Ontario Energy Board (Board Staff) INTERROGATORY #36 ......2012/09/20 · Filed: September 20, 2012...

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 1.01 Staff 36 of 2

Ontario Energy Board (Board Staff) INTERROGATORY #36 List 1 1

2

Issue 6 Are the proposed spending levels for Shared Services and Other 3

O&M in 2013 and 2014 appropriate? 4

5

Interrogatory 6

7

Ref: Exhibit C1/Tab4/Sch2/p 2 8

Hydro One attributes higher CCFS costs to ‘higher Real Estate Costs for additional space 9

in the company’s work program’. Why do these real estate costs increase so significantly 10

in 2012 (levels continuing to the test years) when the evidence shows a reduction of staff 11

in 2011 and moderate staff growth from 2012 to 2014 (Exhibit C1-5-2/Attachment 2)? 12

13

14

Response 15

16

As outlined in the evidence Exhibit C1, Tab 4, Schedule 2 on page 24, the change in 17

funding requirements in bridge year 2012 and test years 2013 and 2014 is mainly driven 18

due to the following factors: 19

20

• The facilities infrastructure base is dominated by buildings that are at or reaching the 21

end of their asset life cycle. Approximately 40% of administrative and service centre 22

facilities are estimated to be more than 40 years old. The change in funding 23

requirements in bridge year 2012 and test years 2013 and 2014 is driven due to 24

incremental increase of space in the field as result of new facilities and building 25

additions being put in service providing for replacement facilities due to end of life, 26

and new and additional facilities to meet accommodation needs in terms of Company 27

work program and operating requirements (which includes housing specialized work 28

equipment). The examples of the facilities additions include the following new 29

operation centre locations: Mississauga, Picton, Bolton, London, Belleville, and 30

Orleans. 31

32

• The increase in funding requirements in bridge year 2012 and test year 2013 is also 33

contributed by planned head office improvements, which are expected to result in 34

additional temporary relocation space for employees during the duration of the 35

improvements and employee office moves costs. 36

37

• The majority of facilities work program costs are fixed. The facilities work program 38

is extensively driven by fixed-cost contractual obligations which arise primarily 39

through relationships with external landlords (leases). Other fixed costs include 40

utilities and costs that are represented by negotiated contracts with internal and 41

external service providers for base level facility maintenance (for example, 42

administrative/service centre building maintenance, janitorial and snow removal, 43

minor repairs, building inspections and similar activities). The change in funding 44

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 1.01 Staff 36 of 2

requirements in bridge year 2012 and test years 2013 and 2014 is partially influenced 1

by rising facilities space costs described above. 2

3

• The funding requirements in bridge year 2012 takes into consideration corporate 4

health and safety initiatives, which specifically include funding for Arc Flash 5

calculations. The Facilities Arc Flash initiative identifies the energy levels of the 6

electric circuits at Hydro One Operation Centres. The energy levels will then be 7

labeled on these circuits as required so that those performing work on these circuits 8

can do so wearing the necessary protective equipment. 9

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 1.02 Staff 37 Page 1 of 2


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5

Interrogatory 6

7


Table 1 shows that along with higher Real Estate costs, Hydro One shows large Bridge 9

Year increases in many categories: Finance 7.5%, General Counsel and Secretariat 10

17.6%, Regulatory Affairs 11.4%, Security Management 23% and Internal Audit 35%. In 11

many cases these increased levels carry on into the test years. While the following pages 12

of the evidence provide details of the work programs, no overall rationale is provided for 13

the excessive increases in these programs and why such high increases are justified. 14

Please provide further justification for the increases in these areas. 15

16

17

Response 18

19

In general, shared service spending is increasing in order to support the increase in the 20

overall work program. With respect to the specific departments highlighted, costs 21

increase by $8.9 million (13.6%) over the 2011-2014 period, while the total work 22

program spend has increased by 17.2% . Please see Exhibit I, Tab 7, Schedule 1.04 Staff 23

42, Table 2, for details of this calculation. 24

25

Specific reasons for the increases include: 26

27

• Finance 28

o Filled vacancies to shore up support capabilities 29

o Transfer in of the HR Payroll function (note decrease in HR) 30

o Transfer in of Business Planning and Program Results departments from Asset 31

Management 32

33

• General Counsel 34

o Increased work due to Green Energy Act and distributed generation to support 35

government programs 36

o Records Management project to increase integrity of information across the 37

corporation 38

39

• Regulatory Affairs 40

o Costs increase in 2012 due to the planned rate cases 41

o Other Regulatory initiatives over the test period include Regional planning, 42

System Reliability studies, Smart Grid Standards development, East/West Tie and 43

other potential partnership initiatives. 44

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 1.02 Staff 37 Page 2 of 2 • Security 1

o Additional measures to address metal (copper) theft at locations across Ontario to 2

increase safety of employees and the general public 3

4

• Internal Audit 5

o Increased safety audits 6

o Increased activity related to ISO 14001 & OHSAS 18001 certification 7

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 1.03 Staff 38 Page 1 of 1


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5

Interrogatory 6

7


Table 4 shows that IT Development categories Enhancements and Upgrades almost 9

double from 2012 to 2013. Why is such a steep increase required in 2013? Please explain 10

whether or not this spending could be smoothed over a number of years? What is the 11

urgency that drives these increases in the test years? 12

13

14

Response 15

16

Enhancement and upgrade costs were deferred in 2012 due to the focus on the 17

Cornerstone Phase 4 CIS Replacement project. Enhancement costs in 2013 return to 18

steady state levels (see 2010/2011) to deliver system changes that support business, 19

process and reporting improvements. Upgrade costs in 2013 are higher due to the 20

cyclical nature of application upgrades to keep them in a vendor supported state. Key 21

upgrades in 2013 include SAP Supplier Relationship Management (SRM), SAP Supply 22

