Acting Commission Secretary British Columbia Utilities ... … · and the vendor, Itron Canada Inc. ... 7.2.2 Financial Analysis ... BC Hydro to take strategic steps towards further

British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3

www.bchydro.com

Janet Fraser

Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 [email protected] March 12, 2012 Ms. Alanna Gillis Acting Commission Secretary British Columbia Utilities Commission Sixth Floor – 900 Howe Street Vancouver, BC V6Z 2N3 Dear Ms. Gillis: RE: Project No. 3698622

British Columbia Utilities Commission (BCUC) British Columbia Hydro and Power Authority (BC Hydro) Amended F2012 to F2014 Revenue Requirements Application (F12-F14 RRA) Response to Canadian Office and Professional Employees Union Local 378 (COPE) Information Requests (IRs) 1.15.1 and 1.16.2

COPE submitted its Round 1 IRs to BC Hydro in the F12-F14 RRA proceeding by letter dated December 20, 2011 (Exhibit C2-9). COPE IR 1.15.1 requested that BC Hydro provide the business case supporting the decision to outsource the materials transportation services. BC Hydro indicated in its response to COPE IR 1.15.1 that the documents used to support the decision contained information that could harm BC Hydro’s commercial interests and, as there was insufficient time in Round 1 to provide redacted versions of these documents, declined to provide the documents. COPE IR 1.16.2 requested the disclosure of the duration of manufacturer warranties regarding smart meters currently being installed. BC Hydro declined to respond on the basis that such information is confidential, in accordance with the terms of the agreement between BC Hydro and the vendor, Itron Canada Inc. COPE and BC Hydro have discussed the adequacy of BC Hydro’s response to COPE IRs 1.15.1 and 1.16.2 (and other COPE IRs). In consequence of those discussions, BC Hydro has agreed to file supplemental responses to these IRs. With respect to COPE IR 1.15.1, BC Hydro is filing redacted versions of the requested document and supporting appendices. With respect to COPE IR 1.16.2, BC Hydro is filing the requested information in confidence and a redacted version for the public record.

B-16-2

mailto:[email protected]

markhuds

BCH 2012-2014 Revenue Requirements

March 12, 2012 Ms. Alanna Gillis Acting Commission Secretary British Columbia Utilities Commission Amended F2012 to F2014 Revenue Requirements Application (F12-F14 RRA) Response to Canadian Office and Professional Employees Union Local 378 (COPE) Information Requests (IRs) 1.15.1 and 1.16.2 Page 2 of 2

Therefore, attached are the following:

Exhibit B-16-2 Public Supplemental Responses to COPE IR 1.15.1 and COPE IR 1.16.2

Exhibit B-16-2-1 Confidential Supplemental Response to COPE IR 1.16.2

For further information, please contact Fred James at 604-623-4317 or by e-mail at [email protected]. Yours sincerely,

Janet Fraser Chief Regulatory Officer bh/af Enclosures (2) Copy to: BCUC Project No. 3698622 (Amended F12-F14 RRA) Registered Intervener

Distribution List.

Canadian Office and Professional Employees Union, Local 378 SUPPLEMENTAL Information Request No. 1.15.1 Dated: February 16, 2012 British Columbia Hydro & Power Authority Response issued March 12, 2012

Page 1 of 2

British Columbia Hydro & Power Authority F2012 to F2014 Revenue Requirements Application (F12-F14 RRA)

Exhibit: B-16-2

15.0 Outsourcing

BC Hydro states that it has also recently decided to outsource materials transportation (i.e., trucking) services, previously performed by Construction Services in the T&D Business Group, to various external companies (Exhibit B-1-3, p.5-17).

1.15.1A Please provide the business case for this decision.

As we understand BC Hydro’s response, it refused to comply because of time constraints. We are prepared to accept a response at the time of BC Hydro’s responses to IR #2.

ORIGINAL RESPONSE:

The documents used to support the decision to outsource trucking and transportation functions contain information that could harm BC Hydro’s commercial interests if disclosed, in particular because BC Hydro expects to undertake a procurement process related to these services later this year.

The documents would require extensive redaction before they could be disclosed, and there has not been time to do so within this IR round.

SUPPLEMENTAL RESPONSE:

Please find attached the two documents used to support the decision to outsource certain trucking and transportation functions:

1. The business case entitled “Transportation Optimization Project” – this document summarizes information such as the background and context, issue definition, evaluation of alternatives and the project roadmap; and

2. The business case appendices entitled “MMBU Transportation Study Project” – this document includes the results of a third-party study into the feasibility of various external alternatives.

The work associated with the two documents was undertaken in F2010, culminating with the approval to proceed with the recommended option by BC Hydro’s Executive Team in Q4 of F2011.

As noted in the response to COPE IR 1.15.1, some of the information in the attached could harm BC Hydro’s commercial interests if disclosed, in particular because

Canadian Office and Professional Employees Union, Local 378 SUPPLEMENTAL Information Request No. 1.15.1 Dated: February 16, 2012 British Columbia Hydro & Power Authority Response issued March 12, 2012

Page 2 of 2

British Columbia Hydro & Power Authority F2012 to F2014 Revenue Requirements Application (F12-F14 RRA)

Exhibit: B-16-2

BC Hydro expects to undertake a procurement process related to these services later this year. Accordingly, redactions have been made to the attached for (1) personal information of employees, (2) third party proprietary or confidential information (e.g., information pertaining to existing contracts and costs) and (3) information impacting BC Hydro’s position and ability to engage the market as planned later this year.

BC Hydro Amended F12-F14 RRA COPE 378 SUPPLEMENTAL IR 1.15.1 Attachment 1

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-j

Transportation Optimization Project

January 2011

BChydro m

Submitted by: Philippa Smith,

Transportation & Customs Manager, MMBU


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Table of Contents

1 Classification ........................................................................................................................................................ 3

2 Executive Summary ............................................................................................................................................. 3

3 Issue Definition .................................................................................................................................... ; ............... 4

3.1 Description of the Problem/Opportunity .............. ...... ................. .. .................................................................... 4

3.2 Stakeholders and First Nations ........ .. ............................................. ................................................................. 4

3.3 Business Risks ............. ... .. ..... ...... ..... ............................................................................ ............... ...... ..... .......... 5

4 Background and Context .................................................................................................................................... 5

4.1 BC Hydro Transportation Constituents ................................................. ...................... ..................... .. .. .. .......... 5

4.1.1 CS Transportation .. ...... ...... ...... ............. ... .... .. .. ............................................... ..................... .... .. .. ...... ..... 6

:: ~:~ ~:%~~.~~.~.:.~~~~~~~~~~~~.~~~~.~~~. ::::: :::: : :: :: ::::::::::::::::: : ::::: : ::::::::::::::::::::::::: :::: ::::::::::::::::::::::: :: ::::::::::::~ 4.2 Current Delivery Model ... .......... .. .................................................................................................... ... .............. 8

5 Impetus for Change ............................................................................................................................................. 9

5.1. 1 Cost reduction ......... .... ... ..... .... .. .. ....... .. .. ..... ... ............... ... .... .. ................ .... ......................... ................... . 9 5.1.2 Operational Flexibility ...... ... ..... ............. ...... ...... .. ......... ..................... ...... ......... ............. .................... .. .... 10

6 Key Assumptions ............................................................................................................................................... 10

7 Scenarios - New Transportation Model, Analysis, Trade-offs & Recommendation ................................... 10

7.1 Proposed new model ........................................................................................................................... .......... 10

7.1.1 Routing Model (MMBU Scheduled deliveries) .......... ...... .. .. ................ .. .......... .. .............. .. .................... 10 7.1.2 FSK Delivery to Unmanned locations .................. .... ............ ......... ...... .. .................. .. ......... , ...... ............. 11 7.1.3 Transportation Coordination ... ..... ............ .... ... .. ............ ... .. ..... ............ .. .......... ....................................... 11

7.2 Description of Options: .... ........... .. ..................... ............................................................................................. 12

7.2.1 Analysis of Options ..... ... .. ... .... .. .. ... .. ....... ..... ..... ......... ............ .. ... .. ............ ............. ........ ....... ....... .......... 14 7.2.2 Financial Analysis ..... .. .. ....... ........... ...... ..... .. ...... ............................................................... .... ...... ........... 14 7.2.3 Environmental Analysis .... .... ...... ......... ........... ... ... ........ ..... .... ... .... .. ................ ............ ................ .... .... ... 17 7.2.4 Social Analysis ... ....... ............... ...................... ...... ........... .......... ......... ...... ... .... ...... .................. ... ..... ..... . 17 7.2.5 Summary of Trade-off Analysis (Appendix 12) ......... ..... .......... .. .. .. .... .............. .. .......... .. ...... .. .. ............. 17

7.3 Recommendation ........ .. .............. .. ... .. ....................................................................... ....................................... 18

8 Project Roadmap ............................................................................................................................................... 18

8.1 Scope .................................. : .......................................... .................. ............ ................. ...... ............. .... .......... 19

8.2 Implementation Strategy ...... .. ............................ ............................................................................................ 19

8.3 Staffing Strategy ...... .... ................ .. .. .. ................ .. ..... .. ............... ..... .. .. ........... ; ..................... ......... ................... 19

8.3.1 Implementation Feasibility ..... .............. ... ... .. ....... .......... ............ ...................... .. .. .. ..... .... .. ........ ..... ......... 19 8.3.2 Employee Impact Strategy ..... ....... .. .. .. .. ............ .. .. .... ....... ............ ... .... .. ... ... ........ ...... ..... .. ....... ...... .. ... ... 21 8.3.3 Actions: ...... ... .. ...... ..... ........ .......... ....... ...... .. ... ..... ... ........ ... ... ......... .. ... .... .. .... .. ... ... ..... .... ... .... ..... ...... ..... .. 21

8.4 Schedule .............. ......................................................................................................... ............... ...... ... .. .... ... 22

8.5 Costs .......................................................................... : ......... .. ......... .... .. ...... .......... ........... : .......... ................... 22

. 8.6 Project Team .................................................................................................................................................. 23

8.7 Risk Management .. ....... .......... ... ....... ..... .... ..... ........ ... ........... : ........................................................................ 23

9 List of Appendices ................................................................................... · .......................................................... 24


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1 Classification • This strategy is classified as continuous improvement.

Cost reductions Minimal Specific Capital investment Moderate employee impact

2 Executive Summary

BChydro '" l!JI

The CS Transportation group has provided transportation services to internal BC Hydro groupsfor the past 15 years. In the past three to five years, external vendors have supplemented this service. The Materials Management Business Unit (MMBU) is the largest user of transportation services, moving approximately 103 million pounds of materials in F2010.

MMBU's current direct delivery model runs scheduled shipments from the Main Distribution Centre in Surrey to field store locations throughout the province. These scheduled shipments are handled by CS with transportation vendors supplementing service when CS cannot provide capacity.

CS services are convenient as their employees have access to all BC Hydro sites and can deliver to manned and unmanned locations. With regards to the MMBU unmanned locations however visits from MMBU field storekeeper from neighbouring locations is still required in order to perform transaction processing and inventory control.

This model provides a high degree of reliability, but has an associated high cost and limited operational flexibility.

A regional-depot transportation model was developed to increase operational flexibility, enable cost savings and position BC Hydro to take strategic steps towards further operational efficiencies. The new model establishes high volume routes and regional depots where shipments will be repositioned for delivery to regional field locations.

Furthermore, temporary Field Storekeepers (FSK) will be assigned to address the local delivery and inventory control needs of the unmanned locations. This role will be incorporated into the MMBU structure for a three-year interim term and is expected to serve as a conduit to clearly identify the currently undocumented operational needs of the unmanned locations. By collecting information on these operational needs, BC Hydro will be able to establish its service readiness to go to an outsourced transportation model.

The recommendation proposed has focused on optimizing BC Hydro's opportunities to realize cost savings and operational flexibility.

Cost savings:

• Over a 10 year horizon the NPV of the recommended option is $8 million less than current state.

Operational flexibility:

• Ability to maximise equipment utilization, establish economies of scale on high volume routes and drive further cost savings.

• Ability to change equipment configurations quickly depending on volumes.

• Ability to scale transportation service requirements up, or down, as required by business needs.

In addition to the opportunities presented above, implementation of the recommendation will realize further benefits specifically eliminating functional redundancies, streamlining processes and reducing Green House Gas (GHG) emissions.

The recommended option was chosen for the following reasons:

a. 'Upon implementation operational efficiencies and cost benefits are realized with the application of high volume transportation equipment configurations into the regional depots.

b. An exclusive transportation model is not feasible immediately due to the unknown service requirements at the unmanned locations.

c. An exclusive transportation vendor model is established as the final goal.

