SUMMARY OF TRANSMISSION BUSINESS

Transcription

1 Filed: September, 0 EB-0-00 Schedule Page of SUMMARY OF TRANSMISSION BUSINESS.0 INTRODUCTION 0 Hydro One Networks Inc. is licensed by the Ontario Energy Board (the OEB or the Board ) to own, operate and maintain transmission facilities in the Province of Ontario. Hydro One s transmission system is one of the 0 largest in North America based on net book value and includes facilities that service connected customers and other transmitters province wide. These facilities comprise about % of the licensed transmission facilities in Ontario. This exhibit provides a summary of Hydro One s transmission business in Section. A discussion of the business model implemented within the Company is provided in Section. The manner in which investment programs are managed is set out in Section..0 CORPORATE MISSION To be an efficient and dynamic transmission and distribution business that is the best in North America in the areas of safety, customer satisfaction, reliability and shareholder value." The transmission aspects of this mission are achieved through the processes and activities outlined in this Application..0 STRATEGIC GOALS AND PERFORMANCE TARGETS Hydro One s strategic goals and performance targets are shown in Table below. The performance targets shown are for 0. The 0 and 0 investments and

2 Filed: September, 0 EB-0-00 Schedule Page of expenditures described in this filing are consistent with achieving these 0 targets and consistent with meeting the business values as described in, Tab, Schedule. 0 Strategic Goals Safety Focus on cultural change to create and maintain an injury-free workplace. Table Customer Service Become a more customer-focused company. Improve customer satisfaction. Build relationships with large and mid-size customers that reflect their commercial requirements. Reliability Maintain or improve reliability and service levels in the transmission system while expanding the system to meet Ontario's future needs. Employees Manage the challenges of labour demographics, productivity improvement, development of skills and retention of critical staff. Shareholder Maintain an effective borrowing capability through stable credit quality, and deliver stable financial returns. 0 Performance Target Zero serious injuries and zero serious near misses 0% customer satisfaction in all major segments Top quartile transmission reliability Attract, develop and retain productive employees Maintain A credit rating Allowed regulated return on equity Top quartile capital/operating efficiency Top quartile employee productivity

3 Filed: September, 0 EB-0-00 Schedule Page of.0 HYDRO ONE S TRANSMISSION BUSINESS. Transmission System Background Hydro One s transmission business comprises a high voltage system that operates at 00 kv, kv, 0 kv, kv and kv, and is designed to transmit electricity from directly connected generation systems to Local Distribution Companies ( LDCs ), and end-use transmission customers as of December, 0. 0 The simplified figure of the Transmission System is provided in Figure below. Figure Hydro One s Transmission System Transmission Transformation Connection Primary Distribution Feeder For illustrative purposes only, actual configuration may vary from case to case. Subtransmission Feeder

4 Filed: September, 0 EB-0-00 Schedule Page of 0 The Hydro One transmission system includes approximately,000 circuit kilometers of high voltage transmission lines and cables. The major components of the transmission lines are conductors, wood or steel support structures, foundations, insulators, connecting hardware and grounding systems. Hydro One owns transmission stations. The major components of transmission stations are transformers, circuit breakers, switches, bus bars, insulators, reactors, capacitors, connecting hardware, associated protection and control equipment, grounding systems and revenue meters. Hydro One also owns an extensive telecommunications network for the monitoring, control and protection of the power system. A detailed description of the Company s transmission assets is provided in Exhibit D, Tab, Schedule. These transmission assets also include facilities required for operation, protection, control, and monitoring functions necessary for the effective and efficient operation of the transmission system. These facilities include telecommunication equipment, protection and control equipment, the Ontario Grid Control Centre ( OGCC ) and the back-up operating facilities which serve as a fully redundant back-up to the OGCC. The OGCC monitors and controls the operation of the transmission system. Hydro One has interconnection facilities with neighbouring provinces and states, specifically Manitoba, Quebec, Minnesota, Michigan and New York. These interconnection facilities are designed to facilitate the transfer of electrical energy between Ontario and these jurisdictions. Actual import and export capabilities of the interconnections depend on limitations at the interface as well as within Hydro One s transmission system and transmission systems in other jurisdictions. Hydro One s transmission system is also connected to other transmitters representing about % of the licensed transmission facilities within Ontario. The other Ontario transmitters are Great Lakes Power, Canadian Niagara Power and Five Nations Energy.

