar amount that should be associated with a 1% deterioration in performance is explained in detail and is the same approach used in Maine Central Maine Power Co.) and Washington Puget Sound Energy) If the same indicator is missed two years in a row, the penalty amount should be doubled; Utilities should not be allowed to pay and ignore the problem.

4 4 No offsets among the indicators. Each is valuable: customers would not agree that a failure to answer the phone within a reasonable time is somehow excused because power was restored faster Utilities should not earn incentives for doing their job. The purpose of this SQI with penalties is to right the balance in light of the earnings potential and incentives under the PBR Compensation credits paid to customers as an annual credit with a report card of all results V. FBC/FEI'S REBUTTAL FAILS TO PROPERLY REFLECT FACTS AND EVIDENCE A. The Company's statement that the "base year costs do not reflect the costs that would be required to increase service levels in the manner suggested by Ms. Alexander" is not accompanied by any cost estimates, is made with no reference to any specific performance indicator most of which are based on actual historical performance and do not import any mandatory improvement), and fails to recognize that the Company has stated throughout this Application that it will deliver a high level of service quality to its customers and describes many investments and programs that are designed to improve service quality, yet none of the Company's indicators reflect any improvement over the five year plan. These include AMI, new CIS, Mandatory Reliability Standards, Call Center and Billing efficiencies, impact of synergies with shared services, new gas customer services. B. I never rejected or criticized the "balanced scorecard" and recognize its role in internal decisions about compensation and incentives. I only pointed to the incongruity of giving managers incentives for service quality performance yet failing to give any guarantees to customers when that performance fails to meet predetermined standards. C. Rejection for a benchmark for AIFR, CAIDI, and SAIFI is contrasted by other PBR plans in Canada and the Ll.S. D. The allegation that there are costs associated with meeting the 80% telephone service factor level rings hollow when no costs are identified, when the actual performance of FEI's call center is close to this standard already, and the Company fails to recognize that relatively minor changes in staffing levels at

5 5 certain high usage times of day or days of the week could result in meeting the proposed annual average without significant costs since most call center employees are required to work either part time or with flexible schedules. E. The allegation that CAIDI and SAIFI are somehow too variable to measure and subject to "external factors" has been rejected in most states and jurisdictions where enforceable annual standards are in effect. These metrics reflect annual average data for 365 days and already exclude major events in the same manner as recommended by FBC/FEI. This argument is specious. I would urge the BCUC not to adopt the lowest common denominator, in the form of the 20+Ll.S. jurisdictions that do not have reliability standards with penalties. I urge this Commission to rely on the best practices which are reflected in my recommended approach. F. If FBC and FEI are focused on customer service they should track whether they keep appointments and the reasons why appointments are not kept. They offer no reason to reject my approach other than arguing again that failure to keep an appointment may not be their "fault." They ignore my recommendation to track appointment not kept" due to Company reasons." If the customer fails to keep the appointment, obviously that would not qualify for a credit payment. I would also agree that a major weather event or declared emergency should also excuse keeping an appointment. G. With regard to the Public Contacts with Pipelines, the notion that the Company should be excused from experiencing more "contacts" with pipelines because the economy will ramp up ignores the duty of the utility to "ramp up" its educational and outreach efforts to prevent such incidents when there is reason to believe that additional activity is likely to occur. A public which interacts at times with the utilities' infrastructure is an inherent part of their operating environment. The pertinent question is how effectively they minimize risks arising from those interactions. H. The claim that this penalty structure reflects an "asymmetric risk" does not reflect that its real purpose is to create a balance in the PBR mechanism that the Company completely ignored when it shifted all risks of non-performance to customers and failed to propose any means by which earnings reflect nonperformance. What the Company gets in return for a meaningful and effective service quality mechanism is a PBR regime, with the loosened regulatory oversight which it entails, and the opportunity to increase shareholder return which flows from it.

