2018 06 13 bc hydro revised proposal - bcuc.com€¦ · june 13, 2018 mr. patrick wruck commission...

British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com

Fred James Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 [email protected]

June 13, 2018

Mr. Patrick Wruck Commission Secretary and Manager Regulatory Support British Columbia Utilities Commission Suite 410, 900 Howe Street Vancouver, BC V6Z 2N3

Dear Mr. Wruck:

RE: Project No. 3698877 British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) Compliance with Commission Order No. G-59-18 - Revised Proposal

BC Hydro writes in response to Commission Order No. G-59-18 directing BC Hydro to file on June 13, 2018 our revised proposal (Revised Proposal), which includes the 2018 Capital Filing Guidelines (2018 Guidelines) (together called the Filing).

1 Background

On April 3, 2018, BC Hydro filed its Initial Proposal and Proposed Capital Filing Guidelines with the Commission. The Initial Proposal and Proposed Capital Filing Guidelines expanded on the 2010 Capital Project Filing Guidelines to include the review of capital expenditures and projects in revenue requirements applications and compliance reports. On April 24, 2018, BC Hydro received technical and clarifying questions from the Commission and registered interveners, and provided responses to those questions on May 18, 2018.

On May 23, 2018, BC Hydro led a transcribed workshop (Workshop) to explain and provide further clarity on the Proposed Capital Filing Guidelines and to get feedback from the Commission and interveners on the Initial Proposal and the Proposed Capital Filing Guidelines. On June 1, 2018, BC Hydro filed (i) the undertaking request from the Workshop to provide the number and description of additional projects that would be subject to a Major Project filing at lower thresholds and (ii) the Capital Investment Guide and Corporate Risk Matrix, both requested by Commercial Energy Consumers (CEC).

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mailto:[email protected]

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Capital Expenditures and Projects Review

June 13, 2018 Mr. Patrick Wruck Commission Secretary and Manager Regulatory Support British Columbia Utilities Commission Compliance with Commission Order No. G-59-18 - Revised Proposal of 8

2 Revisions to the Initial Proposal and Proposed Guidelines

BC Hydro considered the topics and questions raised in the technical and clarifying questions received from the Commission and interveners and at the Workshop. BC Hydro has made a number of changes to its Filing to reflect the feedback it has received.

In particular, in response to the number of clarifying questions on Programs of Projects, BC Hydro has made changes to the proposal to clarify how BC Hydro manages and approves Programs of Projects, and improve visibility into projects managed as part of a Program of Projects in revenue requirements applications. BC Hydro has included the following information in the Filing:

BC Hydro has attached as Appendix H, the Program Management Practice which describes in greater detail the various types of programs, the program lifecycle, and program management processes;

BC Hydro has further explained that unlike projects that have a fixed scope, Programs of Projects are often flexible in scope and managed and planned to allow them to evolve over time. This distinction makes it challenging to treat Programs of Projects similar to individual Projects;

BC Hydro has provided a fuller description of the funding approval approaches;

BC Hydro has included in the 2018 Guidelines that projects that are part of Programs of Projects, and above the materiality limit, will be identified in Appendix I of revenue requirements applications; and

BC Hydro has indicated that a program strategy, which is developed in the Identification Phase and includes the program’s description, objectives, scope, schedule, and risk and mitigation strategies, as well as cost estimates if available, will be provided in revenue requirements applications for any Program of Projects identified in Appendix I.

Other changes include clarifying BC Hydro’s definition of extension and what constitutes Building projects, and adding guidelines on new service areas.

Please refer to section 1.3 of the Revised Proposal for a list of the modifications from the Initial Proposal and Proposed Guidelines.

3 BC Hydro’s Response to Questions and Comments at Workshop

BC Hydro is providing below responses to address topics raised in the Workshop. BC Hydro is providing as Appendix G a summary of the key questions and topics raised in the Workshop and where to find BC Hydro’s response.


Timing and Effectiveness of Prudence Reviews

BC Hydro considers a prudence review to be a retrospective review of project execution. As BC Hydro has indicated in its Filing, BC Hydro believes that a prudence review is best undertaken after project completion, when final costs and outcomes are known. After project completion, a prudence review could occur in a revenue requirements proceeding or in a specific process designed for that purpose.

If the Commission found that capital expenditures were not prudent, the Commission could reduce the amount of amortization recovered in rates subject to the restriction on retroactive ratemaking. Changes to amortization in the current test period would be captured by BC Hydro’s Amortization of Capital Additions Regulatory Account. However, as capital additions are typically amortized over many years, the amount of capital amortized in the first years after a project enters service would generally not represent a significant portion of the capital additions of the project. If the Commission is concerned about ongoing depreciation on a particular project it could establish a deferral account to capture ongoing depreciation on the project, or make BC Hydro’s rates interim until the matter is resolved.

Performance Based Ratemaking

BC Hydro cannot determine at this time what the impacts of moving to a Performance Based Ratemaking (PBR) regime may have on its 2018 Guidelines. BC Hydro discussed the potential implications on the oversight of BC Hydro’s capital in response to CEABC IR 1.9.0.

As directed by the Commission, BC Hydro will be filing a report on PBR, which will be made available to interveners involved in the Fiscal 2017 – Fiscal 2019 Revenue Requirements Proceeding.

In BC Hydro’s view, further discussion of PBR should be referred to Commission processes designed for that purpose.

Government Policy Directions

Specific actions taken by BC Hydro to maintain affordable rates are appropriately the subject of revenue requirements proceeding. BC Hydro’s 2018 Guidelines are not directly affected by recent Government policy directions or the Government’s pending review of BC Hydro. The tools available to the Commission pursuant to the Utilities Commission Act to oversee BC Hydro’s capital expenditures and projects have remained the same.

BC Hydro has described how it has responded and is responding to Government policy directions in Chapter 1 of its Fiscal 2017 – Fiscal 2019 Revenue Requirements and Rates Application. Further details were provided throughout that application, in response to information requests and other evidence filed over the course of the proceeding, and


in written submissions. For example, BC Hydro specifically responded to its Shareholder’s request to freeze rates. BC Hydro’s responses to these B.C. Government policy statements do not have an implication on the 2018 Guidelines.

As indicated in the Mandate Letter from BC Hydro’s Shareholder, the Government will be conducting a comprehensive review of BC Hydro and developing a refreshed rates plan. BC Hydro does not foresee any impacts of the Government review or refreshed rates plan on the 2018 Guidelines.

Review of Capital Additions in Revenue Requirements Proceedings

BC Hydro is of the view that it is appropriate to focus on capital additions rather than capital expenditures in revenue requirements proceedings for regulatory efficiency and fairness. BC Hydro provided further explanation on the value of focusing the review on capital additions in revenue requirements proceedings in its response to BCOAPO IR 1.14.1 and CEC IR 1.14.3 filed as Exhibit B-4 in this proceeding.

Expenditure Schedule Authorization

Under section 44.2 of the Utilities Commission Act, the Commission can accept capital expenditures as being in the public interest. Having accepted the expenditures for a project as being in the public interest, BC Hydro has assurance that the Commission has considered and approved of the need for the project and BC Hydro’s chosen alternative to address that need. While recovery of costs in rates is always subject to prudence review by the Commission, if BC Hydro completes the project as approved, then the risk of an adverse prudence finding is significantly reduced.

Capital Planning

BC Hydro believes the issues raised during the Workshop relating to capital planning processes are topics that can be explored in revenue requirements applications. BC Hydro is providing below a brief summary of the capital planning process to be responsive to questions and comments at the Workshop. If there is sufficient interest from interveners and the Commission, BC Hydro is open to holding a workshop for the Commission and interveners on the capital planning process during the next revenue requirements proceeding.

Fundamentally, BC Hydro’s capital investments reflect our mission to provide our customers with reliable, affordable, clean electricity throughout B.C. safely. BC Hydro invests to sustain existing system assets for reliability and safety, and to meet anticipated customer demand. As BC Hydro has an obligation to provide safe and reliable service, a project’s ability to increase BC Hydro’s revenue is not typically a driver of capital investments.


BC Hydro provided a description of its capital planning processes in Chapter 6 of the Fiscal 2017 – Fiscal 2019 Revenue Requirements Application. There have been some changes to the capital planning and delivery processes since the filing of the application in July 2016 that have further integrated and aligned the capital planning, delivery, and operational processes. While these changes have increased collaboration across the planning, delivery, and operating functions, the core requirement of the capital planning process to identify investments in response to needs or opportunities and to rank the investments into portfolios that align with financial and labour resource availability has not changed.

BC Hydro utilizes a bottom-up approach to identify investments in response to needs or opportunities. This approach considers maintenance and investment decisions for sustaining assets and the need to meet forecast growth in demand. Investments are then ranked and prioritized based on the corporate investment framework (Framework). The Framework provides methodologies to assess and prioritize risk-based and value-based investments.

BC Hydro uses the term risk-based capital expenditures to refer to investments made primarily for the purpose of reducing operational risk. Most of BC Hydro’s capital investments are risk based. Risk-based investments are assigned a risk score based on an assessment in one or more of the following risk categories: safety, reliability, financial performance, environmental performance, and reputational. This type of qualitative assessment of risk reduction benefits is reasonable given the difficulty in quantifying such benefits. Value-based capital investments are assigned a value score based on the economic benefits such as cost reductions or avoided future costs, and/or qualitative benefits such as improved service quality that a project is expected to produce. The methodology to assess value-based capital expenditures is the economic value (or financial cost-benefit analysis) or other benefits for BC Hydro.

Investments are prioritized based on the assessed risk or value score and financial and labour resource availability for inclusion in the capital plan.

Capital Investment Governance

BC Hydro provides a description of its governance and oversight structure in section 3.2 of the Revised Proposal. BC Hydro’s governance structures that provide oversight over BC Hydro’s capital investments involve the Board of Directors, the Executive Team, business unit leadership teams, portfolio managers, and project and program managers. BC Hydro also included a discussion of its governance structure in the Fiscal 2017 - Fiscal 2019 Revenue Requirements Application.

Project Outcomes & Benefits Performance Index

As explained above, BC Hydro’s capital investments can be risk-based or value-based. BC Hydro does not monetize project outcomes from risk-based investments and it may not be practical to monetize non-financial benefits from value-based investments.


Therefore, it is not practical to create a similar financial index for project outcomes and benefits.

Project Selection and Approval

Inclusion in the capital plan is not a guarantee that a project or solution will be initiated and/or implemented. The project’s need, alternatives, cost, and expected impacts and outcomes are evaluated to varying degrees throughout the project’s lifecycle. For the vast majority of projects at BC Hydro, a business case or justification document is developed which outlines and assesses the project’s justification, alternatives, cost, expected impacts and outcomes, and risk and risk mitigation strategies.

For value-based projects like the Supply Chain Applications project, financial criteria will be a key consideration in determining if a project will be advanced and what alternative is selected. For risk-based projects, where there are multiple viable alternatives, financial criteria including net present value (or cost-benefit analysis) is considered in the selection of the preferred alternative. Financial criteria are considered along with other attributes including safety, public interest issues, and environmental and archeological impacts.