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BChgdro m The implementation of this recommendation is expected to span 5 years to F2017 at which point cost savings will be fully realized.

In order to implement the new model the following is required:

• Support to establish one transportation department that resides in the MMBU.

• $150 K implementation costs for:

o Implementation plan development

o Process development

o Effective change management coordination

3 Issue Definition 3.1 Description of the Problem/Opportunity

CS has been providing transportation services to BC Hydro operations for over 15 years. In the last three years this service has been supplemented with service from transportation vendors. In August 2010 the Transportation Study (Appendix 1) evaluated and identified opportunities for BC Hydro to realize cost savings, improve delivery service levels and eliminate functional redundancies, increasing the integration of transportation vendors into the model and consolidating transportation coordination activities into one business unit.

The decision was made to further review t hese opportunities to understand BC Hydro's total cash cost of ownership for transportation by analysing the services provided by CS Transportation to their customers and transportation services purchased off contract. The objective of this Transportation Strategy was to identify cost reductions and process improvement opportunities.

3.2 Stakeholders and First Nations

CS Transportation is based out of Vernon and its customer group includes Generation , Fleet, the MMBU and other Transmission & Distribution (T&D) operations. As customers of CS Transportation , representatives from these groups were consulted as stakeholders throughout the course of this project (Appendix 2).

First Nations do not have a direct stake in the outcome of this business case. However, the increased integration of transportation vendors into the service model is anticipated to provide economic development opportunities throughout the province. Vendors that have a First Nations' business structure will be considered. Future tendering processes for transportation services will be in line with BC Hydro's structured decision making process.




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BChydro

3.3 Business Risks

The high business continuity risks and operational risks associated with the recommendation are as follows:

Risk Ranking Risk Description Mitigation Plan

S F Risk Risk Level Impact

H M 3 R Outsourced carriers not able to Ensure that transportation vendors are fully provide Emergency services. prepared to respond to BC Hydro emergencies.

This would be done through the development and execution of table top exercises, with possible consideration given to live exercises that outline true examples of BC Hydro emergencies and test the vendors' responses to the situations presented.

H M 3 F Renegotiating current contracts Collect contract information as a result of may result in changes to pricing renegotiations and present findings to Steering that are not favourable and do not Committee. SUjlQort the business case.

H M 3 C Without internal transportation BC Hydro supports contracted carriers to obtain resources BC Hydro cannot move hazardous waste certification. hazardous materials.

H M 3 R Vendors do not fully understand Communicate expectations to transportation the level of service expected by vendors and confirm their commitment to the BC Hydro to delivery materials service level required. safely, on time, and within pricing agreements.

H M 3 F Future renegotiation of contracts Closely manage current contract, closely monitor may result in changes to pricing market conditions and be confident in BC Hydro's that are not favourable and do not renegotiation position when contracts come due. support the business case.

H H 3 R Transportation vendors cannot Engage the transportation vendors in table top support emergency efforts to exercises to understand the services they offer in support restoration. case of an emergency and/or work with them to

strengthen emergency processes. S = Severity, F = Frequency, Risk Level = Corporate Risk Matrix calculatIOn 3 = High, 2 = Med, 1 = Low Risk Impact: C = Customer Service, R = Reliability, F = Financial (Appendix 3)

4 Background and Context 4.1 BC Hydro Transportation Constituents

There are three distinct groups involved in providing, or using transportation services at BC Hydro:

1) The CS Transportation group in Vernon [service provider],

2) Externally contracted transportation vendors [service provider], and

3) The MMBU [customer].

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4.1.1 CS Transporlation

BChydro fI1I lUI

The creation of the CS Transportation group in 1979 was to support the high level of BC Hydro construction activity at the time. When this level of activity declined in the mid 1980's the CS group shifted its resources and assets from an operational focus to a customer focus, moving equipment and materials for internal BC Hydro groups such as MMBU , Generation, Fleet and other T&D groups. The F1 0 snapshot (based on labour hours) below outlines the service provided by CS Transportation to these various groups:

CS Transportation (cost centre 8464)

Other CS Support

CS Operations 17%

Fleet Transportation

Source: Peop/eSoft Time & Labour

EARG 6%

3%

MMBU Transportation

49%

MMBU non-transportation

MMBU is the largest customer for CS Transportation, with over 49% of total labour hours; other CS departments represent the second largest slice of work. The balance of the labour hours is split between Generation, T&D operations, and Fleet.

4.1.1.1 · CS Employees

The transportation services are run with an internal fleet of heavy duty road vehicles (Appendix 4). CS employees are temporary BC Hydro employees and are trained in accordance with BC Hydro safety standards, have access to all BC Hydro locations, and understand the safety constraints that apply to the sites created by the close proximity of the energized electrical system. They are qualified to operate equipment (e.g.: forklifts and cranes) at BC Hydro locations, and often support and/or assist with the work being completed by line crews.

The following table lists the CS Transportation employees performing the work considered in this business case:

# of employees IBEW job classification Job function within CS Transportation

8 Machine Operator Tractor Drivers

3 Mechanics Maintenance of tractors

3 Material Handlers Dispatch activities

14 Source: CS Transportation Mgmnt

4.1.2 Contracted Transporlation Vendors

The BC Hydro Strategic Sourcing group reviewed transportation services in 2009 with the intention of strengthening . controls over corporate spend and mitigating operational risk. The result of the review was the creation of three transportation contracts specifically for the movement of materials and equipment:



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Contracted Transportation Vendors Vendor Contract Description

Trailer Load

2 Less than Trailer Load (L TL)

3 ...... Less than Trailer Load(L TL)

Source: Procurement

BChgdro

Region

Provincial

Vancouver Island & Lower Mainland

Southern & Northern Interior

'" UJI

The contracts included negotiated pricing schedules which expected cost reductions of 27.6% on less than trailer load shipments and a 9.6% reduction on the cost of trailer load shipment handled by CS (Appendix 5). The vendors were also fully vetted to ensure their practices were in line with BC Hydro standards in terms of safety protocols, insurance requirements and environmental stewardship.

Transportation Contracts - Annual savings projected for F1 o· Savings Yearly Over 3 years

% $ $

Less than load - -Trailer Load • - -Source: Strategic Sourcing 2009

Although there have been benefits realized since the implementation of the contracts in 2009, the full realization of the benefits from these contracts is still pending. Compliance with the contracts has been a challenge throughout BCHydro.

OfflO C n on rac spen d

On Contract Off Contract Total $K $K $K

Corporate & CCC • 117 -Generation & Engineering - 163 -Field Operations • 287 -Total Spend • 567 -% of Total Spend • 22%

Source: F10 Accounts Payable spend by vendor

The lack of compliance may be driven by a number of factors such as a lack of information on the contracts and how they can be used or a high degree of confidence in local transportation vendors resulting in local hesitation to try a new vendor. Regardless, the initial objectives of cost control/reductions and strengthened risk management have yet to be fully achieved as a result of the non compliance.

4.1.3 MMBU

MMBU has managed the distribution of materials throughout the province since approximately 1994. MMBU's distribution network includes a single Main Distribution Centre in Surrey and 80 field locations, 36 manned by Field Storekeepers and 44 unmanned (Appendix 6). Field locations are categorized into regions:

a) Northern Interior: Peace area, west to Prince Rupert and north to Fort Nelson



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BChydro b) Southern Interior: Cariboo, Okanagan and Kootenay areas, the Lower Mainland and Sunshine Coast

c) Lower Mainland and Sunshine Coast: Abbotsford to Greater Vancouver and up to Whistler

d) Vancouver Island: Victoria to Port Hardy and west to Tofinol Ucluelet.

Legend:

Mt.tOU Facilities MOe - Main Distribut ion Cenler PTH - POlt Hardy VIC - Victoria SAM = Salmon Arm eRA - Cranbrook INY -Invermere GOL- Golden REV - Revelsloke owe - Dawso n Creek FJN-FM St John FNL - Fort Nelson DSL - Dease Lake TER - Terrace

Ge nerating Facilities GMS - GM Shoum BRR - Bridge Rive r MeA - Mica Creek KCL - Kootenay Canal

MMBU material distribution service area

OSl

FNl

FJN

GMS

Prince George

ORR

owe

REV

MCA GOl Kamloops

SAM INV

eRA Vernon KCl

In W

Over 103 million pounds of material was delivered within this service area in F1 O. Due to the size of the service area, and the volume of materials moved, reliable and cost effective materials transportation is a strategic aspect of the MMBU's overall operational effectiveness, and represents a significant cost to the operation: of MMBU's F1 0 $26.9M total OMA costs, transportation services accounted for 16% ($4.3M).

4.2 Current Delivery Model

The current scheduled transportation routing model can be described as a direct delivery model. Shipments are delivered direct from the MDC in Surrey to the field locations by CS Transportation. CS and the MMBU developed a delivery schedule that incorporates weekly trailer service to all regions. The only exception to this frequency is the north which receives weekly delivery into Prince George and bi-weekly delivery north to Fort St John and bi weekly delivery west to Prince Rupert. If the scheduled deliveries do not meet operational requirements, or in the event of an emergency, less than load shipments are sent direct to the field locations.

The following table reflects the frequency of trailer load and less than load shipments in F'10:

F'10 Shipment summary Total Weight Weight Shipments Total Shipments

# % % %

Trailer load (scheduled) 101 ,227,223 98% 10,565 87%

Less than load (non scheduled) 1,874,829 2% 1,517 13%

Total 103,102,052 12,082

Source: F10 Waybill System




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BChydro m Although reliable service has been provided by CS Transportation there are limitations to the current model. In particular, limited equipment flexibility prevents creating larger, consolidated shipment moves on high volumes routes. Service for non-MMBU customers is also direct delivery however, these shipments are not scheduled.

Unmanned locations are currently managed by FSKs. The operational needs of these locations are not well understood. The existence of the unmanned locations was originally driven by an operational need for proximity of materials to the specific equipment they supported or, to enable material accessibility to line crews through the province. However, these operational needs appear to be varied and to date undocumented or fully understood.

FSKs travel to the unmanned locations on an ad hoc or, as needed basis. The frequency of these visits can leave these locations unattended for up to a month resulting in a high level of "clean up" work such as, inventory checks, investigating inventory discrepancies and transaction processing. The amount of time spent during F1 0 driving to unmanned locations and, making last minute deliveries from the larger centres represents approximately the equivalent of 5 FTEs (Appendix 7).

Unscheduled shipments are also primarily handled by CS Transportation. However, they are arranged based on the specific needs of the shipment as requested by the customer. For instance, Non-Integrated Area (NIA) operations or Generation will contact CS directly to make arrangements for equipment or materials moved from a specified location to a specified destination.

Dispatch is managed by CS and is based in Vernon . The dispatch resources consist of 3 IBEW material handlers and their main focus is the management of CS resources including drivers and equipment. Transportation coordination is supported through use of MS Office applications and recent introduction of a GPS system to monitor CS tractor movement.

The MMBU runs a shipping office with some dispatch duties at the MDC in Surrey. This function is managed by 2 Sr. Storekeepers. They coordinate shipments and contact CS Transportation or transportation vendors depending on the shipment.

The use of transportation vendors is primarily coordinated directly by other BC Hydro business groups. CS interacts with the transportation vendors only when they require back up capacity to meet the requests made of their services. The MMBU Shipping office interacts with transportation vendors when CS cannot provide service due to capacity constraints.

The net effect of the current dispatch/transportation coordination results in a number of functional redundancies between CS Transportation and the MMBU as outlined in the table below:

Redundancy Summary CS activity Redundancy

1 Dispatch office manages fleet or drivers and vehicles MMBU has a dispatch function which requests contracted transportation vendors when CS is at full capacity.

2 CS Drivers deliver materials to unmanned locations MMBU Field Storekeepers visit unmanned locations to perform Storekeeper tasks.

3 CS Transportation M1 Department Manager MMBU M1 Transportation & Customs Manager

These redundancies create unnecessary costs and inefficiencies that create confusion for operations employees as it is unclear who is fully responsible for transportation services.

5 Impetus for Change 5.1.1 Cost reduction

Although CS Transportation has a strong service reputation, there is a cost associated with this level of service. When the F1 0 operating and fuel costs of the current model are analysed against the alternatives proposed by the contracted transportation vendors, potential for cost reductions are revealed

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BChgdro m In support of BC Hydro's emerging strategic direction to identify operational efficiencies, cost reductions have become an even greater priority for T&D operations. The business case (see Section 6.2) supports the strategic intent through identification of realistic and achievable cost savings.