Chain Management (SCM), Trilliant Head-end system, and the enterprise mobile 23

platform. These upgrades are required to get the software into a vendor-supported state 24

and/or to make the software compatible with Microsoft Windows 7. 25

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 3.01 EP 22 Page 1 of 2

Energy Probe (EP) INTERROGATORY #22 List 1 1

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5

Interrogatory 6

7

Ref: Exhibit C1, Tab 3, Schedule 1, 8

9

This page discusses variances between Board Approved 2012 OM&A expenditures and 10

2012 projected actuals. The Shared Services and other Costs category in Table 3 shows a 11

variance of $44.6 M. 12

13

a) Line 14 refers to an increase in Cost of Sales for a metering project planned for 14

2012. Please describe the metering project and specify how much of the variance 15

of $44.6 M is attributable to it. 16

17

b) Line 15 refers to a lower amount of overhead cost capitalized as another reason 18

for the variance. Please provide a breakdown showing the amount of capital and 19

OM&A in projected actual cost for 2012 compared to Board Approved 2012. 20

How much of the $44.6 M variance is attributable to this cause? 21

22

23

Response 24

25

a) The metering project planned for 2012 represents the work to be performed by Hydro 26

One Transmission for the upgrading of revenue meters at various sites within the 27

province per IESO requirements. 28

29

The variance attributable to the metering project is $12.5 million. 30

31

32

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 3.01 EP 22 Page 2 of 2 b) 1 2

2012 Board Approved versus 2012 Projected OM&A Expenditures Shared Services & Other Costs ($M) OM&A Categories Board Variance Approved Projected Real Estate 28.3 30.7 2.4Information Technology 70.1 60.6 (9.5)Asset Management 39.1 35.3 (3.8)Corporate Services* 53.4 52.4 (1.0)Total Change in Shared Services 190.8 179.0 (11.8) External Work Cost of Sales 8.5 21.0 12.5Overheads Recovered (121.1) (112.6) 8.5Other Corporate Costs (10.6) (15.6) (5.0)EB-2010-0002 Reduction (19.1) 0.0 19.1Cornerstone Savings - Unclassified (21.4) 0.0 21.4Net Change in Shared Services & Other Costs 27.2 71.8 44.6* Corporate Services Includes Corporate Management, Finance, Corporate Communications, Corporate Security, HR, Regulatory Affairs, General Counsel & Secretariat and Internal Audit 3



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5

Interrogatory 6

7

Ref: Exhibit C1, Tab 3, Schedule 1, Page 16 8

9

Table 4 on Page 16 shows an increase in supply chain cost from 37.6 M to 45.0 M from 10

2009 to 2011. 11

12

a) What was the value of material and services procured for 2009 and for 2011? 13

14

b) Line 6 states that the contract with INERGI was for the “same service levels at a 15

declining price”. Please reconcile that statement with the 20% increase in costs 16

referred to in table 4. 17

18

19

Response 20

21

a) The value of material and services procured were $983 million in 2009, and $1,052 22

million in 2011. 23

24

b) The Inergi Contract for supply chain management has been contracted for the same 25

service levels at a declining price over the term of the contract. However, any work 26

provided by Inergi over and above the contracted service levels and base transaction 27

volumes results in additional costs. The 20% increase in supply chain costs relates 28

both to Inergi costs and costs retained by Hydro One. 29

30

Supply Chain additional costs between 2009 and 2011 were due to volume increases 31

related to growth in Hydro One’s work program requirements, and increased 32

warehousing and transportation costs related to increased material handled and 33

shipped. In addition, Hydro One implemented its strategic sourcing program, 34

resulting in the sourcing savings discussed in Exhibit A, Tab 15, Schedule 6, pages 9 35

to 11, and depicted in Exhibit D1, Tab 4, Schedule 3, page 8. Growth in Supply 36

Chain between 2012 and 2014 reflects a projected increased cost level related to the 37

volume and complexity of supply chain services to support the increasing work 38

program levels, along with increased costs to transport and handle the related 39

material. 40



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5

Interrogatory 6

7

Ref. Exhibit C1, Tab 3, Schedule 1, Page 2, Tables 2 and 3 8

9

a) Please provide more detail of the variation in the 2011 Shared Services amount. 10

11

b) Please provide more detail on the major variance in 2012 shared services amount. 12

13

c) Explain why Hydro One seems unable to forecast this category of OM&A with 14

similar accuracy to other categories. 15

16

d) Why is the 2013/2014 forecast reasonable? 17

18

19

Response 20

21

a) Please see Exhibit I, Tab 5, Schedule 10.02 CCC9 22

23

b) Please see Exhibit I, Tab 6, Schedule 3.01 EP 22, part b) 24

25

c) Please see Exhibit I, Tab 5, Schedule 10.02 CCC9 and Exhibit I, Tab 6, Schedule 26

3.01 EP 22, part b) where the specific variances in both 2011 and 2012 are 27

documented. 28

29

d) The 2013/2014 forecast is reasonable as it is based on the rigorous business planning 30

process as described in Exhibit A, Tab 13, Schedule 1. 31



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5

Interrogatory 6

7

Ref: Exhibit A, Tab 8, Schedule 3, Page 6, Table 2 & 8

Exhibit C1, Tab7, Schedule 1, Tables 1 & 2 9

10

a) Please provide a Schedule that uses the data in the first reference and lists the 11