As summarized in section 3.2 of the Revised Proposal and in Chapter 6 of the Fiscal 2017 – Fiscal 2019 Revenue Requirements Application, a project’s estimated cost, scope, alternatives, and implementation plans are subject to endorsement by a review at the Gate Governance board before approval by senior executives. For projects whose costs are expected to be greater than $50 million and subject to Board of Directors approval, the Board of Directors is provided with information on a project’s scope, alternatives, cost, expected impacts and benefits, schedule, summary of First Nation consultation, and risk and risk mitigation.

Project Outcomes in Annual Report

BC Hydro does not believe the Annual Report is an appropriate avenue to include project outcomes. As explained in BC Hydro’s response to BCUC IR 1.14.2, the Annual Financial Report does not lead to any Commission decision on rates, a CPCN, or expenditure schedule. It will also duplicate existing avenues where project outcomes are better assessed such as in revenue requirements applications and in project progress and final reports.

Standalone Review of Strategies, Plans or Studies

The primary purpose of our strategies, plans and studies for the power system is to document the identification of system needs and risks along with the potential response. This allows BC Hydro to coordinate and optimize the development of the electric system in response to those needs over a long time frame – up to 30 years. Taking this system view allows us to manage the development of the system and ensure we maintain future system performance and anticipate load growth. Similarly, the primary purpose of our


strategies and plans for Information Technology is to document the identification of Information Technology needs and risks along with potential response. This is done in the Information Technology Five-Year Strategic Plan which is described in section 7.4 of the Initial Proposal. These strategies, plans, and studies typically do not include cost-benefit analysis as it is primarily a vehicle for identifying potential solutions, which are subject to changing needs and emerging risks.

Strategies, plans, or studies support the need or justification for a project or solution, and the assessment and valuation of the benefits of the project. BC Hydro’s proposal to indicate in revenue requirements applications what strategies, plans, or studies a project is linked to, and to provide summaries of the identified strategies, plans, or studies, is to allow for a more effective review of a project’s need and provide greater transparency into linked projects. BC Hydro will continue to provide strategies, plans, or studies to support the project need and justification in Major Project applications.

Major Project Application Thresholds

BC Hydro estimated the number of projects that would be subject to a Major Project application at the lower thresholds requested by CEC. The total number of projects would increase from 23 to 50 over the next decade. This increase in the number of Major Project applications would have material regulatory and capital project cost implications. In BC Hydro’s view, the $100 million threshold for Power System projects, $50 million for Building projects, and $20 million for Information Technology projects represents the right balance between appropriate oversight of BC Hydro’s capital projects and regulatory and cost efficiency.

Risk and Benefit Information included in Revenue Requirement Applications

BC Hydro appreciates the positive feedback from CEC on its proposal to include in Appendix J in revenue requirements applications project impacts and benefits and risk and risk treatment for projects in the Implementation Phase. This proposal reflects an enhancement from what was included in Appendix J in the Fiscal 2017 - Fiscal 2019 Revenue Requirements Application.

Benefits Tracking for Information Technology Projects

Information Technology (IT) initiated a pilot program in fall 2017 as a first step in establishing a formal benefits realization process. The objective of the pilot is to evaluate the feasibility and effectiveness of using a standard methodology to assess the results of IT-enabled business initiatives. The pilot focuses on business outcomes and seeks to improve the identification, tracking, protection and expansion of related business benefits over time. The new benefits realization methodology will be fully rolled out by July 2018.


Public Version of Capital Compliance Reports

As noted at the Workshop, BC Hydro is open to the Commission making available on its website public versions of BC Hydro’s filed capital compliance reports.

For further information, please contact Geoff Higgins at 604-623-4121 or by email at [email protected].

Yours sincerely,

Fred James

Chief Regulatory Officer cu/ma Enclosure (1)


Review of the Regulatory Oversight of Capital Expenditures and Projects

Compliance with Commission Order No. G-59-18

BC Hydro Revised Proposal




Page i

Table of Contents

1 Introduction ........................................................................................................ 1

1.1 BC Hydro’s Proposals Will Provide for Fair And Efficient Review of Capital Expenditures ................................................................................. 1

1.2 Organization of Filing and Concordance With Scoping Order ................... 2

1.3 Revisions to the Initial Proposal ................................................................ 4

1.4 Order Sought ............................................................................................ 5

1.5 Regulatory Process ................................................................................... 5

1.6 Communications ....................................................................................... 6

2 The Nature of BC Hydro’s Capital Expenditures ................................................ 7

2.1 BC Hydro is Planning Significant Capital Investment in the Next Ten Years ................................................................................................. 7

2.2 Business Objectives Driving the Level of Capital Expenditure .................. 7

2.2.1 Sustaining Existing System Assets ............................................. 8

2.2.2 Addressing System Growth ........................................................ 9

2.3 Capital Investments by Type ..................................................................... 9

2.3.1 Power System Investments ........................................................ 9

2.3.2 Properties ................................................................................. 14

2.3.3 Information Technology ............................................................ 14

2.3.4 Vehicle Fleet and Equipment .................................................... 16

2.3.5 Other Capital Investments ........................................................ 16

3 Oversight & Performance of BC Hydro’s Capital Investments .......................... 17

3.1 Commission Oversight of BC Hydro’s Capital Investments ..................... 17

3.1.1 BC Hydro Files CPCN Applications and Section 44.2 Applications Consistent with 2010 Guidelines .......................... 17

3.1.2 Revenue Requirements Applications Address Capital Expenditures and Additions ...................................................... 18

3.1.3 BC Hydro Does Extensive Compliance Reporting .................... 19

3.2 BC Hydro Capital Investment Oversight Structure & Portfolio Performance ........................................................................................... 20

3.2.1 BC Hydro Governance & Oversight Structure .......................... 20

3.2.2 Capital Investments Portfolio Performance ............................... 22

3.3 Commission Review of Adequacy of BC Hydro’s Planning and Execution of Projects .............................................................................. 23

4 Appropriate Scope of Review in Revenue Requirements Applications ............ 25

4.1 Projects With a CPCN, Expenditure Schedule or Legislated Exemption: Assess Project Execution ..................................................... 25




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4.1.1 Proposed Guideline .................................................................. 25

4.1.2 Rationale for Proposed Guideline ............................................. 26

4.2 Projects Underway Without Prior Commission Approval or Legislative Exemption: Commission Can Assess Need, Alternatives and Implementation ................................................................................. 27



4.3 Future Projects Meeting Criteria for CPCN or Section 44.2 Proceeding: Avoid Redundant Reviews in Revenue Requirements Proceeding .............................................................................................. 28



4.4 Future Projects that do not Trigger a CPCN or Expenditure Schedule: Commission Can Assess Need in Revenue Requirements Proceeding .............................................................................................. 30



5 Guidelines for Major Project Applications ......................................................... 32

5.1 Projects Subject to a CPCN: Meaning of “Extension” ............................. 32

5.1.1 Continue to Apply Plain Meaning of “Extension” ....................... 32

5.1.2 Rationale for Proposal on Meaning of “Extension”.................... 32

5.1.3 Expenditure Schedule Applications Facilitate Review of Non-Extension Projects ............................................................ 33

5.2 Clarity on What Constitutes a Project ...................................................... 33

5.2.1 Defining Projects ....................................................................... 33

5.2.2 The Boundary Around Project Scope ....................................... 34

5.2.3 Project Lifecycle ........................................................................ 35

5.2.4 Forecasting Project Cost .......................................................... 36

5.3 Projects Meeting Criteria for CPCN or Section 44.2 Filing ...................... 38

5.3.1 Proposed Major Project Categories and Thresholds ................ 38

5.3.2 Rationale for Major Project Categories and Thresholds ........... 38

5.4 Information Technology Projects Meeting Criteria for a Major Project Filing ....................................................................................................... 44

5.5 BC Hydro’s Commitment to File Section 44.2 Applications Applies to Projects where the Duty to Consult is Triggered ..................................... 45

6 Clarity on Programs .......................................................................................... 46

6.1 Program of Projects ................................................................................ 46

6.2 Recurring Capital Programs .................................................................... 47

6.2.1 Work Programs ......................................................................... 47




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6.2.2 Acquisitions .............................................................................. 48

6.3 Proposed Guidelines for Programs ......................................................... 48

6.4 Rationale for Proposed Guidelines for Programs .................................... 49

6.4.1 Program of Projects .................................................................. 49

6.4.2 Recurring Capital Programs ..................................................... 50

7 Strategies, Plans, and Studies ......................................................................... 51

7.1 Power System Strategies, Plans, and Studies ........................................ 51

7.1.1 Transmission & Distribution Area Plans .................................... 51

7.1.2 Transmission & Distribution Substation Asset Plans ................ 52

7.1.3 Transmission & Distribution Asset Strategies ........................... 52

7.1.4 Generation Facility Asset Plans ................................................ 52

7.1.5 Dam Safety System Studies ..................................................... 52

7.1.6 Sample List of Power System Strategies, Plans, and Studies ...................................................................................... 53

7.2 Information Technology Plans ................................................................. 53

7.3 Properties Capital Asset Strategies ......................................................... 53

7.4 Proposed Guidelines for Strategies, Plans, and Studies ......................... 54

7.4.1 Power System Strategies, Plans, and Studies .......................... 54

7.4.2 Information Technology Plans .................................................. 54

7.5 Rationale for Proposed Guideline for Strategies, Plans, and Studies ..... 55

7.6 BC Hydro Led Workshops on Strategies, Plans, and Studies ................. 55

8 Compliance Reporting ...................................................................................... 56

8.1 Annual Report ......................................................................................... 56

8.1.1 Improved Oversight of Capital in F2017 Annual Report ............ 56

8.1.2 Proposed Guidelines for Capital Project Information included in Annual Report ......................................................... 57

8.2 BC Hydro Will Continue to Make Project-Specific Compliance Filings .... 57

8.2.1 Proposed Guidelines for Project-Specific Compliance Reports ..................................................................................... 57

8.2.2 Rationale for Proposed Guidelines for Project-Specific Compliance Reports ................................................................. 58

9 Matters Related to the Form and Content of Revenue Requirements, CPCN and Section 44.2 Filings ........................................................................ 60

9.1 Standardized Naming Conventions ......................................................... 60

9.1.1 Project and Program Naming Guidelines .................................. 60

9.1.2 Implementation of Project and Program Naming Guidelines .... 62

9.2 Provide Relevant Project Information for Consistency and Appropriate Reviews ............................................................................... 62

9.2.1 Provide Additional Project Information ...................................... 62




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9.2.2 A Master Source for Capital Project and Program Information ................................................................................ 63

List of Figures

Figure 2-1 Consolidated Capital Expenditures by Asset Group ($ million) .......... 7

List of Tables

Table 1-1 Proposed Regulatory Schedule .......................................................... 5

Table 3-2 Results Fiscal 2016 and Fiscal 2017 ................................................ 22