5.1.2 Operational Flexibility

The CS Transportation group has limited equipment flexibility: they currently on ly use a fleet of 30 open flat deck trailers. In order to increase the fleet to meet an increase in operational demands a full process of capital expenditure approvals must be followed. When operational demands decrease the reverse effect is BC Hydro assets and resources may be left stranded. Both situations create a financial and operational impact to the corporation.

Limited operat ional flexibility also has the added financial impact of requiring the movement of less than trailer load shipments. This is significant as the open flat deck trailers do not enable the movement of weather sensitive materials such as revenue meters. As a result, this material is often moved by the less than trailer load contracted vendor which carries a higher cost.

6 Key Assumptions • Decisions will be made with the analysis of the data available:

o Waybill system data for F1 0 o Data provided by CS Transportation Management o Vehicle operations data provided by Fleet

• There will be no transformational organizational changes within BC Hydro that directly impact this project • Current service level will be maintained • Unmanned locations will remain within the MMBU network • There will be no significant IT changes • The funds will be available to implement recommendation

7 Scenarios - New Transportation Model, Analysis, Trade-offs & Recommendation

7.1 Proposed new model

Analysis of the services offered by CS Transportation and the transportation vendors indicate that the current management and execution of transportation services within BC Hydro has not been optimized with respect to cost and f lexibility. Within the last two years strategic direction has been taken with the creation of transportation contracts. However, management and operational decisions have not followed to support the reinforcement of the contracts resulting in process redundancies and an inability to fully achieve the expected outcomes of this direction.

7.1.1 Routing Model (MMBU Scheduled deliveries)

The proposed routing model (Appendix 8) suggests a cross dock model with the creation of Regional Depots.

Volume analysis of MMBU materials moving from MDC in F1 0 identified 4 high volume routes:

a) MDC - Prince George: materials required for the Northern Region

b) MDC - Kamloops: materials requ ired for the Southern Interior, specif ically the Kootenays and Cariboo areas

c) MDC - Vernon: materials required for the Okanagan ·

d) MDC - Nanaimo: materials required through northern Vancouver Island1

1 Victoria serviced direct from MOe due to its proximity .and positioning relative to Nanaimo

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BChgdro m Shipments are dispatched from the MDC to the regional depots. The materials are then "cross docked" onto a second vehicle and delivered by transportation vendors to the manned locations and by the FSKs to the unmanned locations throughout the respective regions with the exception of Vancouver Island. Vancouver Island will be serviced by transportation vendors and unmanned locations will continue to be monitored by existing Field Storekeeper staff.

Equipment flexibility:

• Equipment variations will be applied allowing the movement of larger, consolidated shipments less often.

• Cost savings will be realized as a result of the consolidated shipments; based on rates provided by the contracted transportation vendors applying suitable equipment to the high volumes routes will create a cost saving of -$180K annually, based on F10 volumes (Appendix 9).

7.1.2 FSK Delivery to Unmanned locations

The introduction of 3 temporary FSKs supports a new concept being proposed within the MMBU to enable the documentation of service requirements at the unmanned locations. The FSKs will be based out of the regional depots in the Northern and Southern regions and report into the Transportation department. They will provide weekly material deliveries to the unmanned locations in the regions. Their duties at these locations will include:

• Delivering materials from the regional depots to the unmanned locations.

• Performing the transaction processing and inventory control functions of the FSK role.

The current lack of visibility into the activities within unmanned locations limits BC Hydro from considering significant strategic change, such as implementing a fully outsourced transportation model. In order to establish a successful outsourcing arrangement BC Hydro needs to clearly describe the service expectations required at the unmanned locations. The role of these FSKs is to identify the service requirements for the unmanned locations while a management review of the viability of these locations is also completed. These FSKs will be temporary resources employed for a defined period of time.

7.1.3 Transportation Coordination

The transportation coordination function replaces the current dispatch function managed out of CS Transportation. The creation of a centralized transportation group is expected to produce results by establishing clear accountability for transportation activities which will streamline communication with vendors and facilitate coordination to reduce the current off contract spend. This group will be directly responsible for the following:

Scheduled deliveries:

• Monitor the scheduled deliveries by transportation vendors to ensure timely and reliable service.

• Coordinate backhaul requirements with transportation vendors.

• Provide feedback to transportation vendors to increase or decrease transportation services based on volume fluctuations. .

• Provide management and direction to temporary FSKs.

On Demand deliveries:

• Provide centralized transportation coordination for BC Hydro for the shipment of materials and equipment.

• Collect transportation needs from customers and communicate these needs to the transportation vendors.

• Track shipments.

The department will be staffed with 3 Transportation Coordinators. They will be temporary resources to provide management flexibility to assess the long term need of this function and provide the option for dispatch outsourcing at a later date, if appropriate.

The department will manage transportation tasks through advanced MS Office applications and shipment volumes will be tracked using the current Waybill application.


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7.2 Description of Options:

Option 1 - Status Quo

Operational Description:

!-..:::-~---. --.

Maintain current delivery schedule, resources and equipment.

BChgdro

Management of transportation services resides with CS Transportation group in Vernon.

Benefits:

Drawbacks:

Risks:

1. Continue with reliable service.

1. Lack of equipment flexibility.

2. Maintain MMBU delivery schedule.

3. Inefficiencies of functional redundancies.

4. Lack of operational scalability.

5. GHG emissions of tractors.

none

Cost of Scenario: NPV $51.7 over 10 years

Option 2 - Transportation Vendors and FSK Drivers, Current Service Level

Operational Description:

Transportation vendors delivering scheduled shipments to regional depots and manned locations. 3 FSK Drivers distribute materials to unmanned locations.

fill W

- 1 FSK Driver in the Northern Interior, bi weekly delivery to unmanned locations in north and north west areas - 2 FSK Drivers in the Southern Interior, weekly delivery to unmanned locations through Kootenays, Okanagan and Cariboo areas.

Benefits: 1. Scalable equipment flexibility.

2. Centralized transportation coordination. 3. Reduced of GHG emissions generated by BC Hydro for movement of materials and equipment.

Drawbacks:

Risks:

4. Regular attention to unmanned locations.

1. Reduced visibility of emission generated by BC Hydro transportation needs.

2. BC Hydro still generating GHG emissions with FSK driver vehicles.

low risk



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Page 13 of 24

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Option 3 - Exclusive Transportation Vendors, Current Service Level Operational Description:

Transportation vendors providing weekly scheduled deliveries to all regions with the exception of the areas

north and west of Prince George which would receive bi-weekly deliveries.

Benef its : 1. Scalable equipment flexibility.

2. Centralized transportation coordination

3. Elimination of GHG emissions generated by BC Hydro for movement of materials and equipment.

4. Elimination of equipment capital and operating costs.

Drawbacks: 1. Reduced visibility of emissions generated by BC Hydro transportation needs.

Risks: Outsourced transportation model will reduce BC Hydro's control over the execution of transportation services.


Option 4 - Hybrid: FSK Drivers for 3 years, begin Exclusive Transportation Vendors in the 4th year. Current Service Level Operational Description:

Benefits:

Drawbacks:

Risks:

Yrs 1-3: Transportation vendors delivering scheduled shipments to regional depots and manned locations.

3 FSK Drivers distribute materials to unmanned locations.

Yr 4: Transportation vendors providing weekly scheduled deliveries to all regions with the exception of the area:

north and west of Prince George which would receive bi-weekly deliveries.

- 1 FSK Driver in the Northern Interior, bi weekly delivery to unmanned locations in north and north west areas

- 2 FSK Drivers in the Southern Interior, weekly delivery to unmanned locations through Kootenays,

1. Scalable equipment flexibility

2. Centralized transportation coordinatioh.

3. Yrs 1-3: Reduced of GHG emissions generated by BC Hydro for movement of materials and equipment.

4. Yrs 1-3: BC Hydro still generating GHG emissions with FSK driver vehicles.

3. Yr 4: Elimination of GHG emissions generated by Be Hydro for movement of materials and equipment.

4. Yr 4: Elimination of equipment capital and operating costs.

5. Regular attention to unmanned locations.

1. Reduced visibility of emission generated by BC Hydro transportation needs.

low risk




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Page 14 of 24

t:-_-_-__ "_

7.2.1 Analysis of Options (Appendix 10)

Summary Evaluation Matrix

1. Status Quo 2. Transportation (Current State) Vendors & FSK

Drivers, Current Service Level

Options

NPV over 10 years 51.7 44.8

($ millions)

Implementation Costs ($ millions) - 0.15

,,, ,pacts

of Dangerous Goods

~. I mic spin-offs

Safety

Reliability

Risk Red - high, Yellow - medium, Green - low

Operational · Flexibility p .,." -- ,~,j Evaluation not good good

* cost savings projected are based on cons/deration of transportation activities only.

!3. Exclusive

IVendors, Current Service Level

41.7 *

0.15

~ good

BChgdro

4. Hybrid Yrs

, '''''~..,u,'''''u, Vendors & FSK

~~ivers

Vendors Current Service Level

43.2

0.15

recommended

III !WI

When the options are compared it is clear that the most attractive option from a cost perspective is option 3. However, this option is not viable in the near term. The operational unknowns created at the unmanned locations present an obstacle that needs to be fully analysed prior to moving to an outsourced model. When a full analysis of these locations is completed it is advised that the direction to outsource transportation is reviewed and reconfirmed in order to ensure that the cost benefits of this option still align with the company's operational needs.

From a qualitative perspective the options do not demonstrate any significant differences apart from the socio economic spin offs. With the development of a new transportation model the options which are developed around this model are able to provide opportunities for regional contract development. See section 7.2.4 for further discussion.

7.2.2 Financial Analysis

The graph below reflects the cost savings projections for options 2, 3 & 4. The graph reflects that with any of the 3 options estimated cost savings will be realized upon implementation.



;:.:-


Page 15 of 24

Cumulative Annual Nominal O&M Estimated Savings

.l!l J9 12 en 1: ~ 10 ~ u :U:? 8 ><h 0-(/)~ til(/) t: 0

6

.:;: u 4 ctI

en J§

2 t: Q)

E ~ t,)

.: F12 F13 F14 F15

- Option 2: Transportation Vendors & FSK Dril.ers

-- Option 3: Exciusil.e Transportation Vendor

- Savings are not expressed as 10 year NPV costs - Cost savings shown are based on known costs

Option 2: Transportation Vendors & FSK Drivers

Option 3: Exclusive Transportation Vendor

Option 4: Hybrid of 2 & 3

F16 F17 F18 F19

, Option 4: Hybrid of 2 & 3

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F20 F21

Option 2 and 4 reflect the same level of cost savings for the first three years. From there, with the understanding that operational needs permits moving to an outsourced model, achieving additional savings can be accelerated.



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BChydro rn au

The recommended option will result in an O&M financial reconciliation that will ultimately present cost savings within transportation management. Transportation re lated costs are expected to increase within the MMBU due to the expanded scope of operations within th is business unit, and decrease within CS. The expected cost fluctuations are demonstrated in multiple aspects of transportation management, CS Labour, Equipment Costs, Administration Costs, MMBU Labour, Transportation Vendors and Transportation moves completed by CS without waybill documentation. The following chart represents transportation cost increases and decreases within the first year of implementation (See Appendix 11 for detailed budget reconciliation):

8

2.0 7

6

5

4

3

2

o Base CS Labour

0.8

Net Equip Operating

Costs

0.2

Net Admin

1

MMBU labour Transportation Vendors Transportation, no

waybill

- The costs included reflect total Be Hydro budget changes; it does not reflect business group budgets

7.2.2.1 Financial Analysis Constraint

Proposed

During the discovery phase of the business case project, the scope of CS transportation services for non-MMBU customers was examined. Data reflect ing the destinations and weights for these shipments was unavailable. This.lack of data presented a challenge during future state analysis as without this detail this portion of the business could not be modelled. While the detailed data is considered unknown, the overall costs were determined and costs savings are expected however it is not possible to clearly outline the expected savings. As directed by the Steering Committee, the probability table below il lustrates possible outcomes:

Potent ial Savings o n "unknown" costs

F'10 Total unknown costs (millions) = $2.4

Potentia l Sav ings Confidence level that

sav ings w ill be achieved

% K$ %

Low 5 120 50

Medium 15 360 30

High 25 600 20

Weighted average of potential sa"ings : $360 K

Confidence in the estimated saving is not greater than 50%. The estimated savings may range anywhere from $120-$600K. However, in the absence of accurate data an average estimated cost savings on the currently unknown costs is $360K.