2011 Board approved to forecast 2014 Shared Services and shows the pricing of 12

the common corporate services and the allocation to affiliates. 13

14

b) Reconcile to the costs and allocation in the second reference. 15

16

c) Please provide for 2013/2014 a variance report for all material cost changes and 17

allocations from 2012 board approved. 18

19

20

21

Response 22

23

a) See schedule that uses Exhibit A, Tab 8, Schedule 3, Page 6 Table 3 and lists the 24

2011 Board approved to forecast 2014 shared services and shows the pricing of the 25

common corporate services and the allocation to affiliates. 26

27

Services (in $Thousands) Hydro One Inc. Remotes Telecom Brampton

NetworksGeneral Counsel and Secretary Services (note 1)

2011 EB-2010-0002 92 230 92 1842012 EB-2010-0002 86 216 86 1732012 EB-2012-0031 Bridge 87 217 87 1742013 EB-2012-0031 Test 89 222 89 1772014 EB-2012-0031 Test 91 226 91 181

Financial Services2011 EB-2010-0002 18 305 311 4072012 EB-2010-0002 18 307 305 3802012 EB-2012-0031 Bridge 74 260 342 3902013 EB-2012-0031 Test 75 263 346 3962014 EB-2012-0031 Test 77 270 356 40828

29

30


Corporate Services (note 1)2011 EB-2010-0002 0 352 419 332012 EB-2010-0002 0 366 436 342012 EB-2012-0031 Bridge 0 267 253 262013 EB-2012-0031 Test 0 274 261 272014 EB-2012-0031 Test 0 284 267 28

Telecommunication Services2011 EB-2010-0002 0 134 280 02012 EB-2010-0002 0 155 325 02012 EB-2012-0031 Bridge 0 128 279 02013 EB-2012-0031 Test 0 118 256 02014 EB-2012-0031 Test 0 115 249 0

Transfer Price Charges for HONI Assets (note 2)

2011 EB-2010-0002 0 0 0 02012 EB-2010-0002 0 0 0 02012 EB-2012-0031 Bridge 0 0 0 02013 EB-2012-0031 Test 0 200 500 02014 EB-2012-0031 Test 0 200 500 0

Other Services 2011 EB-2010-0002 0 620 2,033 02012 EB-2010-0002 0 645 2,109 02012 EB-2012-0031 Bridge 0 375 1,031 02013 EB-2012-0031 Test 0 366 1,006 02014 EB-2012-0031 Test 0 348 957 0

CEO/President Services2011 EB-2010-0002 0 80 0 02012 EB-2010-0002 0 80 0 02012 EB-2012-0031 Bridge 0 80 0 02013 EB-2012-0031 Test 0 80 0 02014 EB-2012-0031 Test 0 80 0 0

Utility Operation Services2011 EB-2010-0002 0 1,004 0 02012 EB-2010-0002 0 1,004 0 02012 EB-2012-0031 Bridge 0 936 0 02013 EB-2012-0031 Test 0 929 0 02014 EB-2012-0031 Test 0 929 0 0Utility Joint Services2011 EB-2010-0002 0 15 0 02012 EB-2010-0002 0 15 0 02012 EB-2012-0031 Bridge 0 0 0 02013 EB-2012-0031 Test 0 0 0 02014 EB-2012-0031 Test 0 0 0 01


Supply Chain Services (note 3)2011 EB-2010-0002 0 77 200 02012 EB-2010-0002 0 77 200 02012 EB-2012-0031 Bridge 0 77 200 02013 EB-2012-0031 Test 0 77 200 02014 EB-2012-0031 Test 0 77 200 0

Totals (note 2 and 3)2011 EB-2010-0002 110 2,817 3,335 6242012 EB-2010-0002 104 2,865 3,461 5872012 EB-2012-0031 Bridge 161 2,340 2,192 5902013 EB-2012-0031 Test 164 2,529 2,658 6002014 EB-2012-0031 Test 168 2,529 2,620 617

Note 1: costs were reclassifed from general counsel to corporate services in presentation of EB-2010-0002 numbers to conform with presentation in EB-2012-0031Note 2: Transfer price charges were incorrectly presented in $M in Exhibit A-8-3. The figureshave been corrected in the table aboveNote 3: EB-2010-0002 Supply chain services were included in a separate service level agreement.They have been included to conform with presentation in EB-2012-0031 1

2


1

b) See attached tables used to prepare Exhibit C1, Tab 7, Schedule 1 Page 3, Tables 1 2

and 2. 3

4

TABLE A 5 Reference

Description 2013 Total Tx Dx Telecom Brampton Remotes HOICorporate Management 5.3 2.7 2.3 0.1 0.1 0.1 0.1

General Counsel and Secretary Services 0.9 0.5 0.4 0.0 0.0 0.0 0.0 aPresident / CEO / Chairman Services 3.5 1.8 1.6 0.0 0.0 0.0 0.0 bChief Financial Office Services 0.9 0.4 0.3 0.0 0.0 0.0 0.0 c

Finance 34.0 19.5 13.6 0.5 0.2 0.2 0.1 HONI Finance 22.0 12.6 8.7 0.2 0.2 0.2 0.1 dInergi - Finance 7.8 4.4 3.2 0.2 - 0.0 - eInergi - HR 4.3 2.5 1.7 0.1 - 0.0 - f

Human Resources 10.9 6.4 4.3 0.2 - 0.1 - gCorporate Communications 11.4 5.3 6.1 - - 0.1 - hGeneral Counsel & Secretariat 8.9 4.7 3.6 0.1 0.2 0.2 0.1 iRegulatory Affairs 23.6 11.5 12.0 - - 0.1 - jCorporate Security 3.8 1.8 2.0 0.0 0.0 0.0 - kInternal Audit 4.3 2.5 1.3 0.1 0.2 0.1 0.0 lReal Estate & Facilities 62.5 31.8 30.7 - - 0.0 - mCF&S Costs (as per C1-7-1) 164.8 86.1 75.9 0.9 0.7 0.9 0.2