Table 5-3 2010 Guidelines: Estimated Number of Applications Over Next Decade ............................................................................................. 40

Table 5-4 2018 Filing Guidelines: Estimated Number of Applications Over Next Decade .................................................................................... 40

Table 5-5 Anticipated CPCN or Section 44.2 Filings over the Next Decade as of April 1, 2017 ............................................................................ 41

Table 9-6 Examples of Project Activities .......................................................... 61

Appendices

Table of Concordance Appendix A 2018 Capital Filing Guidelines Appendix B 2010 Capital Project Filing Guidelines Appendix C Revised Capital Project Information Template – “Appendix J” Appendix D Strategies, Plans and Studies Template Appendix E Draft Order Appendix F Summary of the Key Questions and Topics Raised in the Workshop Appendix G Program Management Practice Appendix H

Appendix F Draft Order Appendix G Summary of the Key Questions and Topics Raised in the Workshop Appendix H Program Management Practice




Page 1

1 Introduction 1

1.1 BC Hydro’s Proposals Will Provide for Fair And Efficient 2

Review of Capital Expenditures 3

Over the past decade, British Columbia Hydro and Power Authority (BC Hydro) has 4

invested billions of dollars to provide reliable, affordable, clean electricity throughout 5

B.C., safely. BC Hydro’s electricity system was largely built in the 1960s, 1970s and 6

1980s, and B.C.’s population and economy continue to grow. BC Hydro expects to 7

invest over $2 billion annually over the next ten years to upgrade and maintain aging 8

assets and build new infrastructure so that our customers continue to receive 9

reliable and clean electricity. To ensure economic and social benefits for ratepayers, 10

BC Hydro manages our capital portfolio with an emphasis on cost-consciousness, 11

respect for the environment and communities in which we work, and strengthening 12

our relationships with First Nations communities. The size and extent of BC Hydro’s 13

capital investments underscores the importance of efficient and effective British 14

Columbia Utilities Commission (BCUC or Commission) review processes and 15

oversight. 16

The Commission currently oversees BC Hydro’s capital spending through a variety 17

of means, and in a manner consistent with BC Hydro’s 2010 Capital Project Filing 18

Guidelines (2010 Guidelines). The Commission reviews the majority of BC Hydro’s 19

capital expenditures and additions in revenue requirements proceedings. BC Hydro 20

must obtain a separate Certificate of Public Convenience and Necessity (CPCN) for 21

significant system extensions. BC Hydro seeks acceptance of capital expenditure 22

schedules under section 44.2 of the Utilities Commission Act (UCA) for many other 23

large investments. BC Hydro submits a variety of compliance filings on a regular 24

basis that include information on capital investments, including periodic reporting 25

typically required by the order granting a CPCN or accepting capital expenditures 26

pursuant to section 44.2 of the UCA. 27




Page 2

The Commission, at the suggestion of BC Hydro, established this process to 1

examine how the Commission reviews BC Hydro’s capital expenditures and 2

projects. The Commission has indicated that a “possible outcome of this proceeding 3

is Commission-approved BC Hydro Capital Filing Guidelines.”1 In this Filing, 4

BC Hydro makes the case for a set of guidelines reflective of BC Hydro’s capital 5

investment and planning processes, and expands the scope of the 2010 Guidelines 6

to also reflect the review of capital spending through revenue requirements 7

applications and compliance reporting. The 2018 Capital Filing Guidelines 8

(2018 Guidelines) included in Appendix B to this proposal will provide for the 9

continued fair and efficient Commission review of BC Hydro’s capital expenditures 10

going forward. 11

1.2 Organization of Filing and Concordance With Scoping Order 12

Commission Order No. G-63-16 included Appendix B Proposed Scope of the Issues 13

and Timing. The Commission reaffirmed the scope of the issues in 14

Order No. G-174-16.2 This Application addresses all of the issues identified by the 15

Commission. BC Hydro includes as Appendix A to this proposal a Table of 16

Concordance, which identifies where in this proposal the Commission’s issues have 17

been addressed. 18

1 Order No. G-63-16, Appendix B, Proposed Scope of the Issues and Timing. 2 The Commission stated at page 2 of its Decision: “The scope of the Review of the Regulatory Oversight of

Capital Expenditures and Projects proceeding remains as outlined in Appendix B to Order No. G-63-16, subject to review at the next procedural conference.”




Page 3

An outline of the chapters and attachments to the Application is provided in the table 1

below. 2

Section 2 Includes background information on the nature of BC Hydro’s capital investments. The size of BC Hydro’s capital portfolio, and the importance of proceeding with needed investments in a timely manner, underscores the need for efficient regulatory oversight.

Section 3 Discusses the applicable legal and regulatory framework and highlights the ways in which the Commission currently oversees BC Hydro’s capital expenditures.

Section 4 Addresses when and how the Commission should review BC Hydro’s capital spending in revenue requirements proceedings. BC Hydro explains why revenue requirements proceedings should remain a key avenue for overseeing significant portions of BC Hydro’s capital spending.

Section 5 Addresses when a CPCN should be required for extensions, and when the Commission should review major projects in advance. BC Hydro’s proposal is for the largest projects to be reviewed separately, with the majority of the capital portfolio still being considered in the context of revenue requirements proceedings.

Section 6 Provides clarity on programs and addresses the appropriate mechanism for the Commission’s review of programs.

Section 0 Defines a regulatory practice for the review of projects that are linked to strategies, plans, and studies.

Section 8 Addresses updates to the annual report and proposed changes to project-specific compliance filings.

Section 9 Covers other matters related to the form and content of revenue requirements, CPCN, and related section 44.2 filings.

Appendix A Table of Concordance Appendix B Proposed Capital Filing Guidelines Appendix C 2010 Capital Project Filing Guidelines Appendix D Revised Capital Project Information Template – “Appendix J” Appendix E Strategies, Studies and Plans Template Appendix F Draft Order Appendix G Summary of the Key Questions and Topics Raised in the Workshop Appendix H Program Management Practice




Page 4

1.3 Revisions to the Initial Proposal 1

On April 24, 2018 BC Hydro received technical and clarifying questions from the 2

Commission and registered interveners, which it responded to on May 18, 2018. 3

BC Hydro also participated in a transcribed workshop (Workshop) on May 23, 2018. 4

We have incorporated into the Revised Proposal the feedback from the Workshop 5

and the request for clarification on certain topics. The table below lists the sections 6

revised and the corresponding revisions. 7

Topic Revisions Section

2018 Guidelines Seeking an order from the Commission accepting the 2018 Guidelines and setting out BC Hydro’s recommended further process.

Revised Proposal sections 1.4 and 1.5

Major Project Applications

Interpretation of Extension: removed capability from the definition of extension in the body of the Proposal and replaced geographic extent with service area for clarity.

Revised Proposal section 5.1.1


Clarified that Buildings refers to work on BC Hydro’s field and office buildings funded and managed by the Properties group.

Revised Proposal section 5.3.2


Include the 3 projects that meet the criteria for a major project application inadvertently omitted from the Initial Proposal

Revised Proposal section 5.3.2.1

IT Projects Remove need for expedited transition as an attribute for when two-phase process is appropriate.

Revised Proposal section 5.4

Programs Provided more clarity on the evaluation and funding of Program of Projects. Will increase visibility into which projects are part of programs in revenue requirements applications.

Revised Proposal sections 6, 6.1, 6.3, and 9.2.2; 2018 Guidelines paragraph 6

Compliance Reporting

Clarified that BC Hydro intends to continue filing progress reports until the Project Final Report has been filed.

Revised Proposal section 8.2.2.2

RRA Removed language that excludes the review of the projects that have been reviewed in previous test periods.

2018 Guidelines paragraphs 3 and 4

New Service Area Added to the guidelines the requirement for a CPCN for new service

2018 Guidelines paragraph 14

Appendix J In revenue requirements applications, will include the construction start date for projects in the Implementation Phase.

Changes in Revised Proposal’s Appendix D




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1.4 Order Sought 1

BC Hydro requests the Commission issue an Order, pursuant to sections 45 to 46 2

and 59 to 61 of the UCA, approving the 2018 Guidelines as proposed. 3

BC Hydro submits that the 2018 Guidelines will: 4

(i) Promote an effective and efficient review of BC Hydro’s capital expenditures 5

and projects; 6

(ii) Clarify the nature of the Commission’s oversight over BC Hydro’s capital 7

expenditures and projects in revenue requirements applications, major project 8

applications, and compliance reports; 9

(iii) Provide guidance to BC Hydro with respect to the information required for 10

revenue requirements applications, when a CPCN is required, and the timing of 11

compliance reports; and 12

(iv) Documents BC Hydro’s commitment to file section 44.2 applications for major 13

projects that are not extensions. 14

A Draft Order is attached as Appendix F to this filing. 15

1.5 Regulatory Process 16

BC Hydro proposes the following process for the balance of this proceeding. 17

Table 1-1 Proposed Regulatory Schedule 18

REGULATORY TIMETABLE ACTION DATE BC Hydro files the Revised Proposal June 13, 2018

Procedural conference regarding further process June 27, 2013

Commission and Intervener Comments July 18, 2018

BC Hydro Reply Comment August 8, 2018

Commission Decision on 2018 Capital Filing Guidelines




Page 6

1.6 Communications 1

Fred James Chief Regulatory Officer

BC Hydro 1600-333 Dunsmuir Street Vancouver, BC V6B 5R3

Telephone: 604-623-4317 Fax: 604-623-4407

Email: [email protected]

Christopher Bystrom

Legal Counsel

Fasken Martineau 2900-550 Burrard Street Vancouver, BC V6C 0A3

Telephone: 604-631-4715 Fax: 604-631-3232


Matthew Ghikas

Legal Counsel

Fasken Martineau 2900-550 Burrard Street Vancouver, BC V6C 0A3

Telephone: 604-631-3191 Fax: 604-631-3232








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2 The Nature of BC Hydro’s Capital Expenditures 1

BC Hydro plans to make significant capital investments over the next decade and 2

beyond. These investments are required to meet customer’s needs, upgrade and 3

maintain aging assets, ensure reliable operation, and address safety risks. Such 4

investments enable our ability to meet demand for energy and capacity, as well as 5

sustain or replace aging assets to maintain or improve overall system reliability and 6

the safety of the system for workers and the public. 7

2.1 BC Hydro is Planning Significant Capital Investment in the 8

Next Ten Years 9

The information presented in the table below is taken from BC Hydro’s Ten-Year 10

Capital Forecast that was included in BC Hydro’s Fiscal 2017 - Fiscal 2019 Revenue 11

Requirements Application (Fiscal 2017 – Fiscal 2019 RRA). It summarizes 12

BC Hydro’s planned capital expenditures over the next decade. 13

Figure 2-1 Consolidated Capital Expenditures by 14 Asset Group ($ million) 15

2.2 Business Objectives Driving the Level of Capital Expenditure 16

There are a variety of needs driving the level of capital investments, but they can be 17

broadly grouped into sustaining existing assets and addressing system growth. 18




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2.2.1 Sustaining Existing System Assets 1