Page 17 of 24

For Financial Analysis Assumptions and detailed 10 year NPV costings see Appendices 12 & 13.

7.2.3 Environmental Analysis

Option 1: GHG emissions of tractors

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Option 2 & 4: Reduced visibility of emissions generated by BC Hydro transportation needs. BC Hydro is still generating GHG emissions with FSK vehicles.

Option 3: Reduced visibility of emissions generated by BC Hydro transportation needs. Elimination of GHG emissions generated by BC Hydro for movement of materials and equipment.

Green House Gas Emissions and Transportation Services

In addition to the traditional operating costs of the equipment BC Hydro also considers GHG emissions costs and environmental impacts. The provincial government's Greenhouse Gas Reduction Targets Act published in November 2007 requires Crown Corporations to implement strong measures to reduce GHG emissions and become carbon neutral by 2010. BC Hydro has developed a strategy to work towards this goal focusing on emission reduction$ first and purchasing carbon offsets for emissions generated to take the corporation to zero GHG emissions. As a result of the fuel consumption of the CS Transportation tractors these vehicles generate 627 tonnes of GHG emissions annually. This emission measure makes these vehicles candidates for review when identifying opportunities to reduce GHG emissions within BC Hydro. Reducing the use of tractors, moving to smaller vehicles or removing them from operation are all positive steps that would lead BC Hydro closer to its GHG emissions target.

As a result of this corporate strategy, the environmental analysis of the 3 options presented indicates that option 3 or 4 are the preferred options. Although these options are not operationally feasible in the short term these options need to be considered as goals for BC Hydro Transportation management with regards to reducing BC Hydro generated GHG emissions

7.2.4 Social Analysis

Option 1: Remaining with the current state does not provide BC Hydro with the opportunity to support regional economic or social development.

Opt ion 2: Increases BC Hydro's ability to provide opportunities to support regional economic or social development

Option 3: Strongest option to increase BC Hydro's ability to provide opportunities to support regional economic or social development.

Option 4: Increases BC Hydro's ability to provide opportunities to support regional economic or social development in the short term and enables further development of these opportunities in the long terms .

The creation of a regional transportation model allows for consideration to be given to creating regionally based transportation contracts. This would enable smaller, regiona l transportation companies to bid on smaller portions of BC Hydro's transportation business.

7.2.5 Summary of Trade-off Analysis (Appendix 12)

Option 1: There are tradeoffs associated with this option :

• Cost savings and Operational Flexibility: BC Hydro is denied the opportunity to implement improved financial and operational efficiencies.

• GHG emissions - no positive impact on reducing BC Hydro generated GHG emissions.

Options 2, 3 & 4: There are tradeoffs associated with these options:


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Page 18 of 24

BChgdro • GHG emissions - although BC Hydro is reducing or eliminating the internal creation of GHG emissions the

transportation services that the corporation requires is still generating these emissions through the use of transportation vendors,

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• Safety training and compliance - by increasing the use of transportation vendors BC Hydro loses direct control of safety training and compliance behaviours related to transportation services.

• Dangerous goods and hazardous waste shipments - by increasing the use of transportation vendors BC Hydro loses direct ,control over compliance regarding the appropriate treatment of these sensitive shipments.

The benefits attached to the proposed transportation model of increased flexibility and cost savings out weigh the tradeoffs when maintaining the status quo is compared to increased use of transportation vendors. The tradeoffs identified with respect to the transportation vendors are not insurmountable and with the appropriate level of management oversight, relationship management and diligence in selecting reputable transportation vendors BC Hydro can overcome the challenges.

7.3 Recommendation

It is recommended to proceed with Option 4:

Incorporate the temporary FSKs for up to 3 years. Document the current service requirements in the unmanned locations and analyse their need. At year 4, remove the FSKs from the operation and establish a transportation model that is serviced exclusively by transportation vendors for the delivery of materials and equipment to all locations.

8 Project Roadmap , , , , Approvals Phase I Phase II Phase III

201 1 I ' Mar Jun Jul Aug ISep Oct Nov Dec

4 Months 6 Months '-----------,/ \,------,/ I\,-------1/1'\r---------,A \r--------,/

Approval Timelines

Execution

Change Management

Continuous Improvement

Implementation Funds

SC approves Be Executive approval Union notifica tion & discussion

1

1

I 1

1

1

I 1

1

1

1

I I 1

I I •

1 1 1 1 1 1

Develop detailed I I implementation plan I ~~:cr:!~~~e:ransport Implement I ~~~~~p~~~~~~cision I Develop transportation Evaluate I drivers I ~~O~d~~~~~~~ ~~~~~::e I ~~ag:~: ~::~~~~~~~~n I • Engage contracted I vendor operations on I transportation vendors I

Vancouver Island ~I ----~~---+~--------rl _ _ ~_~ __ --,\ i\r B~ Hydro Change Management Strategyl vi

$40,000 Implementation plan

Consulting Fees

I • Address employee impacts I · Train resources

K,

1 ) . I Continuous Improvement .

Continuous communication and development of new transportation processes Education ofT&O operations employees on new processes Introduction of new resources into the MMBU

F:::~~::aIYSe "Unk no; costs

ChaRge Management I Consulting Fees I

1

I

•

$55,000 Implementation Consulting Fees

- Dispatch system - Office space



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t: -_-~-___ ._

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8.1 Scope

The scope of this project will include:

- Transitioning transportation coordination from CS Transportation to the MMBU.

- Coordinating the divesting of CS equipment and purchase of FSK vehicles.

- Resource hires and training for temporary FSKs and Material Handlers executing Transportation Coordination activities.

- Implementation of transportation vendors executing scheduled deliveries

- Development of transportation coordination processes to meet needs of schedule deliveries and on demand shipments.

8.2 Implementation Strategy

A detailed implementation plan will be developed to fufther expand on the following implementation steps:

- Communication to CS Transportation on final decision of business case.

m w

- Change management activities to address in accordance with the BC Hydro Change Management Framework.

- Implementation and execution of new MMBU department functions and new routing model.

8.3 Staffing Strategy

8.3.1 FTE Reduction

The recommended option identifies opportunities for FTE reductions. The functional redundancies that currently exist and the increased use of transportation vendors allows for an FTE reduction of 9 positions within the first 3 years, and 3 more positions in year 4 , for a total reduction of 12 positions.

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Page 20 of 24

FTE Impact

Dispatch Drivers

Current

CS 3 8

MMBU 0 0

Ttl Costs ($) 224,484 598,126

Future

CS 0 0

MMBU 3 3

Ttl Costs ($) 224,484 224,484

Time Frame: 1 - 3 yrs

Net FTE changes 0 -5

Net FTE savings ($) 0 373,642

Time Frame: 4+ yrs

Net FTE changes 0 - 8

Net FTE savings ($) 0 598,126

ReductIOn of 3 FSKs In year 4

Calculated on Standard Labour Rates

Reflects the straight savings attributed to FTE reduction

8.3.2 Implementation Feasibility

Mechanics M1 Mgr

3 1

0 1

307,575 268,534

0 0

0 1

0 134,267

-3 -1

307,575 134,267

-3 -1

307,575 134,267

BChgdro

Totals

15

1

1,398,720

0

7

583,235

-9

815,484

- 12

1,039,968

'" !WI

CS manages a group of mainly temporary employees to carry out the work that will be contracted out. The IBEW Collective Agreement does not prevent implementation of the proposed strategy to contract out work currently undertaken by CS temporary IBEW employees provided regular employees are not affected.

While the Collective Agreement requires that "the Employer will place its contracts to perform electrical construction with contractors employing organized labour" (article 3(c) IBEW Collective Agreement), we have determined that the work described in this strategy is not "electrical construction". Therefore the article does not apply.

In addition, the contracting out under the proposed strategy must not affect the employment of regular IBEW staff. Article 3 (f) of the Collective Agreement stipulates that

" .. . regular employees of the Employer shall not be terminated from employment or sustain a reduction in pay rate or loss in classification in status as a result of the Employer placing its work with outside contractors"

Since the majority of employees expected to be impacted are temporary employees, not regular employees, this article does not prevent the implementation of the strategy. One possible exception is the single regular IBEW employee who could potentially be impacted. Therefore we must ensure that he is not affected by the strategy contrary to Article 3(f) (see section 8.3.2).

The remaining impacted employees are Full time temporary employees (FTT's) under the IBEW Collective Agreement and they may be laid off by job classification in order of seniority in accordance with Article 47(b). They will also have the right to bump more junior employees within CS in the Unit Area as per Article 47(b)(2). Under the Collective Agreement FTT's are not entitled to severance or notice of layoff.




Page 21 of 24

8.3.3 Employee Impact Strategy

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Although the Collective Agreement does not prevent the implementation of the strategy, the human element needs to be reviewed and addressed with respect. With the exception of the M1 Manager and 1 employee, the affected CS Transportation employees are temporary. However, some of these "temporary" employees have a considerable length of service with BC Hydro ranging from .1 - 34 years. Given this, it is expected that contracting out this work and laying off

, these temporary staff will have a significant impact on employee morale and will also raise concerns by the IBEW. Given recent displacements of IBEW FTT's in other areas, the IBEW will likely want to know if this strategy is part of a larger plan to contract out bargaining unit work.

The following table lists all employees within the CS Transportation Department in Vernon . Only 14 of the total 21 employees listed will be impacted. However the full list has been presented as all employees within the organizational unit, may be impacted when layoffs are issued as a result of bumping activity under Article 47.

Summary of CS Transportation Employee Service and Age

Union Code Job Title Reg/T~mp Location Length of Service

(vrs)

M+P Field Mgr Construction R Vernon Construction • ISEW Can Tool & Mat Handler FMIWMN R Vernon Construction • ISEW Con Tool & Mat Handler FMIWMN T Vernon Construction • ISEW Con Tool & Mat Hndler SFMIWMN T Vernon Construction • ISEW Const Tool & Material Handler T Vernon Construction • ISEW Const Tool & Material Handler T Vernon Construction • ISEW Machine Operator T Surrey-Store 1 • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Machine Operator T Vernon Construction • ISEW Mechanic T Vernon Construction • ISEW Mechanic T Vernon Construction • ISEW Mechanic SFMNIWMN T Vernon Construction • Average: 13

• 14 employees wJ/1 be Impacted from thIs flsf, the full fist has been presented due to dommlo effect of bumpmg actIVIty expected

Source: Field Opemtions HR

8.3.4 Actions

Upon approval of the Business Case, the following actions are required to address staffing concerns:

Age

• • • • • • • • • • • • • • .. • • I1iII'!I

III

• • 54

1. Discussion with IBEW Union leadership to explain the reasons for change and the impact of the Transportation Strategy on IBEW members currently employed within the CS Transportation Department. Listen to concerns and suggestions to ease impact on affected IBEW staff.

2. Regular employees:

M&P

M1 Manager: Reassignment with the CS - Vernon Business Unit

IBEW union member

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BChydro Consider alternate employment options for regular IBEW employee within Vernon and in accordance with Article 3(f).

1ft

'"

Con Tool & Mat Handler FM.WMN: CS and MMBU to discuss possible options within the business units for this individual. Possible outcome may include:

a. Reassignment within CS Vernon within the current head count structure.

b. Consideration of the MMBU Transportation Activity in Surrey if employee interested in relocating. If so, there may be relocation costs.

3. Conduct Layoffs of Temporary IBEW Employees:

Issue layoff to FTT staff in order of seniority as required by Article 47: 8 Machine Operators (MOs), 3 Mechanics and 2 Material Handlers.

Note that if the laid off employees chooses to displace other employees in their classification with less seniority, in accordance with Article 47 (2), this may trigger bumping activity through CS Vernon and 1 position in Surrey.

Mitigation Strategies should be explored with the IBEW. Ideas for mitigation of the effects of laying off temporaries might include:

• Encourage MOs to consider temporary FSK roles created within the Transportation Strategy. A possible problem with this option is that employees would lose their MO classification and corresponding wage. They would also have to complete the P.Log Essentials credential prior to being considered.

• Consider paying for temporary employees to obtain P. Log or other relevant training to assist them with obtaining alternate employment with BC Hydro.

• Since we will know of layoff dates well in advance we will be able to give employees more notice than normal ofthe expected end dates. This will allow them time to seek out alternate employment. There are concerns that providing too much notice may have negative results on productivity.

• Possible incentives to assist retirements. May only do without prejudice and after consultation within BC Hydro.