Customer CareInergi - CSO 40.9 - 40.8 - - 0.0 - nInergi - Settlements 4.6 0.2 4.3 - - - - oTotal 45.4 0.2 45.2 - - 0.0 -

Information Technology SystemsInergi - ETS 71.9 28.7 42.3 0.6 - 0.2 - pTelecom Services 18.0 10.4 7.2 0.3 - 0.1 - qInformation Technology Systems 20.3 11.5 8.6 0.1 - 0.0 0.0 rTotal 110.2 50.7 58.1 1.0 - 0.4 0.0

OperationsInergi - AP 1.4 0.8 0.5 0.1 - 0.0 - sOperations 65.0 36.9 28.2 - - (0.0) - tTotal 66.5 37.7 28.6 0.1 - 0.0 -

Strategy 62.5 35.8 26.7 - - - - u

Facilities (52.4) (23.6) (28.8) - - - - v

Donations 1.3 - - - - - 1.3 w

Total 398.3 187.0 205.7 2.0 0.7 1.3 1.5

2013

6


TABLE B 1 Reference

Description 2014 Total Tx Dx Telecom Brampton Remotes HOICorporate Management 5.4 2.8 2.4 0.1 0.1 0.1 0.1

General Counsel and Secretary Services 1.0 0.5 0.4 0.0 0.0 0.0 0.0 a1President / CEO / Chairman Services 3.6 1.8 1.6 0.0 0.0 0.0 0.0 b1Chief Financial Office Services 0.9 0.4 0.4 0.0 0.0 0.0 0.0 c1

Finance 34.1 19.5 13.6 0.5 0.2 0.2 0.1 HONI Finance 22.7 13.0 9.0 0.2 0.2 0.2 0.1 d1Inergi - Finance 7.4 4.1 3.0 0.2 - 0.0 - e1Inergi - HR 4.0 2.4 1.6 0.1 - 0.0 - f1

Human Resources 11.1 6.5 4.4 0.2 - 0.1 - g1Corporate Communications 12.6 5.7 6.8 - - 0.1 - h1General Counsel & Secretariat 9.1 4.8 3.7 0.1 0.2 0.2 0.1 i1Regulatory Affairs 23.0 9.7 13.2 - - 0.1 - j1Corporate Security 3.9 1.8 2.1 0.0 0.0 0.0 - k1Internal Audit 4.4 2.6 1.4 0.1 0.2 0.1 0.0 l1Real Estate & Facilities 64.3 32.7 31.6 - - 0.0 - m1CF&S Costs (as per C1-7-1) 167.9 86.1 79.1 0.9 0.7 0.9 0.2

Customer CareInergi - CSO 39.4 - 39.3 - - 0.0 - n1Inergi - Settlements 4.8 0.2 4.6 - - - - o1Total 44.2 0.2 43.9 - - 0.0 -

Information Technology SystemsInergi - ETS 68.8 27.4 40.7 0.6 - 0.2 - p1Telecom Services 17.6 10.2 7.0 0.2 - 0.1 - q1Information Technology Systems 20.8 11.8 8.9 0.1 - 0.0 0.0 r1Total 107.2 49.4 56.6 0.9 - 0.4 0.0

OperationsInergi - AP 1.4 0.8 0.5 0.1 - 0.0 - s1Operations 67.9 38.0 29.9 - - (0.0) - t1Total 69.3 38.8 30.4 0.1 - 0.0 -

Strategy 62.7 37.0 25.7 - - - - u1

Facilities (54.0) (24.3) (29.7) - - - - v1

Donations 1.3 - - - - - 1.3 w1

Total 398.3 187.0 205.7 2.0 0.7 1.3 1.5

2014

2 3

4

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 3.04 EP 25 Page 6 of 8 See attached tables with mapping from Table A and B. 1

2

TABLE C 3 Reference

Total Networks Telecom Brampton Remotes Hydro One Inc.