5 Filed: September, 0 EB-0-00 Schedule Page of. Transmission Business Activities Hydro One s transmission business activities are regulated in nature and consist of expanding, maintaining, operating and sustaining the current assets to meet reliability standards and satisfy regulatory, environmental and legal requirements. In particular, Hydro One implements system expansion to: 0 accommodate load growth and new generation, alleviate internal system constraints, and increase interconnection capabilities with neighbouring utilities. The Company s regulated business activities include the management of its transmission assets, the supporting operations, maintenance, construction and engineering services, customer service activities and supporting research, environmental, and public/employee health and safety programs. The costs of all these activities are included in the revenue requirements for Hydro One s regulated transmission business. These activities are performed by a multi-disciplined workforce capable of performing tasks related to operating, maintaining and expanding the transmission business. A number of service centers are located throughout the Province to provide the required operating, maintenance, construction and restoration services. In order to carry out the work, these service centers provide base locations for the mobile workforce and contain essential infrastructure components such as: land and buildings for staff accommodation,

6 Filed: September, 0 EB-0-00 Schedule Page of transport and work equipment, including large work vehicles, off-road vehicles, small vehicles (trucks, cars and vans), and specialized units (snow mobiles, chippers, trailers), and minor fixed assets, including computers, test equipment, construction and maintenance tools and office furniture. 0 Also included in the regulated transmission business revenue requirements are expenditures for corporate functions and services, such as internal audit, strategy, human resources, legal and general counsel and secretary, finance, information management, performance management, regulatory, environment, planning and corporate affairs. The nature and costs associated with these corporate functions and services are discussed in Exhibit C, Tab, Schedule.. Electricity Industry and Regulatory Framework.. Industry and Regulatory Environment in Ontario In the restructured Ontario electricity industry the Ministry of Energy sets legislative and regulatory requirements through changes to the Electricity Act, and the Ontario Energy Board Act,. The Ontario Energy Board, with respect to Hydro One as a transmitter, sets transmission rates, issues codes and licenses, and grants approval for construction of new transmission lines greater that two kilometers. The Independent Electricity System Operator ( IESO ) administers the electricity market and directs the operation of the power system in Ontario. The transmission assets owned by Hydro One form about % of the IESO controlled transmission grid, which is essential for the operation of the IESO administered markets. The IESO controlled grid provides the infrastructure for transmitting large volumes of electrical energy from major

7 Filed: September, 0 EB-0-00 Schedule Page of generation sources to major load centers. In the restructured Ontario electricity industry, Hydro One provides transmission capacity. The IESO makes that capacity available to market participants. 0 The Ontario Power Authority ( OPA ) establishes new electricity supply contracts, sets provincial Conservation and Demand Management targets, forecasts long-term demand/supply requirements and establishes an Integrated Power System Plan ( IPSP ). With respect to transmission, the IPSP will identify the new or upgraded transmission required to incorporate new generation, relieve constraints on the transmission system and accommodate increasing electricity demand on an area supply basis. Hydro One is working cooperatively with the OPA in the development of the IPSP and will develop detailed plans and seek the necessary approvals to construct the transmission facilities. The Transmission System Code ( TSC ), issued by the OEB, sets out the obligations of electricity transmitters with respect to their customers. It includes a Connection Agreement which covers the technical and commercial responsibilities of both transmitters and their customers. The Code also addresses standards for the operation, maintenance, management and expansion of transmission systems. The TSC and the market rules require all customers directly connected to the transmission system to enter into a connection agreement with their transmitter. Accordingly, Hydro One has established Connection Agreements with its transmission customers. Each Connection Agreement is comprised of two main parts: () general information, such as equipment standards, operational and maintenance requirements, reporting protocol, dispute resolution methodology, disconnection process, etc. and () specific information, including connection point description (diagrams, protection requirements, technical specification for customer s equipment), contact data for both the customer and appropriate Hydro One Networks staff, and description of applicable