8.3.4.1 Expected outcome:

The most significant outcome of layoffs is expected to be the reaction from the IBEW Union leadership and that of the affected employees. The perception will be that BC Hydro is outsourcing IBEW work and eroding the work of the IBEW members atBC Hydro. However, the language of the Collective Agreement does not provide the Union with much leverage since the Transportation Strategy is not contrary to the Collective Agreement.

Movement of staff will flow down depending on their seniority in accordance with Article 47. Considering the scope of change that the Transportation Strategy is proposing, employees that are close to retirement may choose to exercise that option.

Recommendation: Once the Business Case is approved, move forward with discussing the Transportation Strategy with the IBEW. Consider the Union's response and whether BC Hydro will consider funding incentives such as training for displace IBEW members out of the savings identified in the Transportation Strategy.

8.4 Schedule

The proposed project schedule is as indicated in the Project Roadmap, section 7.0

8.5 Costs

Project implementation costs are estimated at $150,000. These costs will cover transition costs, change management and process development consulting fees.

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Page 23 of 24

8.6 Project Team

Project Sponsor:

Project Lead:

Brian Lochansky

Philippa Smith

Representatives from the following groups:

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'"

Human Resources, CS, BC Hydro Change Management, BC Hydro Transportation stakeholders, and external assistance as decided in the implementation plan.

8.7 Risk Management

Risk management will be addressed in line with the corporate risk management process. All identified risks ranked at 4 and higher will be disclosed to the Risk Management Committee.




Page 24 of 24

9 List of Appendices 1. Transportation Study Executive Summary (Aug 2010)

2. List of Stakeholders

3. Medium and Low Risks

4. CS Employee & Equipment List

5. Strategic Sourcing Estimated Savings

6. MannedlUnmanned locations

7. FSK Driving Time

8. Proposed Routing model

9. Anticipated rate savings on high volume routes

10. Detailed Evaluation Matrix

11. Detailed Budget Reconciliation

12. Financial Analysis Assumptions

13. Detailed Net Present Value model for each Option

Transportation Optimization Project SCommittee f inal,doc


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FOR GENERATIONS

MMBU Transportation Study Project

Executive Summary

Prepared by:

Date:

Confidential

Philippa Smith

August 2010


Page 1 of 48

A fundamental part of the MMBU's service is the physical distribution of material throughout the province. As a result, transportation services are critical to the success of the business unit and represent 20% of its operating costs. Due to the significance of the costs involved, MMBU commissioned GLS consulting to conduct an independent study. The objective of the study was to identify the most cost effective transportation model to be used to deliver material to BC Hydro end-users, maintain or improve service levels and minimize capital investment. As a result of the study, it is recommended that the MMBU increases the use of common carrier service providers with the intention of moving to an exclusive common carrier model within 5 years.

The current transportation model utilizes the Construction Services group as the primary carrier supported by common carriers. With this model the drivers are BC Hydro employees and have access to all BC Hydro yards, they are IBEW union members which allows them to handle materials without union conflicts and they have a reputation of being responsive and service oriented. This model has been perceived as a premium cost model and the MMBU wanted to investigate the potential to realize cost benefits by comparing the current state model to the use of private sector common carriers as the primary service provider.

Total Cost of Ownership (TCO) was used to assess the value of potential cost savings which were reviewed in conjunction with service levels, Employee Relations and Change Management impacts. The TCO was calculated using all Construction Services transportation costs required to provide the current service. The TCO was then compared to rates that would be billed by contracted common carriers. Direct and indirect costs as well as BC Hydro corporate overhead allocations were inCluded in the Construction Service costs. These were compared to common carrier prices, which were all inclusive costs, thereby ensuring an equitable comparison.

Employee Relations, Change Management and potential work flow impacts were considered in the review. Attention was paid to potential bargaining unit responses to the changes proposed with a view to identifying implementation constraints. Although some layoffs are anticipated, no significant issues were identified. By paying close attention to details that impact work flows, process changes and changes in practice a fully developed change management strategy including frequent and effective communication and top down management support is expected to minimize the overall impact of the recommended option.

During the month long study GLS collected a broad sample of information including but not limited fo financial documentation, interviews with Construction Services, MMBU management and Storekeepers, along with facility visits. The study included review of processes, outbound freight requirements, reverse logistics (backhaul requirements), dispatch organization, communication flows (automated vs. manual) and vehicle capacity to name a few. The intent was to identify a strategic recommendation that would address cost savings and service level improvement interests and identify opportunities for BC Hydro to implement leading practices in transportation management.

Three options were considered to maximize cost savings, while maintaining or improving service levels and implementing best practices concepts. Two matrices have been developed to illustrate the differences in the options reviewed. The first matrix is embedded in this document and compares the benefits and risks of the options. The second matrix accompanies the Executive Summary and provides a detailed comparison of the three options.

Appendix 1 Transportation Study Executive summary.doc Confidential

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Page 2 of 48

.-.- -; .

Benefits and Risks:

Option 1: Exclusive Common Carrier with Vehicle Flexibility: A contracted common carrier picks up the shipments at the MOC facility in Surrey and delivers directly to manned and unmanned MMBU Field Facilities.

Option 2: Exclusive Common Carrier with regional depots (Prince George, Kamloops): A contracted common carrier picks up the shipments at the MOC facility in Surrey and delivers to the regional depots. The shipments are unloaded and picked up by another common carrier and delivered to manned and unmanned locations within the regions.

Option 3: Combination Common Carrier to regional depots (Prince George, Kamloops), MMBU Storekeeper/Drivers to Field Facilities: A contracted common carrier picks up the shipments at the MDC facility in Surrey and delivers to the regional depots. The shipments are unloaded and picked up by a regionally based Storekeeper/Driver and delivered to the. manned and unmanned locations within the regions.

Option 1 Option 2 Benefits: Low material handling. Moderate material handling.

Enables the use of various vehicle capacities Enables the use of various vehicle capacities without without capital investment. capital investment.

Eliminates current tractor trailer capital investment Eliminates current tractor trailer capital investment needs within BC Hydro. needs within BC Hydro.

Common carriers have increased flexibility and Common carriers have increased flexibility and can can secure different vehiCle configurations. secure different vehicle configurations.

Common carriers have flexibility to increase truck Common carriers have flexibility to increase truck frequencies if and when required. frequencies if required.

Allows the creation of 4 transportation contracts (MDC to hub, Northern region, Southern region, Vancouver Island) facilitating the engagement of regional common carriers.

Risks: Does noleliminate Storekeeper costs incurred to Does not eliminate Storekeeper costs incurred to service unmanned facilities. service unmanned facilities.

Requirement for facility visits. Requirement for facility visits.

Storekeeper driving time not reduced resulting in Storekeeper driving time not reduced resulting in high overtime and exposure to unnecessary high overtime and exposure to unnecessary safety safety risks. risks.

Storekeeper transaction processing time at Storekeeper transaction processing time at unmanned locations. unmanned locations.

Internal driver talent pool would be removed Internal driver talent pool would be removed without without fully understanding its need beyond fully understanding its need beyond MMBU MMBU distribution requirements (Generation & distribution requirements (Generation & Capital Capital Projects reqUirements) . Projects requirements).

Uncertainty regarding impact on IBEW Employee Uncertainty regarding impact all IBEW Employee Relations with regards to the "material handling" Relations with regards to the "material handling" being executed by an external party. being executed by an external party.

Option Savings: $1,288,000 $1,266,000

Appendix 1 Transportation Study Executive sumrnary.doc Confidential

Option 3

Moderate material handling.

Enables the use of various vehicle capacities.

Reduces current trador trailer capital investment needs within BC Hydro.

Common carriers have increased flexibility and can secure different vehicle configurations.

Common carriers have flexibility to increase truck frequencies if required.

Internal driver talent pool is retained while a greater understanding of its need beyond MMBU distribution requirements (Generation & Capital Projects) is gained.

Provides the time to closely examine the service needs of the unmanned facilities .

Storekeeper/Drivers routes planned and managed by dispatch within regular shift hours minimizing overtime and reducing exposure to safety hazards.

IBEW Employee Relations remain constant.

Do"es not eliminate Storekeeper costs incurred to service unmanned facilities.

$884,000

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Page 3 of 48

.- --~-

Further to the comparison between benefits and risks MMBU's Management recommends the implementation of Option 3: Combination Common Carrier to regional depots (Prince George, Kamloops), MMBU Storekeeper/Drivers to Field Facilities over the first 1-3 years. This would be followed by the implementation of Option 2: Exclusive Common Carrier with regional depots (Prince George, Kamloops) to be completed within 5 years. The consecutive implementation of these options does not offer the greatest initial costs savings, however it does offer the most balanced picture for service and efficiency improvement over the long term.

The consecutive implementation of these options will initially cost BC Hydro a premium of $382,000. However, this premium will buy the MMBU the flexibility required to take full ownership and control of its transportation requirements, including dispatch, and to pursue further opportunities to rationalize the transportation network. Option 3 also offers benefits such as, increasing the use of common carriers resulting in volume rate discounts, the use of varied vehicle capacity permitting the movement of all types of freight , the improvement of service levels through the province and the opportunity to strengthen front line customer relationships while improving material availability. Employee Relations concerns created as a result of increased use of common carriers may be mitigated in the short term by the creation of Storekeeper/Driver positions. And, by maintaining the internal talent pool the transport needs of other BC Hydro groups can be properly assessed while MMBU evaluates its transportation services to the unmanned facilities.

Option 3 also bodes well in the greater BC Hydro context. There are currently a number of initiatives underway that will create a high degree of change within the T&D business group, the Plan, Schedule, Work (PSW) project, the SMI project and the Generation stores review activity to name a few. These projects will have impacts on many levels but within the MMBU, they will have a significant impact on transportation processes. PSW will enable material distribution streamlining as a result of more accurate planning, SMI will change the meter distribution process, and the Generation stores review may increase the number of locations serviced by the MMBU. Until the full extent of the changes is understood a conservative approach to large scale change in transportation strategy is appropriate in an effort to retain flexibility to meet the needs of other BC Hydro initiatives.

It is reasonable to assume that the MMBU will be ready to take the next step regarding its transportation strategy and move to an exclusive common carrier model within 5 years. For this to happen, the MMBU's distribution needs at all levels from the Main Distribution Centre to the unmanned facilities require further investigation. A complete understanding of the transportation needs of all BC Hydro groups, in all regions, for all types of work will also be required.

In conclusion , the MMBU Management is seeking approval to proceed with further analysis of the proposed recommendation. The first step will be the development of a business case for Option 3 to be concluded by the end of October, a second business case will be developed for Option 2 in year four. This first business case will include confirmation of proposed cost savings, definition of operating requirements and the assessment of the required infrastructure. Subject to receiving approval to proceed with implementation, the next step will be the development of a detailed project plan for Option 3 which will define a phased approach to implementation. Due to the regional nature of the transportation network this implementation project will be broken down into three phases namely; 1) Vancouver Island, 2) Southern Interior and 3) Northern Interior, leaving the Lower Mainland distribution. model untouched. In conjunction with the phased approach, the project plan will address elements of BC Hydro's change management framework: Leadership at all levels, Involvement, Integrated Planning, Continuous Communication, Ability to Adopt, Reinforcement and Sustainment, Clear Vision and Outcomes.

Appendix 1 Transportation Study Executive summary.doc Confidential

4/4


Page 4 of 48

Transportation Strategy Stakeholder List

Steering Committee Maureen Daschuk Donia Snow Brian Lochansky

Stakeholders Finance: Greg Hamilton Barbara Bolenback Steve Young

MMBU: Ron Wiebe Murray Crampton Scott Dobie Barry Eccleton Bill McAuley

Capital Projects: Steve Winkelmann Moira Berg

Fleet: Donna McMinn/ Jonathon Knowles Jim Miki

Generation: Sharon Kucher

Construction Services: Guy Morand Laurie Shykora

Linel Design TBA

NIA Charlotte Mitha

Appendix 2 Stakeholders list v2.xls

FSS General Manager

CS General Manager

MMBU Manager

Sr Finance FSS

Finance MMBU

Fleet Finance

Sr. Operations Mgr, Field

Field Ops Manager

Field Ops Manager

Sr. Operations Mgr, Surrey

Operations Manager, MOC

Operations Manager, Capital Projects & Spares

Construction Office T&O

Fleet Manager

Fleet Manager Vernon Garage

Business Improvement Manager

Regional Manager, CS

Field Manager, CS

BL made request of PatSawatsky on Sept 24th.