Materials Surcharge from Table A

Fees Payable by Affiliates to Networks

General Counsel and Secretary Services 32,482 31,906 89 177 222 89 - i+j

Financial Services 26,276 25,196 346 396 263 75 - d+l

Corporate Services 46,480 45,919 261 26 274 0 - g+h+k+r

Telecommunication Services 18,040 17,666 256 - 118 - - q

Other Services 130,812 129,440 1,006 - 366 - - e+f+n+o+p+s

Total 254,091 250,127 1,958 599 1,242 164 -

Fees Payable by Networks

General Counsel and Secretary Services 930 869 9 19 23 9 - a

President / CEO / Chairman Services 3,514 3,391 29 35 18 41 - b

Chief Financial Office Services 863 773 23 31 9 26 - c

Total 5,307 5,034 61 85 51 76 -

Real Estate 10,058 10,045 - - 13 - - m+v

Donations 1,250 - - - - 1,250 - w

Asset Strategy/Operations (Tx/Dx Only) 127,563 127,563 - - - - - t+u

Total 398,268 392,769 2,019 684 1,305 1,491 -

Description2013

4 5

TABLE D 6 Reference


Materials Surcharge from Table B


General Counsel and Secretary Services 32,046 31,458 91 181 226 91 - i1+j1

Financial Services 27,110 25,999 356 408 270 77 - d1+l1

Corporate Services 48,492 47,931 267 27 267 0 - g1+h1+k1+r1

Telecommunication Services 17,550 17,187 249 - 115 - - q1

Other Services 125,833 124,528 957 - 348 - - e1+f1+n1+o1+p1+s1

Total 251,032 247,103 1,919 616 1,226 168 -


General Counsel and Secretary Services 953 891 10 19 24 10 - a1

President / CEO / Chairman Services 3,564 3,438 29 36 18 42 - b1

Chief Financial Office Services 883 791 24 32 10 27 - c1

Total 5,400 5,121 62 87 52 78 -

Real Estate 10,276 10,263 - - 13 - - m1+v1

Donations 1,250 - - - - 1,250 - w1

Asset Strategy/Operations (Tx/Dx Only) 130,675 130,675 - - - - - t1+u1

Total 398,634 393,163 1,982 702 1,291 1,496 -

Description2014

7 8

9


c) See below tables for variance report on cost allocations. For details on cost changes 1

please refer to Exhibit C1, Tab 4, Schedule 2. 2

3


Materials Surcharge


General Counsel and Secretary Services 0.0% 0.3% 0.0% 0.0% -0.3% 0.0% 0.0%

Financial Services 0.0% 0.7% -0.1% -0.3% -0.4% 0.2% 0.0%

Corporate Services 0.0% 0.0% -0.1% 0.0% 0.1% 0.0% 0.0%

Telecommunication Services 0.0% -0.1% 0.1% 0.0% 0.0% 0.0% 0.0%

Other Services 0.0% 0.9% -0.7% 0.0% -0.2% 0.0% 0.0%

Total 0.0% 0.5% -0.4% 0.0% -0.1% 0.0% 0.0%


General Counsel and Secretary Services 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0%

President / CEO / Chairman Services 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%

Chief Financial Office Services 0.0% 0.6% -0.5% -0.5% 0.3% 0.0% 0.0%

Total 0.0% 0.4% -0.1% -0.2% 0.0% 0.0% 0.0%

Real Estate 0.0% -0.1% 0.0% 0.0% 0.1% 0.0% 0.0%

Donations 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total 0.0% 1.1% -0.6% -0.1% -0.3% -0.1% 0.0%

2013 Variance from 2012 Board ApprovedDescription

4 5


Materials Surcharge


General Counsel and Secretary Services 0.0% 0.3% 0.0% 0.0% -0.3% 0.0% 0.0%

Financial Services 0.0% 0.7% -0.1% -0.3% -0.5% 0.2% 0.0%

Corporate Services 0.0% 0.0% -0.1% 0.0% 0.1% 0.0% 0.0%

Telecommunication Services 0.0% -0.1% 0.1% 0.0% 0.0% 0.0% 0.0%

Other Services 0.0% 0.9% -0.7% 0.0% -0.2% 0.0% 0.0%

Total 0.0% 0.5% -0.4% 0.0% -0.1% 0.0% 0.0%


General Counsel and Secretary Services 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0%

President / CEO / Chairman Services 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%

Chief Financial Office Services 0.0% 0.6% -0.5% -0.5% 0.3% 0.0% 0.0%

Total 0.0% 0.3% -0.1% -0.2% 0.0% 0.0% 0.0%

Real Estate 0.0% -0.1% 0.0% 0.0% 0.1% 0.0% 0.0%

Donations 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total 0.0% 1.1% -0.6% -0.1% -0.3% -0.1% 0.0%

Description2014 Variance from 2012 Board Approved

6 7


There are no variances greater than 1% in the 2013/2014 cost allocations compared to 1

the 2012 allocations. 2

3

Activities in Financial Services that cause shifts from Remotes and Brampton to 4

Networks include Internal Control & Bill 198 activities with a partial offset in time 5

spent on External Reporting and External Audits. Also activities based on the 6

physical driver of assets such as taxation shifted towards Networks as the asset base 7

of Networks grew in higher proportion than Remotes. 8

9

Activities in Other Services, which consists of primarily Inergi costs have also shifted 10

towards Networks. Inergi Finance costs which uses a blend of physical drivers 11

including revenues and total assets has more cost weighted towards Networks than 12

Telecom and Remotes. 13



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5

Interrogatory 6

7

Refs. Exhibit C1, Tab 4, Schedule 2, Page 2, Table 1 & 8

Exhibit C1, Tab 4, Schedule 2, Page 24 - 1.9 Real Estate and Facilities 9

10

a) Please provide a version of Table 1 that shows the Board-approved 2012 amounts 11

by category. 12

13

b) For 2012 Finance cost increase, please identify the reduction in Inergi fees and 14

provide the net amount saved by ratepayers due to bringing the functions in-15

house. 16

17

c) Please provide more details of the real estate related cost increase in 2012 18

continuing into 2013 19

i) In house services costs 20

ii) External contract services costs 21

iii) Rents/leases 22

iv) Amounts capitalized 23

v) Other material costs 24

25

d) Please provide annual office/workspace costs owned and leased 2009-2014. 26

27

e) Please provide office/workspace costs per employee (FTE) 2009-2014. 28

29

30 31

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 3.05 EP 26 Page 2 of 4 Response 1

2

a) 3

Table 1 4

Total 2009 - 2014 CCF&S Costs and 5

2013/2014 Allocation to Transmission ($ Millions) 6

Description Historic Bridge

Test

TX Board

Approved TX

Allocation 2009 2010 2011 2012 2013 2014 2012 2013 2014

Corporate Management 6.0 5.0 5.1 5.2 5.3 5.4 2.7 2.7 2.8 Finance 30.7 31.4 31.9 34.3 34.0 34.0 14.4 19.5 19.5 Human Resources 15.6 16.4 11.0 10.9 10.9 11.2 10.0 6.4 6.5 Corporate Communications* 8.9 9.6 8.7 9.1 11.4 12.6 5.2 5.3 5.7 General Counsel and Secretariat 6.6 7.5 7.4 8.7 8.9 9.1 4.5 4.7

