Defining Levels of Service for Performance Based Regulation. Alida Cameron, M.Eng., P.Eng. Senior Manager, Asset Management Office EPCOR Water Canada

Transcription

1 Defining Levels of Service for Performance Based Regulation Alida Cameron, M.Eng., P.Eng. Senior Manager, Asset Management Office EPCOR Water Canada CNAM 2013 Conference Tuesday May 7 th, 2013

2 Overview Corporate Background Why Levels of Service What is Performance Based Regulation (PBR) Developing Level of Service Measures EPCOR s PBR Measures Changes Over Time Developing Supporting Internal Measures Level of Service Benefits 2

3 120-year history EPCOR at a Glance EPCOR Utilities Inc. builds, owns and operates electrical transmission and distribution networks, water and wastewater treatment facilities and infrastructure in Canada and USA 2,800 employees Headquartered in Edmonton, Alberta Serving over 75 communities Operations in: British Columbia, Alberta, Arizona, and New Mexico 3

4 Governance Dividends paid to the City of Edmonton City of Edmonton is sole Shareholder Independent Board of Directors EPCOR operates as a commercial entity In 2012, EPCOR contributed: $141 million dividend 4

5 EPCOR Water - Edmonton 2 Water Treatment Plants: Rossdale WTP (1947): 280 ML/day capacity E.L. Smith WTP (1976): 400 ML/day capacity Water D&T 18,000 hydrants 3,900 km pipes 4 booster stations & 12 reservoirs 1 Wastewater Treatment Plant: Gold Bar WWTP (1956): 310 ML/day design 5

6 How Level of Service fits into AM 1. What is the current state of my assets? 2. What is my required level of service? Develop Asset Registry Assess Condition, Failure Modes Determine Residual Life Determine Life Cycle & Replacement Costs Set Target Levels of Service (LOS) Determine Business Risk ( Criticality ) Optimize O&M Investment Optimize Capital Investment Determine Funding Strategy Build AM Plan 3. Which assets are critical to sustained performance? 4. What are my best O&M and CIP investment strategies? 5. What is my best long-term funding strategy? 10 steps are from SIMPLE, the Water & Wastewater Sustainable Infrastructure Management Program Learning Environment developed by WERF (Water Environment Research Foundation) & Water Research Foundation. 5 questions are from EPA

7 Why Level of Service? It helps us... Focus our efforts on common goals and targets Ensures performance is measured and in turn sustained or improved Clearly communicate expectations and options to customers Increased services equal increased costs Discussion of trade-offs and risks between options Negotiate with regulators and council/commission/board Service levels O&M Costs and budgets Capital Costs and budgets Rate impacts Level of risk

8 Why Level of Service? 8

9 Performance Based Regulation (PBR) PBR provides a mechanism for cost control, defines good performance, penalizes poor performance EPCOR Water Services and the City of Edmonton first implemented PBR in 2002 Renewed every five years Levels of service defined to support the regulation Subject to penalties if service measures are not met 9

10 Performance Based Regulation Inflation, Efficiency Factor, & Water Consumption Operating & Capital Costs EPCOR WATER & WASTEWATER OPERATIONS Water Rate Structure Rate Comparisons to Other Communities City Council Approves Water Rate Structure Performance Measures Return on Equity (5 Year) EPCOR Water Operates within this framework Takes various business risks Makes capital and operating cost decisions Capital underspend threatens level of service, overspend lowers ROE

11 Developing Levels of Service (LOS) Research Industry Select Potential Measures Determine Potential Targets Review Measures & Targets with Community Update Measures & Targets as per Input Implement Measures Measure! Review & Update

12 Developing LOS Research Industry Ofwat Water Services Regulation Authority (UK) Excerpt from Ofwat s Key Performance Indicators Guidance Document 12

13 Developing LOS Research Industry Australian Government National Water Commission 13

14 Developing LOS Research Industry EPA United States Environmental Protection Agency Effective Utility Management 14

15 Developing LOS - Select Potential Measures Common themes from Industry Research: Customer Service Reliability & Availability (asset-related) Environment Financial Performance Public Health Water Resource Adequacy 15

16 Developing LOS Select Potential Measures Rates Return on Equity Dividend Payment System Reliability Index (25.0) Customer Service Index (20.0) Water Quality Index (25.0) Environmental Index (15.0) Safety Index (15.0) Internal Measures 16

17 Development Process LOS Setting Targets Benchmarking 17

18 Developing LOS Community Input What is important to your community? Ask! Techniques used by EPCOR Public Advisory Committee Focus groups 1 on 1 meetings with each Councilor Standard bylaw update approval process Additional techniques Public meetings Meetings with interest groups Internet consultation Surveys 18