Sustaining investments address reliability, end of life, safety and security, and 2

regulatory and environmental issues associated with existing assets. BC Hydro’s 3

generating, transmission, and distribution assets are aging and continue to 4

experience prolonged use at or near their peak capacity. A large portion of the 5

system was built over 50 years ago, and an increasing number of assets are 6

reaching end of life. As a result, sustaining capital investments are expected to 7

increase over time. 8

2.2.1.1 Asset Condition and End of Life 9

The physical condition of BC Hydro’s major generation assets, along with the 10

performance, maintenance and repair cost history, and criticality of equipment and 11

facilities are significant drivers for planning and prioritizing refurbishment or 12

replacement. A significant proportion of the risks facing BC Hydro’s major generation 13

assets can be attributed to their age. 14

BC Hydro uses equipment health assessments to assess reliability risk associated 15

with transmission and distribution capital equipment. BC Hydro evaluates the 16

condition of these assets on an ongoing basis, which informs the reliability risk 17

associated with those assets. 18

All actual and potential deficiencies in dam performance are characterized in terms 19

of risk, prioritized and monitored until resolved through the Dam Safety Management 20

System. 21

2.2.1.2 Managing Asset Safety 22

As a utility that operates in a high hazard industry, safety is a core value for 23

BC Hydro. We are committed to ensuring our workforce goes home safely every 24

day, and that the public is safe around our system. Achieving a good safety record 25

requires assets that do not introduce undue safety risk to our employees, contractors 26

and the public. Safety risks may prevent maintenance activities from being carried 27




Page 9

out and may even require the removal of the asset from service until the risk is 1

mitigated. Investments are needed to mitigate the safety risks associated with aging 2

assets, or remedy situations not related to aging assets that could escalate into 3

serious safety hazards for employees, contractors and the public. 4

2.2.1.3 Managing Dam Safety 5

Capital investments are required to manage the safety of physical features and 6

structures that retain the reservoirs and control the passage of flows through, 7

around, and beyond the dams that are operated by BC Hydro to protect both the 8

public and BC Hydro workers. 9

2.2.2 Addressing System Growth 10

Growth investments meet anticipated customer demand and increase supply-side 11

efficiency. BC Hydro expects to experience load growth over the next 20 years, and 12

significant new investments are required to meet load growth and provide service 13

safely and reliably. The growth in load is driving generation investments as well as 14

the reinforcement of the regional and bulk transmission systems across the 15

province. All planned investments are aligned with the recommendations of the 16

Integrated Resource Plan. 17

2.3 Capital Investments by Type 18

The sections below provide an overview of the types of capital work BC Hydro 19

implements. The description below divides BC Hydro’s Business Units into two 20

categories: a) Power System Investments and b) Other Capital Investments. 21

2.3.1 Power System Investments 22

This category represents capital investments in BC Hydro’s power system. It 23

includes the growth and sustaining work required to effectively generate, transmit, 24

and distribute electricity to BC Hydro’s residential, commercial, and industrial 25

customers. 26




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2.3.1.1 Generation 1

Generation assets include 82 generating units at BC Hydro’s 30 hydroelectric 2

generating facilities, 79 dams, three gas-fired generating units at BC Hydro’s 3

two thermal generating stations, and four synchronous condenser units at 4

BC Hydro’s one dedicated synchronous condenser station. In addition, Generation 5

works with Dam Safety to assist in aligning investments in the safety of physical 6

features and structures that retain the reservoirs and control passage of flows 7

through, around and beyond dams that are operated by BC Hydro. 8

Generation manages and maximizes the lifecycle value of Generation Assets by: 9

Maintaining Assets so that they perform safely and reliably throughout their 10

operating lives; 11

Investing in Assets to extend their operating lives, enhance capability, manage 12

risk, and increase efficiency and cost effectiveness; 13

Managing public and worker safety risks associated with facilities, especially 14

around reservoirs and dams; and 15

Demonstrating high standards of financial responsibility, integrity and efficiency. 16

Planning processes are in place to support these objectives and also so that the 17

proposed portfolio of investments effectively manages risk and customer needs, 18

within financial and human resource constraints. 19

Many of the equipment condition risks in Generation’s facilities can only be mitigated 20

or resolved through capital investments. There are also other risks identified in the 21

Generation fleet that are recommended for resolution through capital investment, 22

where increased maintenance or other risk mitigation strategies may also be 23

possible but are less economical over the long term. 24




Page 11

Generation capital expenditures mostly comprise of projects in these categories: 1

Sustaining investments mitigate or resolve key risks identified with existing 2

assets. This includes projects to extend the life of an asset, replace equipment 3

at generating facilities, and replace or upgrade facility infrastructure (e.g., 4

cranes and hoists; fire protection systems; ground grids; heating, ventilating, 5

and air condition systems; security; and roofs and remote site accommodation) 6

as well as projects to address safety, environmental and/or regulatory issues 7

and risks. 8

Redevelopment/rehabilitation investments redevelop facilities or significant 9

elements of facilities that are at end of life. Some of the older facilities are 10

approaching end of life and have a large number of different risks that need to 11

be mitigated simultaneously. These may include condition issues and risks with 12

major generating equipment, auxiliary systems, buildings, water passages and 13

large civil assets. It is often beneficial to take a coordinated approach to 14

rehabilitation or redevelopment for improved efficiency in project management 15

and project delivery, reduced project costs, and shorter outages. 16

Growth projects undertaken to enhance capability or increase the efficiency of 17

existing facilities. 18

2.3.1.2 Dam Safety 19

Dam Safety projects improve the safe storage and passage of water under all 20

operating conditions, which includes the ability to pass major floods and the ability to 21

withstand and function after a major seismic event without any harmful release of 22

water. Dam Safety projects reduce the risk from the degradation of the existing civil 23

structures, increase the operational reliability of equipment, and improve seismic and 24

flood performance at dams in alignment with the current Canadian guidelines for 25

major dams. 26




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2.3.1.3 Transmission & Distribution 1

The main business issues facing Transmission & Distribution are aging assets, 2

industrial and commercial load growth in certain regions of the province, and the 3

need to sustain reliability. Transmission and Distribution assets include 4

approximately 59,000 kilometers of overhead and underground distribution lines; 5

18,500 kilometers of overhead transmission lines; 500 kilometers of transmission 6

subterranean and submarine cables; 306 substations; distribution facilities in 7

18 areas not connected to the integrated system; an integrated telecommunication 8

system; and millions of individual transmission and distribution assets like circuit 9

breakers and wood poles. 10

The Transmission and Distribution planning process follows a four-step bottom-up 11

approach. 12

The first step of the process is to identify system and asset needs that should 13

be considered for remediation. This assessment includes regular reviews and 14

studies of existing assets to identify assets that are: reaching end of life; 15

represent safety or other risks; are at risk; do not perform adequately; or do not 16

meet regulatory requirements. 17

The second step of the process is to manage the identified needs to ensure 18

efficient planning and optimized solutions. This step in the process ensures that 19

multiple needs impacting the same parts of the system within a similar time 20

frame proceed through the next stages of the planning process as one 21

integrated bundle. 22

The third step of the process is to study the needs in detail, either individually or 23

in bundles, and identify technically feasible alternatives for the project or 24

program that would remediate the needs. 25

The final step is consolidating the projects and programs in the planning 26

process into a single transmission and distribution capital investment portfolio, 27




Page 13

together with the projects and programs in the delivery process, for the 1

preparation of the 10 Year Capital Forecast. This portfolio is then optimized to 2

maximize risk mitigation given labour and financial constraints. 3

Transmission & Distribution growth and sustaining investments can be broadly 4

grouped into three categories: 5

1. Transmission investments include work on all lines, including underground and 6

underwater cables, of voltage class 60 kV and above that transmit electrical 7

energy from a generation facility step up transformer to a switching/ 8

transmission station and/or a distribution substation; 9

2. Station investments include work on high and low voltage equipment within 10

switching/ transmission stations and distribution substations, including 11

substation step down transformers and all associated distribution voltage 12

equipment up to, and including, the feeder disconnect switch where the 13

distribution feeder cable or overhead conductor is connected. Station work also 14

includes work on associated protection and control equipment including 15

protective relays, local and remote control equipment and panels, and 16

associated telecommunications equipment; and 17

3. Distribution investment includes work on the distribution feeder cable and the 18

distribution overhead conductor within the substation that connect the feeder 19

disconnect switch to assets outside the substation, and all assets outside of the 20

substation operated at less than 60 kV. 21

In addition to the categories above, Transmission and Distribution plans and 22

manages investments in non-integrated areas to sustain existing assets. 23

Non-integrated areas consist of eighteen small communities that are not connected 24

to the integrated system. Transmission and Distribution also plans and manages 25

investments in BC Hydro’s microwave and VHF telecommunication sites, and fibre 26

optic facilities located throughout the province. 27




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2.3.2 Properties 1

Properties assets include close to 100 office and field facilities across the province. 2

Investment in these facilities is required to maintain safe, efficient, and effective 3

operation of BC Hydro’s building assets, to limit costly and disruptive failures, and to 4

achieve the organization's objectives. 5

The investments in the Properties portfolio are driven by the need to address the 6

issues and risks associated with the existing physical assets and infrastructure. 7

Properties Capital Planning focuses on assessing the health of existing assets and 8

determining operational requirements that cannot be met by the existing asset 9

portfolio, to establish an effective long term capital plan. 10

Properties capital investments fall into two general categories: 11

1. Building Development investments for major refurbishment and new 12

construction in areas where BC Hydro’s existing facilities are inadequate; and 13

2. Building Improvement investments for work at existing facilities to address 14

operational deficiencies and end-of-life replacements of aging components. 15

2.3.3 Information Technology 16

The Information Technology capital investments are designed to support BC Hydro’s 17

operational and compliance requirements and to drive greater efficiency and 18

effectiveness. This is done by improving communications, automation of specific 19

activities or processes, and decision support. The Information Technology group 20

manages about $500 million in information technology assets including $360 million 21

in software and $110 million in hardware. 22

The Information Technology Capital Planning process utilizes a portfolio 23

management approach in developing its capital investment plan. It follows a 24

four-step planning process. 25




Page 15

Proposed investments are captured through ongoing discussions with business 1

groups, stakeholders and IT business advisors; active investments are tracked 2

through the various phases of execution; and completed investments are 3

maintained in the portfolio for reporting purposes. 4

Once the new and existing Capital Portfolio entries have been fully captured 5

and detailed, a candidate plan is developed. The consolidated portfolio of 6

proposed and active investments typically exceeds available financial and 7

labour resources in each year. As a result, a process of ranking and selecting a 8

subset of the portfolio is initiated. 9

The candidate plan then undergoes a series of reviews to allow dialogue 10

among Planning team members and affected BC Hydro business stakeholders. 11

The reviews consider factors such as portfolio value, risk, and balance. 12

A final review of the proposed technology capital investment plan is undertaken 13

by both the Information Technology leadership team and BC Hydro’s executive 14

team, as part of the overall oversight of the Technology capital investment plan. 15