4.8 Regulatory Affairs 19.5 21.3 20.1 22.4 23.6 23.0 13.3 11.5 9.7 Security Mgmt. 2.1 2.4 3.0 3.7 3.8 3.9 1.3 1.8 1.8 Internal Audit 2.7 2.8 3.1 4.2 4.3 4.4 1.9 2.5 2.6 Real Estate & Facilities

50.6 49.9 51.6 60.2 62.5 64.3 28.3 31.8

32.7 Total Cost 142.7 146.3 141.9 158.7 164.8 167.9 81.7 86.1 86.1

* Corporate Communications re-stated to exclude certain costs associated with VP Corporate Relations & 7 Regulatory Affairs which are now included in Operations Exhibit C1-3-4 and the work associated with 8 External relations and portion of the Corporate Communications group which can now be found in Shared 9 Services Asset Management C1-4-3. 10

11

12

b) Total Year over Year Savings arising from the Inergi contract in Finance (including 13

the transferred-in payroll function) are $0.7M in 2012, $0.7M in 2013 and $0.8M in 14

2014. 15

16

No Inergi Finance functions were brought in-house to Hydro One. 17

18

19


c) 1

Bridge $M

Test $M

2012 2013 2014 In House Service Costs 6.6 7.3 7.5 Contracted Services 13.7 13.9 14.6 Leased Facilities 26.3 26.8 27.2 Utilities 3.8 4.4 4.7 Total Costs 50.4 52.4 54.0

2

Please see Exhibit I, Tab 6, Schedule 1.01 Staff 36 for more details. 3

4

d) 5

in $M

Historic Bridge Test

2009 2010 2011 2012 2013 2014 Leased Facilities 22.4 22.7 23.9 26.3 26.8 27.2 Owned Facilities 20.3 18.6 19.4 24.1 25.6 26.8

Total Costs 42.7 41.3 43.3 50.4 52.4 54.0 6

7

e) The facilities work program provides for workspace for employees, storage and 8

garage facilities for work equipment. The workspace requirements include space 9

accommodation for various types of staff resources e.g. regular, temporary, 10

contractors and consultants and can vary depending on geographic region and 11

changing company operational requirements including size and storage of specialized 12

equipment. 13

14

The field operation centre facilities are mainly suited to meet operational 15

requirements and typically provide accommodation solutions not only to employees 16

but also for operational company requirements such as specialized work equipment, 17

fleet and storage facilities. The field facilities vary depending on geographic region 18

and changing company operational requirements including size and storage of 19

specialized equipment. 20

21


The office facilities within GTA, (e.g. head office), provides space accommodation 1

for various types of staff resources (e.g. regular, temporary, contractors and 2

consultants). The average space allocation per staff is approximately 160 sq ft (this 3

includes shared space such as meeting and other common areas etc). The head office 4

space consists of 285,616 sq ft and provides workspace to approximately 1,800 staff. 5

The actual workspace cost can vary and is subjected to negotiated lease terms and 6

associated operating costs (e.g. utilities, taxes etc). The table below summarizes the 7

average cost per employee. 8

9

Head Office space cost (in $K)

Historic Bridge Test Test

2009 2010 2011 2012 2013 2014 Cost per Employee

4.7 5.2 5.1 5.3 5.4 5.5

10

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 5.01 VECC 30 Page 1 of 1

Vulnerable Energy Consumers Coalition (VECC)INTERROGATORY #30 List 1 1

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5

Interrogatory 6

7

Reference: Exhibit C1, Tab 3, Schedule 1, page 2, Table 1 8

9

a) Please explain why the 2013 forecast for Shared Services and Other OM&A has 10

increased from $68.0M in the pre-filed evidence to $69.5M in the updated evidence. 11

12

13

Response 14

15

The increase in the updated evidence is due to an increase in the OEB/NEB Costs section, 16

to cover the anticipated allocated proceeding costs from the OEB for the East West Tie 17

designation process (EB-2012-0180 and EB-2011-0140). 18


Vulnerable Energy Consumers Coalition (VECC)INTERROGATORY #31 List 1 1

2



5

Interrogatory 6

7

Reference: Exhibit C1, Tab 3, Schedule 1, pages 5 and 6, Tables 2 and 3 8

9

Preamble: It appears that in order for Hydro One to keep its overall OM &A expenditures 10

close to the Board approved amounts in 2011 and in 2012, Hydro One has reduced 11

spending in aggregate on other categories of OM&A in order to accommodate very large 12

increases in Shared Services and Other Costs above Board approved figures: in Shared 13

Services and Other Costs, Hydro One overspent the Board approved amount by $11.1M 14

or 34.0% in 2011 and by $44.6M or 164.0% in 2012. 15

16

a) In any given year (or two years), does Hydro One view spending on Sustaining, 17

Development, and Operations OM&A as spending that can be easily and materially 18

adjusted to keep the overall OM&A spending within its approved envelope? 19

20

b) Please provide a table that breaks down the overspending (i.e., above Board approved) 21

on Shared Services and Other Costs by component for 2011 and 2012. 22

23

c) Please provide a table that shows, for 2011 and 2012, a breakdown of the variances 24

below Board approved amounts, in OM&A spending for Sustaining, Development, 25

and Operations OM&A, indicating which projects, initiatives, routine spending 26

amounts were cut to below the Board approved figures for these two years 27

28

d) Please extend Table 2 to include a comparison of Board approved versus actual 29