19 Developing LOS Community Input Customer Surveys Excerpt from Assessing Customer Preferences & Willingness to Pay: A Handbook for Water Utilities Water Research Foundation 19

20 EPCOR Water s Performance Based Measures Description Benchmark Wt. Standard Points Bonus System Reliability Index Water Main Breaks Repair Duration Planned Construction Water Pressure Water Loss (ILI) # of breaks % fixed < 24 hour % compliance # times < 20 psi leakage index 25% % 95.0% Water Quality Index Customer Service Index Post Service Audit Response Time Home Sniffing Factor % satisfied min to confirm % satisfaction 25% 99.6% % % %

21 EPCOR Water s Performance Based Measures Description Benchmark Wt. Standard Points Bonus Environmental Index 15% ER Training Reporting Complete Incident Reporting Water Conservation Watershed Program Activity # of exercises % target # of incidents m 3 / residential household # completed 4 100% Safety Index 15% Safety Meetings Safe Work Plans First Aid Training Work Site Inspections Lost Time Frequency Injury Frequency Rate Injury Severity Rate # of meetings # completed % staff trained # frequency rate frequency rate frequency rate %

22 Changes Over Time Improvement? Notes System Reliability Index Benchmark Benchmark Benchmark Water Main Break Factor Yes Water Main Break Repair Duration Factor 92.8% 93.6% 93.7% Yes Planned Interruption Factor 95% 95% 95% Yes Number same, criteria stricter from I / II to III Water Pressure Factor Water Loss Factor 4.90% 4.9% 3.0 Change in benchmark Water Quality Index Benchmark Benchmark Benchmark 99.6% 99.6% 99.6% Customer Service Index Benchmark Benchmark Benchmark Post Service Audit Factor 71.6% 72.6% 74% Yes Response Time Factor Cell phone policy and larger system Home Sniffing Factor 92.5% 93.4% 93.8% Yes 22

23 Changes Over Time Improvement? Environmental Index Benchmark Benchmark Benchmark Emergency Response Training Yes Completeness of Reporting 100% 100% 100% Timeliness of Reporting 100% 100% Environment Incident Reporting System Efficiency (kwh per ML) 561 Water Conservation (% target achieved) Yes Notes One additional site Combined Completeness/Timeliness Change in Benchmark Vehicle Fuel Efficiency (L per 100 km) 30.4 to Had built in improvement Watershed Program Activity 5 Safety Index Benchmark Benchmark Benchmark Safety Meetings Formal Safe Work Plans 906 3,486 3,100 First Aid Training 33% 33% 33% Work Site Inspection / Observations Lost Time Frequency Rate Injury Frequency Rate Yes Injury Severity Rate Change in location Increase from PBR I to II, drop in PBR III Increased from PBR I to PBR II Small drop PBR I to II, increase from PBR II to III 23

24 The Balancing Act Decrease in response time by 3 minutes Increase in O&M Costs of ~ $500,000/year 24

25 Supporting Internal Measures Focused around Operational Excellence Personal Safety Process Safety Emergency Response Environmental Management Equipment Maintainability Equipment Reliability Process Reliability Capital Management Operating Cost Management People / Organization Management 25

26 Internal Measures Equipment Maintainability Example 26

27 LOS Benefits Ensures we sustain performance and encourages continuous improvement Provides assurance to our customers, our shareholder and our regulators Drives performance right down to the front-line worker (i.e. response time of 25 minutes) Communication tool between council, customers and the utility Assists in identifying the costs /benefits of services (setting budgets, development of asset management programs, etc.) 27

28 LOS Resources Ofwat Water Services Regulation Authority Australian Government National Water Commission IWA Publications ( Performance Indicators for Water Supply Services - Second Edition (July 2006) Author(s): H Alegre, JM Baptista, E Cabrera Jr, F Cubillo, P Duarte, W Hirner, W Merkel, R Parena Performance Indicators for Wastewater Services (Oct 2003) Editor(s): R Matos, A Cardoso, R Ashley, P Duarte, A Molinari, A Schulz EPA United States Environmental Protection Agency Effective Utility Management ( Water Research Foundation Reports ( Assessing Customer Preferences and Willingness to Pay: A Handbook for Water Utilities-4085 National Water and Wastewater Benchmarking Initiative ( EPCOR PBR ( - Schedule 3 has details) 28

29 Contact: Questions? Alida Cameron, M.Eng., P.Eng. Senior Manager, Asset Management Office 2000, Street, Edmonton, AB T5H 0E8 Watermark Building, Rossdale Water Treatment Plant Phone: (780) Fax: (780)