8 Filed: September, 0 EB-0-00 Schedule Page of transmission charges. In addition, the TSC requires Hydro One to enter into commercial agreements with directly connected load and generation customers to provide new or modified Hydro One owned connection facilities and to recover the related costs. Depending on the configuration and ownership of facilities, Hydro One provides customers with one or more of the four main types of transmission service: network, line connection, transformation connection and wholesale meter service. 0.. North America Reliability Framework The North American Electric Reliability Council ( NERC ) was established in. Its mission is to ensure that the bulk electric system in North America is reliable, adequate and secure. This objective is met through the establishment of reliability standards and requirements that member utilities voluntarily agreed to comply with. These standards cover the areas of planning, design, operation and maintenance of the bulk electric system. There are eight regional members of NERC, geographically dispersed in North America, that monitor compliance with the NERC standards. In addition, the regions may also develop specific criteria and/or standards applicable to members within the region. The Province of Ontario is within the North East Region whose regional organization is the Northeast Power Coordinating Council ( NPCC ). Hydro One is a member of the NPCC and actively participates in the activities of NERC. As a member of NPCC and as per the requirements of the transmission license and the market rules, Hydro One is required to comply with the NERC and NPCC reliability standards and criteria. NPCC criteria requirements may be more stringent than the NERC standards. These interconnected utility reliability standards and requirements are one of

9 Filed: September, 0 EB-0-00 Schedule Page of the drivers for OM&A expenditures and capital investments. Monitoring and assessment in Ontario is implemented through reporting to the IESO. 0 The passing of the US Energy Bill in 0 set the framework for the creation of the Electricity Reliability Organization ( ERO ). The ERO will have the legal authority to enforce reliability standards on all owners, operators, and users of the bulk power system, rather than relying on voluntary compliance. The US Federal Regulatory Energy Commission approved NERC s application to become the ERO for the United States in July 0. NERC is working to gain similar recognition by governmental authorities in Canada by the end of 0. The new regulated ERO is expected to be in place starting January, 0. Since the August, 0 Blackout the compliance standards have become more numerous and stringent. This trend is expected to continue and will continue to place increasing requirements on Hydro One in the areas of equipment maintenance and testing requirements, monitoring and reporting and, in some cases, new information technology and management equipment and/or processes (e.g. cyber security) to comply with these standards..0 ASSET MANAGEMENT MODEL Hydro One has adopted an Asset Management model in designing the processes used to plan, approve and implement work. The key principles include having functions primarily responsible for defining the work requirements (Asset Management functions) and functions primarily responsible for delivering asset and customer based services in accordance with the defined work (Work Execution functions). Primary responsibility for planning and decision making associated with the management of transmission assets falls under the Asset Management functions, whereas primary responsibility for providing

10 Filed: September, 0 EB-0-00 Schedule Page 0 of engineering, design, estimating, construction, maintenance, operating, and customer care services falls under the Work Execution functions. While both components of the business actively participate in all phases of work planning and implementation, this approach allows Hydro One Transmission to focus on creating the competencies and cost-efficiencies to effectively plan and implement the work.. Asset Management Functions 0 Hydro One manages its transmission assets using two main processes, Strategy Development and System Investment... Strategy Development The Strategy Development function provides a managed approach for developing transmission strategies, policies, and standards associated with the operation, maintenance and expansion of the transmission system. This function is specifically responsible for designing programs to: Ensure compliance with market rules and regulatory requirements; Achieve business objectives such as public and employee safety, reliability, productivity and customer service; Provide feedback for continually improving process effectiveness and asset/business performance; and Incorporate new methodologies and refining existing methodologies to improve effectiveness and productivity of processes in place.