6 6 VI. RESPONSE TO DR. OVERCAST, BLACK AND VEATCH A. Dr. Overcast's suggestion that it is the customer's fault when service quality deteriorates is a novel reason to avoid taking any responsibility for service quality delivered by a monopoly public utility that has not been adopted in any jurisdiction that I am aware of. B. The example given by Dr. Overcast is not a reflection of any proposal I have made. When a utility cannot keep an appointment due to actions of the customer, that would not meet the proposal I made that credits be paid for a missed appointment "for Company reasons." C. When reliability is recorded for 365 days per year and 24 hours a day and reported as an annual average, the suggestion that it is the customer's fault when the utility's performance deteriorates from a three year average standard is a suggestion that should be rejected out of hand since there is no evidence to support such a concern. In fact, the vast majority of outages are due to the impact of trees on power lines, reflecting a utility's obligation to undertake a vegetation management program, as well as the utility's management of the restoration of service when an outage occurs. D. Dr. Overcast's statement that the customer bears the risk under cost of service regulation is not correct. Frankly, it is astonishing to hear a regulated utility say that under its normal regulatory regime, all of the risk arising from substandard service is the customer's problem. First, in traditional cost of service regulatory practice, especially where test periods are lengthy, I would recommend that the Commission adopt enforceable performance standards. Second, when a traditional rate case is underway, the Commission and intervenors are able to review performance, customer complaints, and management's performance in delivering customer service and reliability of service and take this evidence into account in its establishment of the rate of return, thus achieving in a rate case what I have recommended occur in the PBR.

7 7 APPENDIX: My proposed Service Quality Indicators, reproduced here for convenient reference) 1. FortisBC Inc. Performance FBC's COPE's Comments on Proposed Measure Proposed Proposed Benchmark Benchmark Benchmark Telephone 70% of calls 80% of calls FBC should be required to Service Factor answered answered demonstrate improved non-emergency within 30 within 30 performance over time; the calls) seconds or seconds or less 80% answer time is less reasonable and reflects a best practice performance standard. SAIDI None Three-year FBC should be held rolling average accountable for actual with 2012 as reliability performance that minimum: 2.22 reflects improved performance over time. SAIFI None Three-year FBC should be held rolling average accountable for actual with 2012 as reliability performance that minimum: 1.64 reflects improved performance over time. All Injury None Three-year FBC should be held Frequency Rate rolling average accountable for employee based on the safety performance with a initial average three-year average from : benchmark, but excluding from this average due to deterioration. Customer None 8.5 Eliminate the complicated Satisfaction With index proposed by FBe, Recent the response to the Transaction with question about actual Call Center customer experience with a recent call center transaction should be I i

8 8 included. Field None $25 to customer New. The Company Appointments for failure to should offer customers an Kept keep appointment window and appointment for track whether the Company Company meets the reasons appointment window. Appointments not met due to customer reasons should not be included. Billing Index 5 None Eliminate from SQI due to historical performance and impact of future AMI system. Meter Reading 97% None Eliminate from SQI due to Accuracy historical performance and impact of future AMI system. First Contact 78% None Eliminate due to reliance Resolution on customer satisfaction survey results on recent transaction, as well as concerns abou t the dubious nature of the measurement protocol. Emergency 85% within None Eliminate from SQI. This Response Time two hours metric is not sufficiently important to include in the SQI since customers are more concerned with restoration time and not necessarily the arrival of the utility personnel at the trouble location for electric issues _._ outage

9 9 2. FortisBC Energy Inc: Performance FEI's COPE's Comments on Proposed Measure Proposed Proposed Benchmark Benchmark Benchmark Emergency 95% of Calls 95% of Calls The proposed benchmark Response Time Responded to Responded to is appropriate. within 60 within 60 minutes minutes Telephone 95% of 95% of The proposed benchmark Service Factor emergency emergency calls is appropriate emergency) calls answered within answered 30 seconds within 30 seconds Telephone 70% of non- 80% of non- FEI should provide the Service Factor emergency emergency calls same level of telephone non-emergency calls answered within call center performance as calls) answered 30 seconds FBe. within 30 seconds Meter Reading 95% 95% Retain due to manual Accuracy meter reading process for gas meters. All Injury None Rolling Three- FEI should be held Frequency Rate year average accountable for employee wi th initial safety performance with a standard at 2.08 three-year rolling average ). benchmark. Public Contact None Three year Retain with performance with Pipelines rolling average indicator due to public of number of line safety concerns and FEI's damages per obligation for customer 1,000 BC One education. Calls Received: ). Customer None 8.5 Rather than the Satisfaction with complicated index Recent Call proposed by FEI that

10 10 I Center reflects several questions, Transaction the response to the question about actual customer experience with a recent transaction is preferred. Field None $25 to customer New. The Company Appointments for failure to should offer customers an Kept keep appointment window and appointment for track whether the - Company Company meets the reasons appointment window. Appointments not met due to customer reasons cancellation; failure to show) or if there is a major storm event should not be included. Meter Exchange 95% None Eliminate and substitute Appointment the "missed appointment" customer credit. First Contact 78% None Eliminate due to reliance Resolution on customer satisfaction survey results on recent transaction and the dubious nature of the measurement protocol. Billing Index 5 None Eliminate due to historical performance.,