OM&A expenditures for all historic years prior to 2011. 30

31

32

Response 33

34

a) No, this spending cannot be easily and materially adjusted. Please see the response to 35

Exhibit I, Tab 5, Schedule 1.01 Staff 23. 36

37

38

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 5.02 VECC 31 Page 2 of 3 b) 1

Board Approved versus Projected/Actual OM&A Expenditures Shared Services & Other Costs

OM&A Categories 2011 Board

Approved

2011 Historic

Variance 2012 Board

Approved

2012 Bridge Year

Variance

($M) ($M) ($M) ($M) ($M) ($M) Real Estate 27.6 26.7 -0.9 28.3 30.7 2.4 Information Technology (excl. Cornerstone) 68.6 57.6 -11.0 70.1 60.6 -9.5 Asset Management 34.5 25.0 -9.5 39.1 35.3 -3.8 Corporate Services 51.6 45.6 -6.0 53.4 52.4 -1.0 Total Change in Shared Services 182.2 154.9 -27.4 190.8 179.0 -11.8 External Work Cost of Sales 14.9 12.8 -2.2 8.5 21.0 12.5 Overheads Recovered -126.3 -105.5 20.8 -121.1 -112.6 8.5 Other Corporate Costs -11.9 -18.5 -6.6 -10.6 -15.6 -5.0 EB-2010-0002 Reduction* -13.9 0.0 13.9 -19.1 0.0 19.1 Cornerstone Savings* -12.5 0.0 12.5 -21.4 0.0 21.4 Net Change in Shared Services & Other Costs

32.6 43.7 11.1 27.2 71.8 44.6

2

* Adjustments made to Board Approved amounts to account for the Envelope Reduction 3

from the Decision and the Cornerstone savings included in EB-2010-0002 4

5

6

7


c) 1

Board Approved versus Historic & Bridge Year OM&A Expenditures Sustainment, Development & Operating Costs

OM&A Categories

2011 Board

Approved 2011

Historic Variance

2012 Board

Approved

2012 Bridge Year Variance

($M) ($M) ($M) ($M) ($M) ($M)

Sustainment

Stations 168.0 166.7 (1.3) 173.4 155.0 (18.5)

Lines 50.8 49.4 (1.4) 54.6 49.7 (4.9)

Engineering and Environmental Support 10.9 12.0 1.1 11.7 9.9 (1.8)

Total Sustainment 229.7 228.2 (1.6) 239.7 214.6 (25.2)

Development

Smart Zone 4.0 3.2 (0.8) 4.0 3.3 (0.7)

Standards, Research, Development & Demonstration 14.1 9.5 (4.6) 14.8 7.9 (6.9)

Total Development 18.1 12.6 (5.4) 18.8 11.2 (7.6)

Operating

Operations 33.2 33.0 (0.2) 33.3 31.9 (1.4)

Operations Support 24.5 23.3 (1.3) 25.6 24.2 (1.5)

Environment, Health, & Safety 3.4 1.0 (2.4) 3.4 2.2 (1.2)

Large Customer & Generator Relations 5.3 3.7 (1.6) 5.5 3.6 (1.9)

Total Operating 66.6 61.0 (5.6) 67.9 61.8 (6.1) 2

3

d) For details on past year variances of Board Approved versus Actuals please refer to 4

Exhibit I, Tab 5, Schedule 10.07 CCC 14. 5

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 9.01 SEC 19 Page 1 of 1

School Energy Coalition (SEC)INTERROGATORY #19 List 1 1

2



5

Interrogatory 6

7

Please reproduce Table 1 showing the Tx allocation for 2009-2014. 8 9 10

Response 11

12

Total 2009 - 2014 CCF&S Costs and 13

Allocation to Transmission ($ Millions) 14

Description Historic Bridge Test 2009 2010 2011 2012 2013 2014

Corporate Management 3.2 2.9 2.2 2.7 2.7 2.8 Finance 16.3 18.1 17.6 19.6 19.5 19.5 Human Resources 8.3 9.5 6.6 6.4 6.4 6.5 Corporate Communications* 4.7 5.6 3.8 5.2 5.3 5.7 General Counsel and Secretariat 3.5 4.3 4.2 4.6 4.7

4.8 Regulatory Affairs 10 9.8 8.9 9.8 11.5 9.7 Security Mgmt. 1.1 1.4 1.5 1.7 1.8 1.8 Internal Audit 1.5 1.6 2 2.5 2.5 2.6 Real Estate & Facilities 23.9 23.5 26.7 30.7 31.8

32.7 Total Cost 72.5 76.5 73.4 83.1 86.1 86.1

* Corporate Communications re-stated to exclude certain costs associated with VP Corporate Relations & 15 Regulatory Affairs which are now included in Operations Exhibit C1, Tab 3, Schedule 4 and the work 16 associated with External relations and portion of the Corporate Communications group which can now be 17 found in Shared Services Asset Management C1, Tab 4, Schedule 3. 18

Filed: September 20, 2012 EB-2012-0031 Exhibit I Tab 6 Schedule 10.01 CCC 16 Page 1 of 1

Consumers Council of Canada (CCC) INTERROGATORY #16 List 1 1

2



5

Interrogatory 6

7

(Ex. A/T8/S3) Have there been any significant changes related either to the Services 8

provided by HONI to its affiliates, or the Services provided by the affiliates to HONI in 9