11 Filed: September, 0 EB-0-00 Schedule Page of In addition, the Strategy Development function provides the strategies and framework for the System Investment function. 0.. System Investment Hydro One s transmission business strives to continuously improve the efficiency and effectiveness of the regulated wires assets. This involves asset management processes and practices to ensure that the asset related decisions are consistent, cost-efficient and effective. These decisions are aimed at developing a prioritized and rationalized investment plan for the operation, maintenance and upgrade of existing assets, and the addition of new assets. One of the key philosophies used in developing investment plans is the Life Cycle Planning concept which recognizes that the transmission business encompasses a portfolio of assets that must be managed over the long term and reflects the fact that not all assets are the same in value, criticality to achieve business values, performance, or life cycle characteristics. In preparing investment plans, the planning function utilizes Asset Condition Assessment information (described in Exhibit D, Tab, Schedule ), historical performance data, asset criticality, availability of spares and asset demographics to develop a detailed list of specific work needs. Each specific work need is evaluated against the business values, described in, Tab, Schedule, to establish associated risks of not conducting the work. Solutions are developed to mitigate these risks on a project-by-project basis. For each project a prioritization index (cost versus benefit) is developed and all investments are then prioritized in accordance with the process described in, Tab, Schedule.

12 Filed: September, 0 EB-0-00 Schedule Page of This prioritized list of projects is then detailed, scheduled and implemented by the work execution functions. Hydro One s transmission system is planned and designed to address mid and long term generation and consumption needs. Plans are developed to reduce or eliminate transmission bottlenecks as power flow patterns change due to generation retirements, addition of new generation, reduction in demand in some areas, and load growth. Transmission losses are minimized through the design, specification and procurement of equipment. 0. Work Execution Functions The work execution functions provide engineering, design, estimating, construction, maintenance, and operating services. Customer relationship management and support services and supporting research, environmental, and public/employee health and safety programs are also provided by these functions. These activities are performed by a multidisciplined workforce capable of performing tasks related to operating, maintaining and expanding the transmission business. There are three primary work execution functions within Hydro One: Engineering and Construction, Grid Operations and Customer Operations... Engineering and Construction The Engineering and Construction function provides services ranging from engineering and design to the construction and commissioning of new or enhanced facilities. These projects include the engineering, estimating, project management, and construction of stations and lines, system protection and control, as well as engineering services. The work activities are managed through the following core processes:

13 Filed: September, 0 EB-0-00 Schedule Page of Estimating Process, Planning and Scheduling Process, Project Management Process, and Project/Program Controls Process... Grid Operations 0 The Grid Operations function provides maintenance and technical services for stations and protection and control. This function also provides central operations and services for the transmission operating function which includes operation from the OGCC. The work activities are managed through the following core processes: Estimating Process, Planning and Scheduling Processes, Condition Assessment, Station Maintenance, and Station Sustainment Capital work execution, Trouble Response and Corrective Action Process, Work Program Management, and Work Reporting Processes. All of the transmission assets are monitored and controlled from one location, the OGCC. At the OGCC, the integrity of the transmission system is monitored in real time to ensure reliable performance of the network under present conditions while recognizing potential contingencies and to provide immediate response to customers. The OGCC also coordinates an extensive outage program with various internal stakeholders and external customers to support Hydro One s transmission expansion and maintenance programs. Required outages are assessed and coordinated to minimize their