Manager, Non Integrated Areas

1/1


Page 5 of 48

MM

BU T

rans

porta

tion

Stra

tegy

Ris

k R

egis

ter

Date

Ris

k Te

am Id

entif

ying

Co

nseq

uenc

e Pr

obab

ility

No

Id

entif

ied

the

Risk

Po

tent

ial R

isk

Desc

riptio

n Ty

pe

Seve

rity

of

Risk

Lev

el

Miti

gatio

n Pl

an

Occ

urrin

a

1 9-

15-1

0 T&

D

HR re

sour

ce c

halle

nges

pre

sent

del

ays

in fin

aliz

ing

the

Fina

ncia

l M

ed

Med

2

Con

side

r mov

ing

forw

ard

with

out t

he F

SK

Fiel

d St

orek

eepe

r (FS

K) D

river

con

ceD

t D

river

s.

Con

tract

ed tr

ansp

orta

tion

carri

ers

have

all

10

9-15

-10

T&D

Th

e ca

rrier

s do

n't h

ave

the

sam

e sa

fety

pra

ctice

s as

Sa

fety

M

ed

Med

2

been

vet

ted

by S

trate

giC

Sour

cing

to e

nsur

e BC

Hyd

ro.

that

thei

r saf

ety

prac

tices

wer

e in

line

with

BC

Hvd

ro's

stan

dard

s.

Tran

spor

tatio

n ve

ndor

s do

not

mai

ntai

n th

eir

Con

tract

ed tr

ansp

orta

tion

carri

ers

have

all

13

10-1

9-10

T&

D

equi

pmen

t to

the

stan

dard

s th

at B

C H

ydro

dee

ms

Rep

utat

iona

l M

ed

Med

2

been

vet

ted

by S

trate

gic

Sour

cing

to e

nsur

e

acce

ptab

le.

that

thei

r mai

nten

ance

rec

ords

are

in li

ne

with

Be

Hvd

ro's

. 1S

.

Ship

men

ts a

re tr

acke

d by

the

way

bill

syst

em,

BCH

has

not d

irect

influ

ence

on

trans

porta

tion

vend

ors

mat

eria

ls a

re n

ot m

oved

with

out a

way

bill

15

9-15

-10

T&D

w

hen

mat

eria

l goe

s m

issin

g.

Rel

iabi

lity

Med

M

ed

2 re

cord

. Th

is in

form

atio

n pr

ovid

es a

pap

ertra

il to

ena

ble

follo

w u

p w

ith v

endo

r if m

ater

ial

';!

n(JP's

miss

inn

16

9-15

-10

T&D

St

orek

eepe

rs re

fuse

to d

rive

vehi

cles

with

out b

eing

Fi

nanc

ial

Med

M

ed

2 C

onsi

der m

ovin

g fo

rwar

d w

ithou

t the

FSK

Da

id th

e M

achi

ne O

Der

ator

rate

. D

river

s.

17

9-16

-10

T&D

H

azar

dous

Mat

eria

ls Ba

ck-H

aulin

g ca

n no

t be

done

by

Fina

ncia

l M

ed

Med

2

Supp

ort t

rans

porta

tion

vend

ors

to s

ecur

e Tr

ansp

orta

tion

Vend

ors

Haz

ardo

us W

aste

cer

tific

atio

n.

20

9-16

-10

T&D

M

MBU

may

cre

ate

juris

dict

iona

l iss

ues

if FS

K dr

iver

s Fi

nanc

ial

Med

M

ed

2 C

onsi

der m

ovin

g fo

rwar

d w

ithou

t the

FSK

I

rece

ive M

O ra

te th

at a

re h

ard

to u

ndo

at a

late

r tim

e D

river

s.

With

the

incr

ease

d us

e of

tran

spor

tatio

n ve

ndor

s BC

Ve

ndor

man

agem

ent,

mar

ket m

onito

ring

to

Hyd

ro w

ill ha

ve to

face

mar

ket d

riven

pric

es d

urin

g en

sure

that

con

tract

s ar

e ne

gotia

ted

21

10-1

9-10

T&

D

rene

gotia

tion

time

inst

ead

of b

eing

abl

e to

con

trol

Fina

ncia

l M

ed

Med

2

effe

ctiv

ely

and

prov

ide

plan

ning

info

rmat

ion

to

stea

dy c

osts

inte

rnal

ly.

BC H

ydro

fina

nce

to fa

cilita

te in

corp

orat

ion

of

thp. m

::lrkp

.t nr

ivp.n

r.ns

ts

The

curre

nt tr

ansp

orta

tion

cont

ract

s ar

e no

t as

App

roac

h tra

nspo

rtatio

n ve

ndor

s to

rea

lize

24

9-16

-10

T&D

Fi

nanc

ial

Med

M

ed

2 fu

rther

cos

t sav

ings

, or c

onsi

der r

eneg

otia

ting

adva

ntag

eous

as

they

cou

ld b

e.

the

cont

ract

s up

on th

e en

d da

te in

201

1.

App

endi

x 3

Med

ium

and

Low

Ris

ks.x

ls

1/3


Page 6 of 48

Date

Ris

k Te

am Id

entif

ying

Co

nseq

uenc

e Pr

obab

ility

No

Id

entif

ied

the

Risk

Po

tent

ial R

isk

Desc

riptio

n Ty

pe

Seve

rity

of

Risk

Lev

el

Miti

gatio

n Pl

an

Occ

urrin

a ~

The

reso

urce

s re

quire

d fo

r im

plem

enta

tion

(FSK

.

Mov

e fo

rwar

d w

ith F

TT e

mpl

oyee

s w

ith

25

9-16

-10

T&D

Driv

ersr

& T

rans

porta

tion

Coo

rdin

atio

n) p

ositio

ns a

re

Fina

ncia

l M

ed

Med

2

cons

ider

atio

n gi

ven

to th

is st

atus

as

the

new

not c

lear

ly de

fined

, run

ning

risk

of h

iring

FTR

reso

urce

s m

odel

bec

omes

furth

er e

ntre

nche

d an

d fu

ture

w

hen

FTT

reso

urce

s ar

e su

itabl

e.

deve

lopm

ent c

an b

e m

ore

clea

rly v

isual

ized.

The

curre

nt tr

ansp

orta

tion

cont

ract

s do

not

inclu

de a

on

dem

and

deliv

ery

serv

ice in

the

regi

ons

whi

ch m

ay p

ose

Seek

out

on

dem

and

trans

porta

ton

26

9-16

-10

T&D

a

prob

lem

whe

n th

e FS

K D

river

s ar

e se

t up

on d

eliv

ery

Rel

iabi

lity

Med

M

ed

2 co

mpa

nies

with

in th

e re

gion

s th

at a

re a

ble

to

sche

dule

s w

ith n

o fle

xibi

lity to

add

ress

on

dem

and

prov

ide

on d

eman

d m

ater

ial d

evliv

ery.

Id

eliv

erie

s.

Fact

or in

the

FSK

Driv

er v

ehicl

e lim

itatio

ns to

28

9-17

-10

T&D

FSK

Driv

ers

cann

ot m

anag

e la

rger

am

ount

s of

scr

ap

Envir

onm

enta

l M

ed

Med

2

the

rout

ing

mod

el a

nd c

oord

inat

e sm

alle

r mov

es

mat

eria

l ret

urns

. to

man

ned

loca

tions

whe

re tr

ansp

orta

tion

vend

ors

can

pick

up

and

retu

rn m

ater

ials

. '::

29

9-17

-10

T&D

Ret

urne

d m

ater

ials

may

go

miss

ing

with

tran

spor

tatio

n En

viron

men

tal.

Med

M

ed

2 du

plica

tions

, sam

e as

#15

ve

ndor

s ha

ndlin

q th

e re

turn

tran

spor

t.

31

9-28

-10

T&D

Disp

atch

faci

lity re

quire

men

ts c

anno

t be

inco

rpor

ated

R

elia

bility

M

ed

Med

2

cons

ider

mov

ing

trans

porta

tion

depa

rtmen

t to

into

MM

BU p

rope

rtv c

onfiq

urat

ion.

an

othe

r BC

Hvd

ro lo

catio

n.

Ensu

re th

at a

det

aile

d im

plem

enta

ton

plan

is

deve

lope

d w

ith c

onsid

erat

ion

give

n to

If

Con

stru

ctio

n Se

rvice

s is

requ

ired

to p

rovid

e C

onst

ruct

ive S

ervic

es T

rans

porta

tion

33

9-28

-10

T&D

trans

porta

tion

supp

ort i

n th

e fir

st y

ear t

hey

will

requ

ire

Fina

ncia

l M

ed

Med

2

requ

irem

ents

in F

'12.

If th

eir s

ervic

es a

re s

till

tract

or/tr

aile

rs o

r oth

er v

ehicl

es w

hich

will

crea

te

requ

ired

thro

ugh

part

of th

e im

plem

enta

tion

redu

ndan

cies.

do

cum

ent t

he n

eed

and

just

ificat

ion

for t

he

tem

pora

ry e

xiste

nce

of re

dund

ancie

s an

d pr

esen

t to

Stee

ring

Com

mitt

ee fo

r app

rova

l.

Pend

ing

chan

ges

to e

xistin

g m

eans

of d

ispos

ing

of n

on

Prov

ide

this

info

rmat

ion

to tr

ansp

orta

tion

36

9-28

-10

T&D

haza

rdou

s w

aste

or e

quip

men

t in

the

field

may

Fi

nanc

ial

Med

M

ed

2 ve

ndor

s to

ens

ure

trans

para

ncy

and

sign

ifican

tly re

duce

bac

k-ha

ul r

equi

rem

ents

to S

urre

y in

corp

orat

e th

e ch

ange

into

the

rout

ing

mod

el

from

fiel

dlnr

.::Iti

nn"

whe

n ao

oroo

riate

. ,

Insu

ffici

ent f

ocus

on

ratio

naliz

atio

n of

un-

man

ned

,

stor

es lo

catio

ns a

nd in

suffi

cien

t dat

a ga

ther

ing

may

In

itiate

ana

lysis

of u

nman

ned

stor

es

3}

9-28

-10

T&D

Fina

ncia

l M

ed

Med

2

impa

ct M

MBU

's ab

ility

to a

dequ

atel

y sc

ope

out t

he

imm

edia

tely.

se

rvice

s an

d w

ork

bein

g pe

rform

ed b

y th

e FS

K D

river

s.

--

App

endi

x 3

Med

ium

and

Low

Ris

ks.x

ls

2/3


Page 7 of 48

Date

Ris

k Te

am Id

entif

ying

Co

nseq

uenc

e Pr

obab

ility

No

. Id

entif

ied

the

Risk

Po

tent

ial R

isk

Desc

riptio

n Ty

pe

Seve

rity

of

Risk

Lev

el

Miti

gatio

n Pl

an

Occ

urrin

a

2 10

-13-

10

T&D

FSK

Driv

er c

once

pt n

ot a

ccep

ted

by H

R Fi

nanc

ial

Low

Low

1 C

onsi

der m

ovin

g fo

rwar

d w

ithou

t the

FSK

D

river

s.

3 9-

15-1

0 T&

D IB

EW

relu

ctan

ce to

acc

ept F

SK D

river

con

cept

Fi

nanc

ial

Low

Lo

w 1

Con

sider

mov

ing

forw

ard

with

out t

he F

SK

Driv

ers.

C

ontra

cted

tran

spor

tatio

n ca

rrier

s ha

ve a

ll

8 9-

15-1

0 T&

D Tr

ansp

orta

tion

vend

ors

may

go

out o

f bus

ines

s.

Rel

iabi

lity

Low

Low

1

been

vet

ted

by S

trate

gic

Sour

cing

to e

nsur

e th

at th

eir b

usin

ess

is so

und

redu

cing

risk

of

Con

tract

ed tr

ansp

orta

tion

carri

ers

have

all

';:

9 9-

15-1

0 T&

D Th

e ca

rrier

s do

n't h

ave

the

appr

opria

te c

argo

Fi

nanc

ial

Low

Lo

w 1

been

vet

ted

by S

trate

gic

Sour

cing

to e

nsur

e in

sura

nce

to c

arry

BC

Hyd

ro m

ater

ials.

th

at th

eir i

nsur

ance

is in

line

with

BC

Hyd

ro's

11

9-15

-10

T&D

The

carri

er tr

aile

rs a

ren'

t lice

nsed

to b

e pu

lled

by a

BC

Rel

iabi

lity

Low

Low

1

N/A

-BC

Hyd

ro tr

acto

r not

exp

ecte

d to

pul

l H

vdro

trac

tor.

ca

rrier

's tra

ilers

.