Information Technology capital investments can be grouped into: 16

1. Business-driven expenditures related to information systems for supply chain, 17

customer support, work management, asset management, the integration of 18

systems and devices, and specialized business applications; and 19

2. Foundational expenditures, which include the implementation and sustainment 20

of software platforms and applications, information technology infrastructure 21

and telecommunications, cyber security, analytics and mobility support. 22




Page 16

2.3.4 Vehicle Fleet and Equipment 1

BC Hydro’s vehicle fleet and equipment includes close to 3,200 vehicles, trailers, 2

forklifts, and other equipment assets used by field crews and staff across the 3

province to meet operational, reliability, and safety targets. Investments in fleet 4

assets are made to sustain reliable operations, minimize total asset lifecycle costs, 5

ensure fitness of given assets for evolving work purposes, and limit safety and 6

operational risks by meeting safety and other regulatory requirements. 7

Fleet capital investments are of two major types: 8

1. Timely replacement of older vehicles to reduce financial risks, control lifecycle 9

costs and address age-related mechanical, safety and reliability issues. These 10

sustaining investments are optimized to manage increasing maintenance costs 11

as assets age (including higher likelihood of costly unplanned maintenance 12

events). On average, approximately 10 per cent of all vehicles in the fleet are 13

replaced annually; and 14

2. Upgrading and addition of required fleet assets to improve operational 15

productivity, flexibility, and safety. This represents a small portion of the capital 16

investment in the fleet and includes value-based vehicle purchases via the 17

upgrading or the addition of new vehicles due to changing business needs and 18

work method changes 19

2.3.5 Other Capital Investments 20

Other Capital Investments includes capital expenditures related to Materials 21

Management upgrades, Field Operations tools and equipment, Control Centre 22

systems upgrades, and workforce training equipment. The total annual capital 23

expenditures driven by these different areas are generally less than $5 million. 24




Page 17

3 Oversight & Performance of BC Hydro’s Capital 1

Investments 2

3.1 Commission Oversight of BC Hydro’s Capital Investments 3

The UCA provides the Commission with a number of mechanisms to oversee 4

BC Hydro’s capital investments. The key mechanisms available to the Commission 5

are: (i) requiring BC Hydro to obtain a CPCN for extensions; (ii) reviewing 6

BC Hydro’s applications for acceptance of capital expenditure schedules under 7

section 44.2 of the Act; (iii) revenue requirements proceedings; and, (iv) Compliance 8

filings, including BC Hydro’s Annual Report to the Commission. Each of these 9

mechanisms is outlined below. 10

3.1.1 BC Hydro Files CPCN Applications and Section 44.2 Applications 11

Consistent with 2010 Guidelines 12

Under section 45 of the UCA, public utilities generally require a CPCN to construct 13

and operate a public utility system. However, the Act also establishes that BC Hydro 14

has a deemed CPCN for its existing system, and extensions to the system, because 15

it was operating the utility system on September 11, 1980. Pursuant to section 45(5) 16

of the UCA, the Commission may, however, require a CPCN for an extension. 17

Where a separate CPCN is required, BC Hydro is not able to start construction in 18

advance of the Commission granting a CPCN. In the event that the CPCN is not 19

granted, BC Hydro is unable to construct the project. 20

Utilities such as BC Hydro may also file for acceptance of capital expenditures under 21

section 44.2 of the UCA. Section 44.2 applications are voluntary, i.e., the 22

Commission cannot direct a utility to file an application under section 44.2. 23

The 2010 Guidelines establish criteria for determining when BC Hydro files a CPCN 24

application, and when it files a section 44.2 application for acceptance of a capital 25

expenditure schedule. The 2010 Guidelines (i) establish expenditure thresholds, (ii) 26

elaborate on the type of projects that could be characterized as an extension to the 27




Page 18

existing BC Hydro system, and (iii) describe BC Hydro’s commitment to file 1

section 44.2 applications. 2

3.1.2 Revenue Requirements Applications Address Capital Expenditures 3

and Additions 4

In revenue requirements applications, the Commission can review capital 5

expenditures and additions during a particular test period (the period for which the 6

Commission will be setting rates). Depreciation expense, property and other taxes, 7

and financing costs associated with assets already in service and planned capital 8

additions during the test period impact BC Hydro’s revenue requirements, and are 9

thus a consideration in the determination of rates. 10

In circumstances where the Commission has issued a CPCN or accepted an 11

expenditure schedule, the question of whether the project is required has been 12

established and does not arise again in later revenue requirements proceedings. 13

However, the revenue requirements application still provides a venue for the 14

Commission to assess whether a capital project carried out pursuant to an 15

expenditure schedule or CPCN has been, or is being, executed prudently. 16

In its Fiscal 2017 - Fiscal 2019 RRA, BC Hydro filed a large amount of evidence on 17

its actual and forecast capital expenditures and additions. The evidence included: 18

A chapter of BC Hydro’s Application (Chapter 6) that described BC Hydro’s 19

capital investment planning process, capital project and program delivery, and 20

planned capital expenditures and additions for the test period; 21

Various appendices to the Application providing detailed information on 22

BC Hydro’s planned capital investments and specific projects and programs, as 23

well as information on actual to plan capital expenditures and additions for 24

fiscal 2015 to fiscal 2016; and 25

Responses to approximately 575 information requests on capital investments. 26




Page 19

BC Hydro anticipates taking a similar approach in our evidence in the next revenue 1

requirements application to the approach taken in the Fiscal 2017 - Fiscal 2019 RRA 2

process. 3

3.1.3 BC Hydro Does Extensive Compliance Reporting 4

Compliance reporting is another mechanism available to the Commission to oversee 5

BC Hydro’s capital investments. BC Hydro undertakes compliance reporting and 6

files information on a regular basis to assist in the review of BC Hydro’s capital 7

expenditures and projects. Reporting includes BC Hydro’s Annual Report and 8

project-specific compliance reports filed on a schedule determined by the applicable 9

Commission order. 10

BC Hydro files an Annual Report with the Commission that has included the 11

following information on capital expenditures and projects: 12

(a) a summary of capital expenditures by capital category; 13

(b) a listing of the planned expenditures in the current fiscal year for projects over 14

the materiality limit ($2 million for Information Technology projects, $5 million for 15

all other capital projects); 16

(c) an indication of which projects are considered extensions, pursuant to 17

section 45(6) of the UCA for all projects over the materiality limit; and 18

(d) a listing of projects over the major project thresholds and the anticipated type of 19

regulatory filings. 20

BC Hydro also files with the Commission project-specific compliance reports during 21

the project’s Implementation Phase and at the conclusion of the project. 22

Periodic project-specific progress reports for all projects that have been granted 23

a CPCN from the Commission or where the Commission has accepted the 24

project’s capital expenditure schedule. The project-specific compliance reports 25

are submitted on a schedule as directed by the Commission in the applicable 26




Page 20

order. The progress reports keep the Commission informed on the progress of 1

project activities and any impact to costs and schedule. The Commission is also 2

notified of any potential or outstanding issues, and when and how those issues 3

are resolved; and 4

At a specified period after the project’s close, at substantial completion of the 5

project, or a milestone specified by the Commission’s Order, BC Hydro is 6

normally directed to file with the Commission a final project report. The final 7

project report provides the final update on the project, a reconciliation of final 8

costs and schedule changes, and the realized project impacts and benefits. 9

3.2 BC Hydro Capital Investment Oversight Structure & Portfolio 10

Performance 11

3.2.1 BC Hydro Governance & Oversight Structure 12

BC Hydro’s governance structures provide oversight over its capital planning and 13

delivery processes. The governance over BC Hydro’s capital investment involves the 14

Board of Directors, the Executive Team, business unit leadership teams, and 15

portfolio managers. 16

The Board of Directors issues two types of approvals for capital projects whose 17

costs are expected to be greater than $50 million ($20 million for Information 18

Technology projects). The first approval is of the Preferred Alternative and is 19

sought before the project can proceed to Definition Phase. The second 20

approval is of the project itself, including forecast cost, and is sought before the 21

project can proceed to Implementation Phase. 22

The Capital Projects Committee is a sub-committee of the Board of Directors. It 23

provides strategic and policy level advice and direction on the long-term capital 24

plans and capital projects. This sub-committee reviews and recommends for 25

the full Board of Directors approval any changes in total authorized cost (a cost 26




Page 21

estimate that includes the expected cost and the management reserves) for 1

Board-approved projects. 2

The Capital Delivery Management Committee includes members of the 3

executive team and senior managers across the organization. It provides 4

advice and direction: on the planning and delivery of BC Hydro's capital 5

investments; BC Hydro’s adherence to its regulatory requirements, standards, 6

and long-term strategies; and the capital planning processes and re-alignment 7

of priorities as needed. 8

The Capital Delivery Management Committee Working Team is composed of 9

managers and directors responsible for managing assets, managing resources, 10

and implementing capital projects. It provides feedback and recommendations 11

to the Capital Delivery Management Committee to enable them to make 12

informed decisions as part of the portfolio management process. 13

Project Management Meetings are held bi-weekly and perform as 'gates' to 14

review and determine if a Generation, Transmission or Distribution project is 15

ready to progress to the next stage of its lifecycle based on a review of the 16

project's estimated cost, scope, alternatives, and implementation plans. 17

Project Accountability Meetings provide additional oversight to Generation, 18

Transmission or Distribution projects with forecast capital costs greater than 19

$50 million, and for projects under $50 million where there is the risk of 20

significant delays or cost increases. 21

3.2.1.1 Information Technology Portfolio Governance 22

Governance over the Information Technology portfolio and the Five-Year Strategic 23

Plan is provided through the Executive Team as described below. 24

The Executive Team annually reviews the Information Technology Capital Plan 25

and Five-Year Strategic Plan. 26




Page 22

Each Information Technology project with a forecast cost over $6 million3 will be 1

approved by the Executive Team to progress to the next stage of its lifecycle. 2

The Executive Team performs regular reviews on the progress of the 3

Information Technology groups’ capital portfolio. 4

3.2.2 Capital Investments Portfolio Performance 5

BC Hydro sets targets for, monitors, and tracks its performance to ensure it is 6

prudently managing its capital expenditures. 7

BC Hydro uses the Project Budget to Actual Cost performance measure to evaluate 8

its financial performance for capital projects delivery. The measure captures a 9

five-year rolling data set of actual costs compared to originally approved full scope 10

implementation budgets, excluding project reserve funds, for capital projects that 11

were put into service during the period. An under or over percentage is calculated 12

based on these aggregated totals. The target result is +/-5 per cent. 13

The table below includes data on generation, transmission, major distribution, smart 14

metering and infrastructure, and properties projects over $100,000. The results for 15

F2016 and F2017 show actual cost was less than project budget. 16

Table 3-2 Results Fiscal 2016 and Fiscal 2017 17

Rolling Five-Year Period 2016 F2012 to F2016

2017 F2013 to F2017

Project Budget to Actual Cost (%) -0.18 -0.94 Total Capital Cost ($ billion) 6.49 6.36 Total Number of Projects 563 540

3 The selected $6 million is the financial approval limit delegated to the Executive Vice President accountable

for the information technology group.