2013 and 2014 relative to 2012? If so, please identify the changes and how they impact 10

the 2013 and 2014 Revenue Requirements 11

12

Response 13

14

Commencing 2013, Hydro One Networks added Transfer Price Charges for HONI Assets 15

to the service level agreements. The amount charged by HONI to Hydro One Remotes 16

and Hydro One Telecom is $0.2M and $0.5M respectively in each of the test years. See 17

updated Exhibit A, Tab 8, Schedule 3, page 7. This transfer price charge to the 18

subsidiaries is for use of common assets owned by Hydro One Networks and reduces 19

2013 and 2014 Transmission rates revenue requirement by approximately $0.4M each 20

year. 21



2



5

Interrogatory 6

7

(Ex. A/T8/S2) What is the total annual cost associated with HONI's Board of Directors? 8

How is that cost allocated among the various HONI entities? 9

10

Response 11

12

The costs for the Hydro One Inc. Board of Directors is filed at Exhibit A, Tab 8, 13

Schedule 3, Page 3, Table 3 and is allocated per the Service Level Agreement filed at 14

Exhibit A, Tab 8, Schedule 3, Appendix A, Page 8, Schedule A in accordance with the 15

Shared Services Cost Allocation Study filed at Exhibit C1, Tab 7, Schedule 1. 16

17

There are no specific costs allocated to the other entities respecting the HONI Board of 18

Directors since each member of the Board holds an executive position within HONI, their 19

duties on the Board of Directors are part of their overall accountability. 20



2



5

Interrogatory 6

7

(Ex. C1/T4/S2/p. 2) Please recast Table 1 to include Board approved amounts for 2009-8

2012. 9

10

Response 11

12

Board approved amounts for Transmission are included in the following table: 13

14

Description Board Approved ($M) 2009 2010 2011 2012

Corporate Management

3.1 3.1 2.6 2.7

Finance 18.9 18.6 14.5 14.4 Human Resources 6.6 6.7 9.6 10 Corporate Communications

3.2 3.3 5.5 5.2

General Counsel and Secretariat

4.5 4.6 4.8 4.5

Regulatory Affairs 10.4 11.3 11.3 13.3 Security Mgmt. 1.3 1.3 1.3 1.3 Internal Audit 1.9 1.9 1.9 1.9 Real Estate & Facilities

24.5 25.8 27.6 28.3

Total Cost 74.4 76.7 79.2 81.7 15



2



5

Interrogatory 6

7

(Ex. C1/T4/S2/p. 2) Please explain why the Real Estate and Facilities costs increase 8

significantly from 2012 to 2014. Please provide a detailed budget for that cost category. 9

10

Response 11

12

Please refer to Exhibit I, Tab 6, Schedule 1.01 Staff 36 and Exhibit I, Tab 6, Schedule 13

3.05 EP 26 for further details. 14

15

16

in $M

Bridge Test Years

2012 2013 2014 Real Estate 9.8 10,0 10.3 Total Facilities 50.4 52.4 54.0 Field Facilities 29.0 30.2 31.5 GTA Facilities 21.4 22.2 22.5 Total Costs 60.2 62.4 64.3

17



2



5

Interrogatory 6

7

(Ex. C1/T4/S2/p. 12) Please provide Board approved numbers for the Corporate 8

Communications function for the years 2009-2012. Please provide detailed budgets for 9

the test years and explain why there is a significant increase in 2013 and 2014 relative to 10

historical levels. 11

12

13

Response 14

15

16

Corporate Communications Transmission Board Approved Proposed 2009 2010 2011 2012 2013 2014 Corporate Communications 1.5 1.6 1.7 1.7 2.7 2.8 First Nations & Metis Relations 0.7 0.7 2.1 2.1 1.5 1.5 Outsourcing Services 1 1 1.7 1.4 1 1.3

Total 3.2 3.3 5.5 5.2 5.3 5.7 17

For Hydro One Transmission, the test year spending is relatively stable from Board 18

Approved historic year 2011. The main increases proposed in the Corporate 19

Communications Function relate to the Corporate Communications department. There 20

are a number of customer-focused projects that will result in the increase including the 21

development, construction and deployment of the Hydro One Mobile Customer 22

Experience Centre, which will travel across Ontario educating Hydro One customers and 23

communities on electricity, conservation and safety; and expanded customer research 24

focus groups across Ontario to ensure that communications meets their needs and reflect 25

the information customers value. 26



2



5

Interrogatory 6

7

(Ex. C1/T4/S2/p. 18) Please provide a detailed budget for the Regulatory Affairs 8

Function for the years 2012-2014. 9

10

11

Response 12

13

Regulatory Affairs Function Proposed 2012 2013 2014 Regulatory Affairs 7.5 7.7 8.2 OEB Costs 11.1 13.0 11.8 NEB Costs 1.2 1.2 1.3 Rate Hearings 2.6 1.8 1.7

Total 22.4 23.6 23.0 14



2



5

Interrogatory 6

7

(Ex. C1/T4/S4/p. 8) Please provide an explanation for the significant increase in the IT 8

OM&A Development Costs from 2012 to 2013 and 2014. Please provide the Board 9

approved amounts for 2009-2012. 10

11

Response 12

13

Please refer to Exhibit I, Tab 6, 1.03 Staff 38 for explanation on development costs. The 14

Board approved amounts for 2009-2012 are as follows: 15

16

Description Historic TX Allocation 2009 2010 2011 2012

Small Projects / Enhancements 1.5 3.9 3.6 3.6

Upgrades 1.4 1.9 2 2 Impact of Capital Projects 0 0 0 0

Total 2.9 5.8 5.6 5.6 17

Ontario Energy Board (Board Staff) INTERROGATORY #36 ......2012/09/20 · Filed: September 20, 2012...

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Transcript of Ontario Energy Board (Board Staff) INTERROGATORY #36 ......2012/09/20 · Filed: September 20, 2012...