BC H

ydro

's tra

ilers

are

not

lice

nsed

to b

e pu

lled

by

N/A

-Tr

ansp

orta

tion

vend

ors

traile

rs a

re

12

9-15

-10

T&D

trans

porta

tion

vend

or's

tract

or.

Rel

iabi

lity

Low

Lo

w 1

goin

g to

be

appl

ied

in th

e ne

w ro

utin

g m

odel

.

19

9-16

-10

T&D

MM

BU F

SK s

taffi

ng d

oes

not a

llow

for a

ppro

pria

te

vaca

tion/

sick

time

cove

raqe

R

elia

bility

Lo

w

Low

1

Mitig

ate

thro

ugh

reso

ure

plan

ning

22

9-16

-10

T&D

FSKs

refu

se to

driv

e ve

hicle

s w

ithou

t bei

ng p

aid

the

Safe

ty

Low

Lo

w

1 C

onsid

er m

ovin

g fo

rwar

d w

ithou

t the

FSK

M

achi

ne O

oera

tor r

ate.

D

river

s.

30

9-17

-10

T&D

How

will

trans

porta

tion

vend

ors

unlo

ad w

hen

FSK

is R

elia

bility

M

ed

Med

1

trans

porta

tion

vend

ors

will

only

unlo

ad a

t no

t pre

sent

? m

anne

d fa

ciliti

es

Futu

re w

ork

requ

irem

ents

put

a st

rain

on

the

38

9-28

-10

T&D

trans

porta

tion

mod

el to

the

exte

nt th

at re

sour

ces

Fina

ncia

l Lo

w

Low

1 En

sure

app

ropr

iate

tran

spor

tatio

n pl

anni

ng is

(la

bour

and

equ

ipm

ent)

are

insu

ffici

ent t

o m

eet

exec

uted

to a

lign

with

exp

ecte

d vo

lum

es.

requ

irem

ents

or t

hat b

udge

ts a

re n

egat

ively

impa

cted

.

The

pick

up

and

deliv

ery

of n

ew v

ehicl

es is

not

39

T&

D in

corp

orat

ed in

to th

e FS

K D

river

or t

rans

porta

tion

Rel

iabi

lity

Low

Lo

w 1

serv

ice n

ot e

ssen

tial a

s pe

r Jim

Miki

9-

28-1

0 ve

ndor

resp

onsib

ilitie

s.

Tran

spor

tatio

n ve

ndor

s an

d FS

K D

river

s ca

nnot

40

T&

D pr

ovid

e em

erge

ncy

deliv

ery

serv

ice to

and

from

veh

icle

Rel

iabi

lity

Low

Lo

w 1

serv

ice n

ot e

ssen

tial a

s pe

r Jim

Miki

9-

28-1

0 re

pair

faci

lities

with

in th

e re

mot

e re

gion

s.

App

endi

x 3

Med

ium

and

Low

Ris

ks.x

ls

3/3


Page 8 of 48

Div

isio

n E

qu

ipm

en

t L

ists

Eq

uip

me

nt

Typ

e

Tra

cto

r, H

ighw

ay

Tra

ctor

, H

ighw

ay c

/w S

TC

T

ract

or,

Hig

hway

c/w

Hia

b T

ract

or,

Hig

hway

c/w

Hia

b T

ract

or,

Hig

hway

c/w

Hia

b T

ract

or,

Hig

hway

c/w

Hia

b T

ract

or,

Hig

hw

ay

Tra

ctor

, H

igh

wa

y c/

w H

iab

Tru

ck, C

ran

e

Tru

ck,

Cra

ne

P

icku

p,

1 T

on 4

x4

Pic

kup

, 1

Ton

4x4

P

icku

p,

1/2

Ton

4x4

P

icku

p,

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on 4

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Page 9 of 48

BC

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Page 10 of 48

MM

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ns

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ne

is

ther

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of o

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ay o

f ea

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the

are

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8/15

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12

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2012

-01-

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Page 12 of 48

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Page 13 of 48

MM

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ned

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.xls

Hou

rs o

f ser

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20

12-0

1-04


Page 14 of 48

, ~,

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1-04


Page 15 of 48

Safety Inspections Inspection Frequency MMBU I Facility Facility Description FTE at HQ Monthly Quarterly Annually VI CAR CAMPBELL RIVER 1 x VI CNY COURTENAY 3 x VI DUN DUNCAN 1 x VI GAN GANGES x VI NAN NANAIMO 3 x VI PTA PORT ALBERNI 1 x VI PTH PORT HARDY x VI QUA QUALICUM x VI VIC VICTORIA 4 x

LM ABB ABBOTSFORD 4 x LM COQ COQUITLAM 1 x LM HPN HORNE PAYNE 2 x LM LMS LOWER MAINLAND SOUTH (Surrey) 3 x LM NVR NORTH VANCOUVER x LM PWR POWELL RIVER x LM SEC SECHELT x LM SQA SQUAMISH x LM VCR VANCOUVER I BURNABY EDMONDS 3 x

IS HMH 100 MILE HOUSE x IS CCR CACHE CREEK x IS CLR CLEARWATER x IS CRA CRANBROOK 2 x IS FER FERNIE x IS GOL GOLDEN x IS INV INVERMERE x IS KAM KAMLOOPS 4 x IS L1L L1LLOOET x IS MRT MERRITT x IS NKS NAKUSP x IS RVS REVELSTOKE x IS SAM SALMON ARM 2 x IS VAL VALEMOUNT x IS VER VERNON 2 x IS ·WST WESTBANK 1 x

IN BNL BURNS LAKE x IN CHT CHETWYND x IN DWC DAWSON CREEK x IN FNS FORT NELSON n/a IN FJN FORT ST. JOHN x IN PG PRINCE GEORGE 4 x IN PRP PRINCE RUPERT n/a IN QCH QUEEN CHARLOTTE ISLANDS n/a IN QNL QUESNEL x IN SMR SMITHERS x IN TER TERRACE 2 x IN VDF VANDERHOOF 1 x IN WLM WILLIAMS LAKE x

CPS BGS Burrard Thermal x CPS ENG ENGINEERING SERVICES (Surrey) 7 x CPS LMT LOWER MAINLAND TRANSMISION (Sur 3 x CPS STR STRATEGIC TRANSMISSION RES. (at MDC) x CPS SSS SURREY SYSTEM SPARES (at MDC) x CPS TEL TELECONTROL (Burnaby - located near 1 x

Appendix 6 Manned vs Unmanned locations.xlsSafety Inspection Frequency 2012-01-04


Page 16 of 48

Location Name Manned Unmanned 100 MILE HOUSE ABBOTSFORD X Atchelitz x Atlin X Deese Lake X Hazelton X Bella Bella X Bowen Island X BURNS LAKE X Burrard Thermal X CACHE CREEK X CAMPBELL RIVER X CHETWYND X Chilliwack X CLEARWATER X COQUITLAM X Cortez Island X COURTENAY X CRANBROOK X DAWSON CREEK X DUNCAN X FERNIE X FORT ST. JOHN X Galiano X Gambier X Keats X GANGES X GOLDEN X Hamilton st. X Hope X HORNE PAYNE X INVERMERE X KAMLOOPS X LlLLOOET X LOWER MAINLAND SOUTH (Surrey) X LOWER MAINLAND TRANSMISION (Surre X Mackenzie X MAIN DISTRIBUTION CENTRE (Surrey) X Maple Ridge (sub) X Masset X Sandspit X Stewart X Kitimat X Mayne Islands X MERRITT X NAKUSP X NANAIMO X NORTH VANCOUVER X Pender X PORT ALBERNI X PORT HARDY X

2012-01-04 Appendix 6 Manned vs Unmanned locations.xlsSheet1


Page 17 of 48

(

Location Name Manned Unmanned POWELL RIVER X PRINCE GEORGE X PRINCE RUPERT X QUALICUM X QUEEN CHARLOTTE ISLANDS X QUESNEL X REVELSTOKE X Richmond X Rosedale X SALMON ARM X SALVAGE (Surrey - Salvage yard) X SECHELT X SMITHERS X SQUAMISH X Staterna X STRATEGIC TRANSMISSION RES. (at MD X SURREY SYSTEM SPARES (at MDC) X TELECONTROL (Burnaby - located near VC X TERRACE X T exada (2x/yr) X Tofino X VALEMOUNT X VANCOUVER I BURNABY EDMONDS X VANDERHOOF X VERNON X VICTORIA X WESTBANK X Whistler X Pemberton X WILLIAMS LAKE X

Total 36 44

Total locations 80

2012-01 -04 Appendix 6 Manned vs Unmanned locations.xlsSheet1


Page 18 of 48

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xls

1/4


Page 19 of 48

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2/

4


Page 20 of 48

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xls

3/4


Page 21 of 48

Tra

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4/

4


Page 22 of 48

Tran

spor

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Page 23 of 48

Tran

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Page 24 of 48

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Page 25 of 48

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4


Page 26 of 48

Anticipated costs savings on high volume routes

Route #1 Weight - OIB from MDC Distribution "Loops"

Weight for CC

# of annual trips @ 25,OOO#/trip Kilometers

Less Zone rate

Transportation Vendor

Fuel s Drop rh;,rn,'o_

Totall trip Total cost

Backhaul weight

Cost! trip Trips @ 25000#/trip

Route #2

Drop cha Totalltrip Total cost

Total

Weight - OIB from MDC Distribution "Loops"

Weight for CC

# of annual trips @ 25,OOO#/trip Kilometers

Less Zone rate


Fuel.su Drop ch Totall trip Total cost

Backhaul weight

Cost! trip Trips @ 25000#/trip

Return portion of round-trip rate Fuel surcharg Drop charges Totalltrip Total cost

Total

Appendix 9 AntiCipated rates savings on high volume routes. xis

B-Trains Cost "'''Vlnln<::

MDC-KAM

1/2


Page 27 of 48

Route # 3 Weight - OIB from MDC Distribution "Loops"

Weight for CC

# of annual trips @ 25,000#ltrip Kilometers

Less Zone rate


Fuel Drop charg Totall trip Total cost

Backhaul weight

Cost! trip Trips @ 25000#ltrip

Assumptions:

Return portion of Fuel surcharge Drop charges Totalltrip Total cost

Total

Total Savings (with use of high capacity equipment)

1 trip = 40,000 Ibs per trailer Round trip rate

MDC- Vernon -

Appendix 9 Anticipated rates savings on high volume routes. xis

-

2/2


Page 28 of 48

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Page 31 of 48

O&M Budget Reconciliation - Changes due to Transportation Implementation

CS Labour - Trucking CS Labour - Dispatch CS T&E - Trucking CS Other non-labour CS Transportation admin costs

MMBU - CC spend MMBU - internal FSK time, servicing unmanned MMBU Admin

Elimination of CS Trucking Services Elimination of CS T&E Elimination of CS other non-labour FSK no longer servicing unmanned MMBU FSKlDriver Labour MMBU FSKlDriver T&E Elimination of current Trucking Fleet FSK/Driver Equipment - Fuel & Mtce CC - Elimination of old route CC - New routing model

Elimination of CS Dispatch Labour MMBU Transportation Coordination

Elimination of CS Admin

0.2 0.1 0.2

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MMBU - CC spend inCludes 0.1 for MMBU off contract spend

CC - New routing model- includes 0.1 for MMBU off contract spend

Appendix 11 Budget Reconciliation.xls 1/2


Page 32 of 48

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Page 33 of 48

~ . . -. ---

Financial Analysis Assumptions and Inputs

The following assumptions were used in the NPV analysis:

• Directed corporate discount rate of 8%

• Time horizon is 10 years

• General inflation measure is the CPI except:

Factor F12 (%) F13 (%) F14 (%) Thereafter (%) CPI 2.1 2.1 2.1 2 Internal Labour 0 2 2 2 Fuel 2.9 7 10.9 US EIA* .. *US Energy Information Administration

The financial picture included Known Costs and Unknown Costs. Known Costs are those costs for which waybill information, such as weight, origin and destination, is available. Unknown Costs do not have any waybill data which severely inhibits estimation of cost savings. The business case assumes no savings for Unknown Costs in NPV but will attempt a reasonable estimation during the implementation project.

Unknown Costs Sources of Data

• Costs of CS transportation for non-MMBU BG/KBUs

• Internal Labour costs are from F10 actuals

• Equipment costs .are based proportionally on MMBU-assigned equipment allocated on CS hours worked

• Contracted Carriers data is from Accounts Payable data for carriers with a BC Hydro contract

• Non-contracted Carriers data is from Accounts Payable for carriers without a contract.