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3.3 Commission Review of Adequacy of BC Hydro’s Planning and 1

Execution of Projects 2

The Commission may review the adequacy of BC Hydro’s capital planning and 3

execution in the context of BC Hydro’s revenue requirements and major project 4

applications. In these proceedings, a review of capital planning and execution may 5

assist in determining the reasonableness of BC Hydro’s capital expenditure or 6

additions forecasts or the prudence of completed projects. 7

Sections 6.3 and 6.4 of BC Hydro’s Fiscal 2017 – Fiscal 2019 RRA described 8

BC Hydro’s capital investment planning process, and capital project and program 9

delivery, respectively. Although the running of the utility is exclusively the 10

responsibility of BC Hydro’s management, this evidence was filed in support of 11

BC Hydro’s forecast capital expenditures and additions over the test period. In the 12

Commission’s Decision on March 1, 2018, the Panel recommended that the issue of 13

the adequacy of BC Hydro’s planning and execution related to large capital projects 14

be explored in this proceeding. 15

In accordance with the approved scope of this proceeding, BC Hydro has focussed 16

this filing on the regulatory processes by which the Commission oversees 17

BC Hydro’s capital expenditures, with the goal of having updated Capital Filing 18

Guidelines approved by the Commission. In this context, BC Hydro’s view is that the 19

adequacy of BC Hydro’s planning and execution related to large capital projects is 20

properly the subject of review in its revenue requirements applications or major 21

project applications, where it could inform the Commission’s determinations on the 22

reasonableness of BC Hydro’s capital expenditure or additions forecasts or the 23

prudence of completed projects. 24

There have been changes to BC Hydro’s capital planning and delivery processes 25

since the filing of its Fiscal 2017 – Fiscal 2019 RRA in July 2016. Since then, under 26

new leadership, BC Hydro has made significant changes to our organizational 27

structure to ensure continued efficient, coordinated practices across the company. 28




Page 24

One of those changes involves bringing together a number of different groups 1

focused on asset management and long-term planning into a single Integrated 2

Planning group. BC Hydro is also currently integrating our capital planning, delivery, 3

and operations for greater efficiency. BC Hydro will be including a description of our 4

current planning and delivery processes in the next revenue requirements 5

application, which we expect to file in February 2019. That proceeding will provide 6

another opportunity for the Commission and participants to review the adequacy of 7

BC Hydro’s planning and execution of capital projects. 8




Page 25

4 Appropriate Scope of Review in Revenue 1

Requirements Applications 2

This section outlines BC Hydro’s views on the appropriate scope of Commission 3

review of BC Hydro’s capital spending in a revenue requirements process. BC Hydro 4

has organized projects into four categories to align with the scoping order. Overall, 5

BC Hydro proposes that the Commission continue to use the revenue requirements 6

process to review significant components of BC Hydro’s capital investments. We 7

believe the approach taken in the Fiscal 2017 – Fiscal 2019 RRA remains 8

appropriate. 9

4.1 Projects With a CPCN, Expenditure Schedule or Legislated 10

Exemption: Assess Project Execution 11

This category consists of projects with a CPCN granted by the Commission, a 12

Commission-accepted expenditure schedule, or a legislative exemption. There is a 13

role for the Commission Panel hearing a revenue requirements application to 14

consider these projects. BC Hydro’s proposal for this category of projects is, in 15

effect, to continue with the status quo. 16

4.1.1 Proposed Guideline 17

BC Hydro is proposing that the scope of review in revenue requirements 18

proceedings include consideration of the execution of projects that: 19

Have a CPCN, were exempted from the CPCN requirement by legislation, or 20

were the subject of a Commission-accepted section 44.2 expenditure schedule; 21

and 22

Either have forecast expenditures or additions in the test period, or were 23

brought into service in the previous test period and are now being depreciated 24

and were not reviewed in that previous test period. 25




Page 26

Detailed consideration of BC Hydro’s project execution should normally await project 1

completion when the total cost and outcomes of the project are known. BC Hydro 2

will include in revenue requirements applications a status update on projects in this 3

category that are underway, including timing and progress against budget. For 4

projects that were completed in the previous test period and are now in service, 5

BC Hydro will include an explanation of any variance between the original 6

applied-for cost and final project cost. The information that BC Hydro provides 7

should generally be at the level of detail included in the Fiscal 2017 - Fiscal 2019 8

RRA. BC Hydro will also provide information on risk and risk treatment and impact 9

and benefits for projects exceeding the materiality limit in its revenue requirements 10

application as shown in the template in Appendix D to this proposal. 11

4.1.2 Rationale for Proposed Guideline 12

The Commission’s issuance of a CPCN and acceptance of an expenditure schedule 13

are both premised on a finding that the expenditure or project is in the public 14

interest. The public interest assessment of CPCN applications and section 44.2 15

applications involves consideration of project need, alternatives, and cost, among 16

other things. A determination that the project is in the public interest demonstrates 17

that there is a need for the project, and the issuance of a CPCN authorizes 18

BC Hydro to proceed. The question of need should not be reviewed again in a 19

subsequent revenue requirements application. A legislated exemption prohibits the 20

Commission from assessing public interest, so the same consideration applies. 21

Project execution, on the other hand, is a matter within the purview of a revenue 22

requirements application. BC Hydro anticipates that the Commission will review the 23

forecast expenditures or capital additions in the test period in the context of the initial 24

forecast approved for the project. A review of the prudency of capital expenditures 25

should generally occur only after the project is complete and in service when final 26

project costs are known. 27




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4.2 Projects Underway Without Prior Commission Approval or 1

Legislative Exemption: Commission Can Assess Need, 2

Alternatives and Implementation 3

This category consists of projects that did not require a CPCN, were not the subject 4

of previous section 44.2 applications, and are underway. A significant portion of 5

BC Hydro’s capital expenditures at any given time would fall within this category. 6

BC Hydro’s proposal is to continue with what already occurs today. 7


BC Hydro is proposing the scope of a revenue requirements proceeding will 9

generally include reviewing capital projects under development that neither meet the 10

requirements for a CPCN application, nor have been the subject of a section 44.2 11

application. The review may include an assessment of need, alternatives, and cost, 12

but any consideration of project execution will normally await project completion. 13

BC Hydro will include in revenue requirements applications information on all such 14

projects that meet the appropriate threshold. The information that BC Hydro provides 15

should generally be at the level of detail included in the Fiscal 2017 – Fiscal 2019 16

RRA. 17


Since the project need, alternatives, and justification have not yet been reviewed for 19

this category of projects, the Commission may inquire into these matters in a 20

revenue requirements application. While the execution of the project to date could 21

potentially be reviewable, a review of the prudence of capital expenditures should 22

generally occur only after the project is in service. As described above, waiting until 23

the project is complete to perform this review is fair to both BC Hydro and 24

ratepayers. 25




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4.3 Future Projects Meeting Criteria for CPCN or Section 44.2 1

Proceeding: Avoid Redundant Reviews in Revenue 2

Requirements Proceeding 3

This category consists of projects that are not yet underway and meet the 4

requirements for a CPCN or section 44.2 application. BC Hydro’s proposal is to 5

review the project need, alternatives, and forecast costs in the context of a CPCN or 6

section 44.2 application, not in a revenue requirements application. This is what 7

occurs today. 8


BC Hydro is proposing the scope of review in a revenue requirements proceeding of 10

future projects that will be subject to a future CPCN or section 44.2 application (i) 11

exclude future projects which are not expected to enter service in the test period or 12

impact the test period revenue requirements, and (ii) include only limited 13

consideration of such projects expected to enter service in the test period and 14

impact the test period revenue requirements. 15

Some projects that will be subject to a future CPCN or section 44.2 application may 16

be expected to enter service in the test period and impact the test period revenue 17

requirements. In these cases, the Commission may wish to examine the 18

reasonableness of the forecast with respect to the timing of the project. Detailed 19

assessment of need, alternatives and costs, however, will normally be left to the 20

CPCN or section 44.2 expenditure schedule application. 21

BC Hydro normally includes in revenue requirement applications information on all 22

such projects exceeding the materiality limit with forecast expenditures or additions 23

in the test period. The information that BC Hydro provides should generally be at the 24

level of detail included in the Fiscal 2017 - Fiscal 2019 RRA. BC Hydro will also 25

provide additional information on risk and risk treatment and impact and benefits for 26

projects exceeding the materiality limit in its revenue requirements application as 27

shown in the updated template in Appendix D to this proposal. 28




Page 29


The Commission Panel hearing a revenue requirements application will be aware of 2

planned projects that are subject to a CPCN requirement, or in respect of which 3

BC Hydro has committed to file a section 44.2 application. BC Hydro will identify in a 4

revenue requirements application any CPCN applications or section 44.2 5

applications anticipated or currently underway. 6

The Commission will review project need, alternatives, and justification in the CPCN 7

or section 44.2 proceeding. It is in the interests of ratepayers, the Commission and 8

BC Hydro to avoid, to the extent possible, regulatory inefficiency associated with a 9

redundant review in a revenue requirements proceeding. Addressing these issues in 10

the CPCN or section 44.2 proceeding also avoids the potential for conflicting or 11

inconsistent Commission determinations. It is possible to avoid redundancy and the 12

risk of conflicting decisions altogether if the project is not expected to enter service 13

during the test period. In that case, the project has no impact on the test period 14

revenue requirements, since project costs are held in construction work in progress 15

until the project goes into service and the costs are classified as capital additions for 16

amortization into rates. 17

It may not be possible to completely avoid addressing the project in a revenue 18

requirements proceeding when the project is expected to enter service during the 19

test period. In that case, the forecast capital additions will affect the revenue 20

requirements. The Commission may have to make some assessment, possibly 21

based on more preliminary information, as to whether the project will actually 22

proceed. BC Hydro’s Capital Additions Regulatory Account captures any variances 23

between actual and forecast amortization expense resulting from capital additions 24

associated with project timing or with a project not proceeding. 25

BC Hydro’s proposal, in effect, is to continue the process already in place for the 26

recognition of costs related to capital investments. 27




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4.4 Future Projects that do not Trigger a CPCN or Expenditure 1

Schedule: Commission Can Assess Need in Revenue 2

Requirements Proceeding 3

This category consists of future projects that have not been, and will not be, the 4

subject of a CPCN or section 44.2 expenditure schedule application. A significant 5

portion of BC Hydro’s capital spending would fall into this category. The revenue 6

requirements application should continue to be the primary venue for reviewing 7

these projects. 8


BC Hydro is proposing the scope of review in a revenue requirements proceeding 10

should include consideration of forecast capital expenditures and additions in the 11

test period, but should exclude future projects for which there are no forecast 12

expenditures or additions in the test period. 13

For those projects with forecast expenditures or additions in the test period, the 14

scope of review may include examination of project need and alternatives, and the 15

reasonableness of the forecast given the stage of the project and assuming the 16

project proceeds. BC Hydro will include in revenue requirements applications 17

information on all such projects exceeding the materiality limit with forecast 18

expenditures or additions in the test period. The information that BC Hydro provides 19

should generally be at the level of detail included in the 20

Fiscal 2017 - Fiscal 2019 RRA. 21


The Commission can review the project need, alternatives and justification, as these 23

issues would not have been addressed in a separate CPCN or section 44.2 24

application. BC Hydro’s forecast would be reviewed in the ordinary course. There 25

would be no actual costs to review, since the projects have not yet commenced. 26