14 Filed: September, 0 EB-0-00 Schedule Page of impact on system security, reliability and customer operation. Outages on the IESO controlled grid are subject to IESO approval. In addition, the OGCC reviews, approves, performs and/or authorizes all switching and control actions on Hydro One s transmission system. The OGCC issues work permits in accordance with the Utility Work Protection Code and prepares switching orders consistent with the issued work permits in order to provide employees with a safe working area. Grid Operations also maintains back-up operating facilities which serve as a fully redundant back-up to the OGCC. 0.. Customer Operations The Customer Operations function is responsible for the completion of line maintenance work, for forestry services and customer care support services. The work activities are managed through the following core processes: Estimating Process, Planning and Scheduling Process, Condition Assessment, Line Maintenance, and Lines Sustainment Capital work execution, Lines Trouble Response and Correction Action Process, Work Program Management, and Work Reporting Processes. Lines and Forestry services provide for the maintenance of overhead and underground transmission lines and for vegetation management. The vegetation management program is necessary to ensure that clearances to energized equipment are maintained and that these clearances provide a sustainable level of reliability. The program is designed to

15 Filed: September, 0 EB-0-00 Schedule Page of control vegetation growth on the rights of way to minimize vegetation encroachment to the lines taking into consideration environmental and community impacts and right of way access needs. Customer care services may be divided into four broad categories: 0 Customer Relations Management, Customer Service Support, Settlements, and Information Technology. Hydro One s transmission customers are provided with Customer Relations Management and Customer Service Support programs which are administered directly by Hydro One resources. Wholesale Settlement services, which are between Hydro One and the IESO, and Information Technology activities are provided under a contact with Inergi LLP..0 INVESTMENT CATEGORIES In organizing and planning its work programs, Hydro One has three main investment categories of work: Sustainment; Development; and Operations which are described below. These categories are used for both the OM&A and Capital components of the investment plan.. Sustainment Sustainment work is defined as the work required by the transmission business to maintain the existing infrastructure and facilities at their required performance level. The capital component of the sustainment work deals with replacement of assets at end of life.

16 Filed: September, 0 EB-0-00 Schedule Page of The OM&A component of the sustainment work addresses preventative and breakdown (corrective) maintenance within the useful life span of the asset including mid life overhauls which are required to achieve the expected life span of the equipment. Sustainment work is designed to maintain customer delivery reliability system-wide while meeting all legislative, regulatory, safety and environmental requirements. The strategy uses a life cycle management approach, which aims at optimizing performance and cost over the service life of assets. 0 The Sustainment OM&A and Capital components of the investment plan are described in Exhibit C, Tab, Schedule and Exhibit D,, Schedule respectively.. Development Development work is defined as the work required by the transmission business to increase the capacity of the transmission system by constructing additional transmission facilities or upgrading existing facilities. Development work provides incremental facilities: to meet the needs of load or generation customers, including connecting new loads or new generating plants, adding capacity to supply increases in existing loads or output of existing generating plants; to reinforce the transmission networks in Ontario or on the interconnections with neighbouring utilities in order to maintain adequate customer supply and system security and to alleviate restrictions to power transfers in accordance with approved plans and directives; and

17 Filed: September, 0 EB-0-00 Schedule Page of to meet customer reliability/power quality service standards, system security standards, or equipment/facilities design standards in a manner consistent with the transmission business asset management strategy and regulatory obligations. The Development OM&A and Capital components of the investment plan are described in Exhibit C, Tab, Schedule and Exhibit D,, Schedule respectively. 0. Operations Transmission operating activities are carried out centrally at the OGCC. The Operations function manages the transmission assets to ensure day to day flow of electricity within the capability of the transmission system, coordinates and schedules planned outages, and monitors and reports on the performance of the transmission system. Capital investments are required to enhance, refurbish and replace transmission system computer management systems and data acquisition systems, including automatic system controls, which monitor and control the operation of the transmission system. OM&A expenditures are required to maintain transmission system computer management systems and data acquisition systems, including automatic system controls, and to fund the resources required to perform the activities necessary for centralized operation of the transmission system. The Operations OM&A and Capital components of the investment plan are described in Exhibit C, Tab, Schedule and Exhibit D,, Schedule, respectively.