Known Costs Sources of Data - Base Case

• CS labour, non-labour and equipment costs are from Phase 1 costs including waybill sources

• Overhead consists of CS management and administration and one MMBU manager

• TL and L TL contracted carriers' costs are from F10 MMBU actual

• Driving Time (Windshield time)

• Capital for tractors: o Capital cost - $300,000 o Useful life - 12 years o Fuel ($/km) - $.60 (F1 0) o Repair and Maintenance (R&M $/km) - $.20 (F 1 0) o Insurance, management & other - $10,000 per unit

• Capital for trailers: o Capital cost - $40,000 o Useful life - 15 yrs o Renewal - 2 trailers per year to maintain operational fleet o Insurance, management & other - $1,500 per unit

Known Costs Sources of Data - Scenarios

• FSK - as per the ciassification Material Handles SLR plus $3 premium; Overtime 15%

• T&E - $500 per week for accommodation; $51 per diem @ 5 days per week

• CS non-labour

Appendix 12 Financial Analysis Assumptions.doc 1/2


Page 34 of 48

--- .--- --'-

• Overhead - CS management and one MMBU manager • Transportation Coordination - three employees to coordinate BC Hydro material movement with contract carriers

• Contract Carrier: o Linehaul (TL) - casted as per existing contracts o "Loops" from Depots to manned stores - costed using mileage rates x loop miles o On "retainer" - all in costing

• Capital for FSK Heavy Duty vehicle: o Flatdeck with HIAB crane o Capital cost - $210,000 o Useful life - 12 years o Fuel ($/km) - $.3783 (F1 0) o R&M ($/km) - $.7131 (F10) o Insurance, management, other - $10,000 per unit

Appendix 12 Financial Analysis Assumptions.doc 2/2


Page 35 of 48

MMBU Transportation Study -Option 1 - Current State, Base Case

Internal Labour 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.0 1.0

Internal Labour 0 .2 0.2 0.2 0.2 0.2 0.2 0 . 2 0.2 0.2 0 .2 0.2

Other 0.1 0.1 0.1 0.1 0.1 0.1 0. 1 0.1 0.1 0 .1 0.1 Other 0.2 0 .2 o.i 0.3 0.3 0 .3 0 .3 0.3 0.3 0.3 0.3

Internal Labour 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0 .3

Internal Labour 0 .3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4

1.8 2.0 . 2.0 2.1 2.1 2.2 2.2 2. 2 2.3 2.3 2.4

Fuel 0.5 0. 5 0.5 0.6 0.6 0 .6 0.7 0.7 0.7 0.7 0.8 other 0.0 0.0 0.0 0.0 0 .0 0.0 0.0 0 .0 0.0 0 .0

Other 0.1 0. 1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Other 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

0 .8 0 .8 0 .8 0 .9 0.9 1.0 1.0 1.0 1. 1 1.1 1.1

Other

Other

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Other

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Labour for other KBUs Internal Labour 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 non· labour . T8:E (other KBU~) Other 0. 1 0.1 0.1 0.1 0. 1 0.1 0 .1 0. 1 0 . 1 0.1 0.1

non· labour . other other KBUs Other 0.2 0.2 0.2 0 .2 0 .2 0 .2 0 .2 0. 2 0 .2 0. 2 0 .2

0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0

Fuel 0.3 0.3 0 .3 0 .3 0.3 0 .3 0.4 0 .4 0.4 0.4 0.4

Other

Other 0.1 0.1 0.1 0.1 0.1 0 .1 0. 1 0 . 1 0.1 0 . 1 0.1

0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5

Other

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'TOTALNPV $51 .7 " ", ' '

NominatAnnualtotal ' ,,\ ,':, 7.1 6.9 7. 5 7.3 , 7.5 7.7 8. 5 8.0 9 .7 8.3 .

Appendix 13 - Option 1 Current State .xlsmNPV-Base 2012-01-041


Page 36 of 48

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2012

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Page 37 of 48

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52

52

75

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,176

65

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4

258,

232

20

12

-01

-04


Page 38 of 48

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tal

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endi

x 13

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ptio

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and

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K D

river

s SL

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e.xl

smN

PV

-Bas

e 20

12-0

1-04

1


Page 39 of 48

MMBU Transportation Study Option 2 - Transportation Vendors and Regional FSK Drivers SL Moderate

Internal Labour 0.3 0~ 3 0 . 3 0. 3 0 .3 0 . 3 0 . 3 0 . 3 0.3 0.3

Other 0. 1 0 . 1 0 . 1 0.1 0 .1 0.1 0.1 0.1 0. 1 0 . 1

Internal Labour 0.1 0 . 1 0.1 0.1 0 . 1 0.1 0.2 0. 2 0.2 0 . 2

Internal Labour 0.3 0 . 3 0.3 0 . 3 0.3 0 . 3 0. 3 0.3 0 . 3 0 . 3

0 .8 0 .8 0.8 0 .8 0.8 0 .8 0 .9 0.9 0 .9 0 .9

Fuel 0 .1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Other 0 .0 0.0 0.0 0 .0 0 .0 0.0 0.0 0.0 0.0 0.0

Other 0.1 0 . 1 0 . 1 0 .1 0 .1 0.1 0.1 0 . 1 0 . 1 0 . 1

Insurance, Mgmt fee, etc Other 0 .0 0 .0 0 .0 0.0 0 .0 0 .0 0.0 0.0 0.0 0 .0

0.2 0.2 0.2 0.2 0 .2 0 . 3 0.3 0.3 0:3 0 . 3

Contracted Carrier

Rate driven costs Other

Fuel

Other

Other

Internal Labour 0 .6 0.6 0.6 0. 6 0 .6 0 .6 0.6 0 . 7 0. 7 0 . 7

Other 0.1 0.1 0.1 0.1 0 .1 0.1 0.1 0.1 0. 1 0.1

Other 0.2 0 . 2 0 .2 0.2 0 .2 0.2 0.2 0.2 0.2 0.2

0.8 0 .9 0.9 0 .9 0.9 0 .9 0 .9 1.0 1.0 1.0

Fuel 0. 3 0 : 3 0.3 0 . 3 0.3 0.4 0.4 0 .4 0.4 0 .4

Other

Other 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0 . 1 0.1 0. 1

0.3 0.4 0.4 0.4 0.4 0 .4 0.5 0 .5 0.5 0 .5

Contracted Carriers

Non-MMBU On-Contract Other

Other

Other

TOTAL NPV " " $44.8 , , .'~ "::'

Nominal Annual total ~ , " ' , 6.6 6.1 6.3 6.5 " , 6 ; ~ 6.8 6.9 7.1 7.2 7.4 {

Appendix 13 - Option 2 Tra ns Vdrs and Reg FSK Drivers SL Moderate.xlsmNPV-Scenario 2012-01-042


Page 40 of 48

MM

BU

Tra

nsp

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atio

n S

tud

y -

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r to

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Trip

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al

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al

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uel

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vers

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eg C

ost

of F

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75

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%

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rly R

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Ap

pe

nd

ix 1

3 -

Opt

ion

2 T

rans

Vd

rs a

nd R

eg F

SK

Driv

ers

SL

Mod

erat

e.xl

smS

cena

rio

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26

52

52

42

,432

3

7,5

44

33

,176

65

,104

1

78

,25

6

2012

-01-

04

:;:


Page 41 of 48

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App

end

ix 1

3 -

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3 E

xclu

sive

Tra

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rs S

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xlsm

NP

V-B

ase

2012

-01-

<)41

~ '~.

" " :;:' " '.


Page 42 of 48

.-.-.-: --

MMBU Transportation Study -Option 3 - Exclusive Transportation Vendors SL Moderate

ITr"n':nnr,",Hnn Coordination

Internal Labour

Other

Internal Labour

Internal Labour

0. 1 0.1

0.3 0. 3

0. 1

0.3

0.1

0. 3

0.1 0.1

0.3 0.3

0.2

0.3

0.4 0.4 0.4 0.4 0.4 0.4 0.4

I Eqjuipment Operating Costs

Costs

Labour for other KBUs

non· labour . T&E (other KBUs)

Car rier s

On·Contract

Carriers

Fuel

Other

Other

Other

Other

Fuel

Other

Other

Internal Labour

Other

Other

Fuel

Other

Other

Other

Other

Other

0.6

0.1

0.2

0.8

0.3

0.1

0.3

0.6 0.6 0.6 0.6 0.6 0.6

0.1 0. 1 0.1 0.1 0. 1 0.1

0. 2 0.2 0.2 0.2 0.2 0.2

0.9 0.9 0.9 0 .9 0.9 0.9

0.3 0.3 0.3 0. 3 0.4 0.4

0. 1 0. 1 0 . 1 0.1 0.1 0.1

0.4 0.4 0.4 0.4 0.4 0.5

0.2

0.3

0.4

0.7

0. 1

0.2

1.0

0.4

0.1

0.5

0.2

0.3

0.5

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0.1

0.5

0 .2

0.3

0.5

0.7

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0.4

0. 1

0.5

TOTAL NPV " U' $41.8 0," "~ , ~; Nominal Annual total ". . ,0 5.7 5.8 6.0 6.1 '; 6.~ 6.4 6.5 6.7 6.8 7.0'~

Append ix 13 - Option 3 Exclusive Trans Vdrs SL Moderate.xlsmNPV-Scenario 2012-01-042


Page 43 of 48

MM

BU

Tra

nsp

ort

atio

n S

tud

y -

Sce

na

rio

Det

ails

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rna

l Lab

ou

r -

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reke

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er/D

rive

rs

FT

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eg C

ost

of F

SK

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ourly

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te

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ode

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2012

-01-

04

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Page 44 of 48

MM

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2012

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041


Page 45 of 48

MMBU Transportation Study -Option 4 - Hybrid 3 yrs FSK Drivers 8: Transportation Vendors SL Moderate

Internal Labour 0.3 0 . 3 0 .3

Other 0.1 0.1 0 . 1

Internal Labour 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0 . 2 0.2

.Internal Labour 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

0.8 0.8 0.8 0.4 0.4 0.4 0.4 0.4 0.5 0.5

Fuel 0.1 0.1 0.1

Other 0.0 0.0 0.0

Other 0 .1 0.1 0.1

Other 0.0 0.0 0.0

0.2 0.2 0.2

Other

Fuel

Other

Other

Internal Labour 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7

Other 0.1 0.1 0.1 0.1 0.1 0.1 0. 1 0.1 0.1 0 . 1

Other 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

0.8 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0

Fuel 0.3 0.3 0.3 0.3 0 .3 0.4 0.4 0.4 0.4 0.4

Other

Other 0.1 0 .1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0 . 1

0.3 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5

Other

Carriers

Other

Other

Total Unknown $18.9 ',;1'

Nominal Annual total , ' I I I I -::1 I I I I I

TOTAL NPV , $43.2 ' . " ,

Nominal Annual total . 6.6 6.1 6. 3 6.1 , 6.2 6.4 6.5 6. 7 6.8 7.0 ' I • ' . ~, , ~_. r •

Appendix 13 - Option 4 Hybrid 3 yrs FSK Driver & Trans Vdrs SL Moderate,xlsNPV-Scenario 2012-01-042


Page 46 of 48

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Page 47 of 48

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Page 48 of 48

Canadian Office and Professional Employees Union, Page 1 Local 378 of 1 SUPPLEMENTAL Information Request No. 1.16.2 Dated: February 16, 2012 British Columbia Hydro & Power Authority Response issued March 12,2012 British Columbia Hydro & Power Authority Exhibit: F2012 to F2014 Revenue Requirements Application (F12- 8-16-2 F14 RRA)

16.0 Smart Metering and Infrastructure (SMI)

Reference: General

1.16.2A What is the duration of any warranties granted by the manufacturer(s) or supplier(s) of the meters being installed under this program?

ORIGINAL RESPONSE:

Equipment warranties were the subject of negotiation between BC Hydro and the meter vendor (Itron Canada, Inc.) and are specified in the smart metering system contract (Metering System and Meter Data Management System Supply and Services Agreement between Be Hydro and Itron Canada, Inc.). Pursuant to the terms of this contract, specifically those related to confidentiality and privacy obligations, BC Hydro is unable to disclose details regarding equipment warranties.

SUPPLEMENTAL RESPONSE:

Pursuant to the Metering System and Meter Data Management System Supply and Services Agreement between BC Hydro and Itron Inc. Itron Canada Inc. as Contractor provided a warranty of

Documents

Acting Commission Secretary British Columbia Utilities ... … · and the vendor, Itron Canada Inc. ... 7.2.2 Financial Analysis ... BC Hydro to take strategic steps towards further