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In light of the fact that revenue requirements applications are focused on a particular 1

test period, the Commission should limit its review to projects for which there are 2

forecast capital expenditures or capital additions in the test period. The Commission 3

should defer its review of future projects without forecast capital expenditures or 4

capital additions in the test period to a future revenue requirements application. This 5

approach has two key benefits. First, it leads to a better quality of review, as projects 6

tend to be subject to a higher level of definition closer to the commencement of 7

construction. Second, it avoids multiple reviews of the same projects in successive 8

revenue requirements applications, which is inefficient. 9

BC Hydro presents information regarding both forecast capital expenditures and 10

capital additions in revenue requirements applications, and will continue to do so. 11

However, BC Hydro believes that the Commission should focus its review only on 12

capital additions, as only the forecast additions affect BC Hydro’s revenue 13

requirements in the test period. Forecast capital expenditures are capital spending 14

associated with work in progress, which do not affect BC Hydro’s revenue 15

requirements until the projects go into service and the expenditures become capital 16

additions. Forecast capital expenditures in one test period will become forecast 17

capital additions in the current or next (subsequent) test periods. Those test periods 18

are the subject of revenue requirements applications, and the Commission and 19

interveners will have the opportunity to probe those same projects at that time. 20

BC Hydro is not proposing a guideline to limit reviews to capital additions but 21

encourages the Commission and interveners to be cognizant of the potential for 22

redundant reviews and regulatory inefficiency when considering capital 23

expenditures. 24




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5 Guidelines for Major Project Applications 1

As described in section 3 above, BC Hydro has a deemed CPCN for its system and 2

all extensions to the system, subject to the Commission requiring a CPCN for an 3

extension. Currently, the scope, timing, and process for CPCN and expenditure 4

schedule applications are aligned with BC Hydro’s 2010 Guidelines. BC Hydro is 5

proposing to continue with this framework, with some adjustments. BC Hydro is 6

proposing to continue with the meaning of “extension” in the 2010 Guidelines, which 7

defines the scope of projects potentially subject to a CPCN. Under BC Hydro’s 8

Proposed Guidelines, the major project thresholds have been re-aligned to be more 9

consistent with how BC Hydro plans and executes its projects and programs. The 10

proposed changes will leave the overall number of total projected major project 11

applications similar to the number projected under the 2010 Guidelines. 12

5.1 Projects Subject to a CPCN: Meaning of “Extension” 13

5.1.1 Continue to Apply Plain Meaning of “Extension” 14

BC Hydro’s proposal is for an “extension” to be interpreted in a manner consistent 15

with the 2010 Guidelines, which in effect means a capital expenditure that expands 16

the service area or capacity of a utility plant or system. 17

5.1.2 Rationale for Proposal on Meaning of “Extension” 18

The UCA does not define the term “extension”. The plain meaning of the word 19

“extension” and its use in the UCA suggests that it refers to the expansion of the 20

geographic extent or capacity of a utility plant or system. This concept of “extension” 21

was generally endorsed by the Commission in its 2015 Thermal Energy Systems 22

(TES) Regulatory Framework Guidelines. The TES Guidelines state: “An extension 23

is a capital addition to the system of a material dollar amount to provide additional 24

capacity to meet increased demand.”4 This interpretation of the term “extension” is 25

4 Order No. G-27-15, dated March 2, 2015. Online:

http://www.bcuc.com/Documents/Guidelines/2015/DOC_42213_TES-Guidelines.pdf.

http://www.bcuc.com/Documents/Guidelines/2015/DOC_42213_TES%1eGuidelines.pdf




Page 33

consistent with the historical origins of the CPCN requirement of guarding against 1

harmful competition among utilities in the same geographic area, and to protect the 2

public from wasteful expenditures from having two utilities serving the same area. 3

In practical terms, the Commission is able to undertake a public interest review of 4

any project over the applicable threshold proposed by BC Hydro, irrespective of how 5

the term “extension” is interpreted. As discussed in the next subsection, BC Hydro is 6

committed to filing with the Commission an expenditure schedule application for all 7

non-extension projects over the expenditure threshold. 8

5.1.3 Expenditure Schedule Applications Facilitate Review of 9

Non-Extension Projects 10

BC Hydro is committed to filing expenditure schedule applications for all 11

non-extension projects that exceed the major project thresholds. BC Hydro will 12

generally provide the same information requested in the 2015 CPCN Application 13

Guidelines and the 2010 First Nations Information Filing Guidelines for expenditure 14

schedule applications. 15

5.2 Clarity on What Constitutes a Project 16

5.2.1 Defining Projects 17

Projects are time-bound, one-time undertakings to buy, replace, maintain, or 18

rehabilitate a distinct asset, a set of assets, or a group of assets to achieve a 19

specified set of objectives: 20

Projects may involve a distinct asset only, such as a single piece of equipment 21

or a component (turbine, transformers, runners etc.), or land; 22

Projects may involve a set of assets. These projects often involve assets that 23

are operated together and where there are substantial benefits to bundling 24

them together. Examples include a turbine and generator, or a transmission line 25

and related interconnections; and 26




Page 34

Projects may involve groups of assets. These projects are where design 1

efficiencies or economies of scale make it more cost effective to manage the 2

implementation or undertake required activities in one project. Examples 3

include replacing 500 kV circuit breakers across a number of stations or 4

facilities or buying cranes of a specific type. 5

Projects are also structured based on a number of factors including: 6

Specific identified needs; 7

Optimizing solutions; 8

Execution efficiency; 9

Timing – when needs have to be meet, to align with planned outages, or to 10

manage required outages; 11

Stakeholders impacted; 12

Environmental considerations; 13

First Nations impacted; and 14

Managing resource constraints. 15

5.2.2 The Boundary Around Project Scope 16

The scope of a single project is the work required to meet the project’s objectives 17

and implement the desired solution. It is determined by a specific set of business 18

requirements. Additional work that does not meet those particular business 19

requirements is not considered part of the project. For instance, two sets of work that 20

are geographically close to each other do not become part of a single project for that 21

reason alone. Rather, the scope of work that makes up a single project should be 22

united by the fact the work is required to meet a common need in a similar 23

timeframe. Projects also provide stand-alone benefits (i.e., are not dependent on 24

something else to achieve the benefits). 25




Page 35

Independent projects that are linked solely due to geographic proximity or work on 1

similar assets should not be treated as a single project. Combining projects solely 2

due to geographic proximity or function with no expected increase in efficiency can 3

lead to large, complex, and unwieldy projects that may increase the risk of project 4

failure. In the event two formerly independent projects are combined for delivery 5

efficiency, a new project with an updated scope, budget, and schedule will be 6

considered. 7

As described in section 6.3.5 of the Fiscal 2017 – Fiscal 2019 RRA, when 8

developing capital plans each Business Group considers, amongst other factors, the 9

size, scope, complexity and costs of capital investments. This consideration may at 10

times lead to previously identified projects being re-scoped into smaller or larger 11

projects to manage risk, for delivery efficiency, meet changing business 12

requirements, adapt to resource constraints, or due to the discovery of new and 13

better solutions. BC Hydro will provide in revenue requirements applications, as part 14

of its variance explanation for projects over the materiality limit, an explanation for 15

any resulting changes in overall project costs. 16

5.2.3 Project Lifecycle 17

The project lifecycle is the full set of activities that is required for a project to meet its 18

objectives. BC Hydro’s project lifecycle is divided into phases, which are in turn 19

sub-divided into stages, with key activities in each stage. For each project that 20

advances through to completion, all the phases must be completed. Gate approval 21

points are positioned at the end of key stages in the project lifecycle to allow 22

management to confirm that the proposed project solution remains in alignment with 23

overall business drivers. 24




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Description of Project Lifecycle Phases 1

The following provides a high level summary of the key activities within the project 2

phases: 3

Initiation Phase: identifies and defines an opportunity or problem; 4

Identification Phase: reviews conceptual alternatives, evaluates feasibility, 5

recommends an alternative, and produces a project plan and business case for 6

Definition phase funding. A leading alternative is identified during the 7

conceptual design stage and a preferred alternative is confirmed at the end of 8

feasibility design stage. At the end of the feasibility design stage, the aim is to 9

have the expected cost estimate accuracy at +50/-15 per cent; 10

Definition Phase: carries out a detailed investigation of the preferred alternative, 11

and prepares a preliminary design and a Project Plan for Implementation phase 12

funding complete with business case. This phase also includes the securing of 13

all licences and regulatory approvals,5 and any key defining agreements. For 14

most projects, regulatory applications are produced on the basis of the 15

preliminary designs. At the end of the Definition phase, the aim is to have the 16

expected cost estimate accuracy at +15/-10 per cent; and 17

Implementation Phase: includes detailed design, material and equipment 18

procurement, construction and testing and commissioning. The phase ends 19

with the Project Initiator acknowledging acceptance of the project results by 20

signing the Project Completion and Evaluation Report. 21

5.2.4 Forecasting Project Cost 22

The availability of formal cost estimates varies with the project lifecycle phase. 23

Formal cost estimates are not available for projects in Identification and earlier 24

phases or for projects that have not yet been initiated. To build the capital plan and 25

5 Information Technology projects may secure licenses in the Implementation Phase.




Page 37

get an overall portfolio perspective, a planning allowance is used as an initial 1

placeholder forecast cost for each project. Cost estimates are first prepared for 2

alternative analysis and more rigorously for the preferred alternative at the end of the 3

feasibility design stage. 4

5.2.4.1 Planning Allowances 5

The planning allowance represents a placeholder forecast that is needed for capital 6

planning purposes when no formal cost estimate for the project is yet available. In 7

order to get an overall portfolio perspective, single point forecasts are required for all 8

projects in all phases of the project lifecycle, including future projects. 9

Planning allowances are single values (rather than ranges) required to support long 10

term capital planning. Planning allowances are used when a project is not sufficiently 11

advanced to have a preferred alternative, and there is insufficient information on the 12

scope and schedule to establish a complete total project cost estimate. The planning 13

allowance is prepared based on historic information pertaining to similar projects, 14

and input from subject matter experts. 15

5.2.4.2 Cost Estimates 16

A total project cost estimate is prepared for the project at the end of the feasibility 17

design stage. A cost estimate for a project can only be developed once the preferred 18

alternative, which defines the scope and implementation schedule for the project, is 19

determined. 20

As part of BC Hydro's Project and Portfolio Management (PPM) Practices,6 a 21

standardized estimating process is followed on all projects, to enhance the 22

efficiency, accuracy and credibility of estimates. The process for determining 23

estimates is based on industry practice, and estimates are checked and reviewed for 24

accuracy, assumptions, risks, and construction methodology depending on financial 25

6 The governance for Information Technology projects is the Information Technology Delivery Standard

Practices (ITDSP) framework.




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thresholds. Third party reviews, and on occasion a partially or completely 1

independent estimate(s), are undertaken for projects that are especially large, 2

complex, difficult to build, or not supported by sufficient in-house expertise. 3

5.3 Projects Meeting Criteria for CPCN or Section 44.2 Filing 4

BC Hydro is proposing a change to the established expenditure threshold levels in 5

the 2010 Guidelines. BC Hydro recognizes that the Commission has the ability to 6

order an application be filed for an extension below the proposed thresholds. 7

5.3.1 Proposed Major Project Categories and Thresholds 8

BC Hydro proposes the following expenditure threshold levels and the threshold 9

categories as follows: 10

1. $100 million threshold for Power System projects (described in section 2.3.1); 11

2. $50 million threshold for Buildings; and 12

3. $20 million for Information Technology projects. 13

5.3.2 Rationale for Major Project Categories and Thresholds 14

The 2010 Guidelines are working well, and capturing BC Hydro’s most significant 15

capital projects for review by the Commission. The proposed changes would not 16

change the quantity or type of projects that would have been reviewed under the 17

thresholds as outlined in the 2010 Guidelines. The aim of the proposed modifications 18

is to align the thresholds with current capital planning processes, and to increase 19

clarity and ease of use. 20

The major difference between this proposal and the 2010 Guidelines is the change 21

in thresholds for Distribution projects. In the 2010 Guidelines, Distribution projects 22

(excluding substation distribution assets), had a separate threshold of $50 million. 23

Under this proposal, Distribution projects would fall under the general category of 24

Power System projects. 25




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Larger, more complex projects involving distribution assets often involve significant 1

work on the transmission system. Including all power system projects under one 2

threshold will make it easier to apply thresholds for projects involving work on the 3

transmission and distribution systems. This change also aligns better with how the 4

system is managed and planned as asset management for the transmission and 5

distribution systems are now the responsibility of a single business unit. 6

Consistent with the 2010 Guidelines, the threshold for Buildings applies to new 7

construction, major refurbishments, and improvements on field and office buildings 8

around the province that would be managed by BC Hydro’s Properties Group. Any 9

work on Power System facilities will be included and assessed as part of a Power 10

System project. 11

5.3.2.1 Anticipated Major Project Filings Under Proposed Changes 12

The proposed categories and thresholds will result in a similar number of 13

applications filed with the Commission as would be expected under the 14

2010 Guidelines. Below, Table 5-3 is the estimated number of filings using the 15

categorization and thresholds of the 2010 Guidelines. Table 5-4 is the estimated 16

number of anticipated filings under the proposed changes. The total number of 17

estimated filings is similar to that under the Proposed Guidelines. Table 5-5 lists the 18

projects (including description and current phase) that may meet the criteria for a 19

CPCN or section 44.2 filing. 20

The information presented in the tables below is based on preliminary assessments 21

of projects in the Fiscal 2019 to Fiscal 2028 Capital Forecast. These are projects 22

early in the project lifecycle phase and/or projects that have not been initiated. All 23

numbers and information presented below is subject to change as business needs 24

change and as the projects become more defined. They should not be viewed as an 25

absolute indication of future project-specific regulatory filings. Refer to sections 5.2.3 26




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and 5.2.4 for a description of project phases and a discussion of placeholder 1

forecasts and formal cost estimates. 2

Table 5-3 2010 Guidelines: Estimated Number of 3 Applications Over Next Decade 4

Threshold Categories

Generation Transmission (incl. SDA)

Distribution Buildings Information Technology

Total Applications

Threshold ($ million)

100 100 50 50 20 23

# 15 7 0 0 1 1 This table is estimated based on the projects in the Updated Fiscal 2019 to Fiscal 2028 Capital Forecast and 5

is subject to change. 6

Table 5-4 2018 Filing Guidelines: Estimated 7 Number of Applications Over Next 8 Decade 9


Power System Investment

Buildings Information Technology

Total Applications

Threshold ($ million)

100 50 20 23

# 22 0 1 1 This table is estimated based on the projects in the Updated Fiscal 2019 to Fiscal 2028 Capital Forecast and 10

is subject to change. 11




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Table 5-5 Anticipated CPCN or Section 44.2 1 Filings over the Next Decade as of 2 April 1, 2017 3


Project Name Project Phase Project Description

Power System

Metro North Transmission Project

Identification Reinforce the Metro North Transmission System by constructing a new 230 kV transmission circuit between Coquitlam and Vancouver to serve the load growth and strengthen the Metro Vancouver Regional Transmission System

Power System

Peace Region to Kelly Lake Transmission Reinforcement

Identification Increase the 500 kV transmission system transfer capacity to facilitate transmission of available generation from the Peace Region to the load centers in the Lower Mainland and Vancouver Island regions

Power System

West Kelowna Transmission Reinforcement project

Identification The West Kelowna Transmission Reinforcement project will provide a second transmission line to supply Westbank Substation.7

Power System

Westbank Substation Upgrade project

Identification The Westbank Substation Upgrade project will increase substation firm capacity to address the current capacity deficit and future load growth.8

Power System

Mainwaring Substation Upgrade

Identification This project will upgrade the existing substation with new transformers.9

Power System

John Hart Dam Seismic Upgrade

Identification The John Hart Dam requires upgrading to reliably withstand severe earthquake loading. This project will involve upgrades to the Middle Earthfill Dam and Power Intake Dam, the North Earthfill Dam, the concrete dam, and the spillway gates system.

7 The West Kelowna Transmission Reinforcement project does not meet the major project threshold under the

2010 Guidelines or the Proposed Guidelines. This project is on the list to reflect the Panel’s direction in the Fiscal 2017 – Fiscal 2019 RRA Decision to file a CPCN application.

8 The Westbank Substation Upgrade project does not meet the major project threshold under the 2010 Guidelines or the Proposed Guidelines. This project is on the list to reflect the Panel’s direction in the Fiscal 2017 – Fiscal 2019 RRA Decision to file a CPCN application.

9 The Mainwaring Substation Upgrade project does not meet the major project threshold under the 2010 Guidelines or the Proposed Guidelines. This project is on the list to reflect the Panel’s direction in the Fiscal 2017 – Fiscal 2019 RRA Decision to file a CPCN application.




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Power System

Strathcona Upgrade Discharge

Identification This project will construct a new Low Level Outlet to allow for effective drawdown of the Upper Campbell Reservoir in a post-seismic situation. The drawdown will protect a potentially seriously damaged Strathcona Dam from failure, and help to ensure there is no uncontrolled release of water from the reservoir which could cause multiple public fatalities.

Power System

Bridge River 1 Replace Units 1 to 4 Generators and Governors

Identification This project will restore the capacity and reliability of the Bridge River Units 1 to 4 generators and governors.

Power System

Spillway Seismic Upgrade at Ladore

Identification Upgrade the spillway gates at Ladore Dam to reliably withstand severe earthquake loading.

Power System

Overhaul Units 1 to 3 Turbines at Seven Mile

Identification Overhaul Turbine Units 1 to 3 at Seven Mile to provide continued reliable service.

Power System

West End Substation Project

Future Build a new 230/12-25 kV, 400 MVA station in the West End neighbourhood of Downtown Vancouver.

Power System

East Vancouver Substation project

Future Construct new substation in Strathcona neighbourhood of Vancouver to offload Murrin Substation

Power System

Northwest Substation Upgrades Project

Future This alternative involves upgrading the substations along the radial line to reduce the number of planned outages required to maintain the equipment at these substations.10

Power System

GM Shrum Generator Units 1 to 5 Capacity Increase

Future This project would increase the overall capacity of generator units by 220 MW.

Power System

Refurbish Kootenay Canal Units 1 to 4 Generators

Future This project is to increase reliability of the generators. The generators have been in service since 1975 and 1976 and have reached the end of their expected design life. As of August 2016, the Equipment Health Rating of each of the four generators is Poor.

Power System

La Joie Dam Improvements

Future The La Joie Dam will be upgraded to both reduce leakage and reliably withstand severe earthquake loading.

10 The Northwest Substation Upgrades Project does not meet the major project threshold under the

2010 Guidelines or the Proposed Guidelines. This project is on the list to reflect the Panel’s direction in the Fiscal 2017 – Fiscal 2019 RRA Decision to file a CPCN application.




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Power System

Mica Discharge Facilities Seismic and Reliability Upgrades

Future The Mica discharge facilities require upgrading to improve reservoir containment and the ability to operate the facilities after a seismic event.

Power System

Addition of 3rd GIS Bus at Revelstoke

Future This project will improve reliability by installing a third bus to achieve full GIS redundancy so that all units could be switched between 2 buses to maintain full plant output in the event of a single bus failure.

Power System

Replace Units 3 and 4 Stators at Revelstoke

Future This project will improve reliability by replacing the stators (including the frame, core and winding) on two units, which both have an Equipment Health Rating of Poor.

Power System

Strathcona New Powerhouse

Future Seismic upgrades to the dam are anticipated to mean that a new powerhouse to be built in a different location.

Power System

Overhaul Units 1 to 4 Turbines at Mica

Future This project will overhaul the Units 1 to 4 turbines at Mica to mitigate reliability risk.

Power System

Overhaul Units 9 and 10 Turbines at GM Shrum

Future This project would overhaul the Units 9 and 10 turbines at GM Shrum to mitigate reliability risk

Power System

Improve Seismic Stability of Duncan Dam

Future Improve seismic stability at Duncan Dam and its related structures to withstand severe earthquake loading.

Power System

1L18 Cable Replacement

Future This project will replace a submarine cable supplying the Gulf Islands from the mainland and Vancouver Island to address reliability issues associated with the end-of-life condition and seismic risks

Power System

Richmond Area Reinforcement – Phase 2

Future This project will increase the Richmond Area substation firm capacity to address the future load growth and address risks associated with the substation equipment approaching end-of-life.

Power System

Maple Ridge/Haney Area Reinforcement

Future This project will increase Maple Ridge/Haney substation firm capacity to address the future load growth and address risks associated with the substation equipment approaching end-of-life.

Information Technology

Operational Work and Asset Management

Future Implementation of technology and business processes for common, integrated, enterprise asset and work management systems to consolidate and standardize asset and work management functions.




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5.4 Information Technology Projects Meeting Criteria for a Major 1

Project Filing 2

BC Hydro is not proposing any change to the major project threshold for Information 3

Technology projects. The $20 million threshold captures significant Information 4

Technology projects and continues to be appropriate. 5

Based on BC Hydro’s experience with its Supply Chain Applications Project, 6

BC Hydro is proposing to include an option for a two-phase regulatory process for 7

Information Technology projects if appropriate based on the attributes of the 8

particular project. 9

Major project applications are typically filed towards or near the end of the Definition 10

Phase seeking approval of the total forecasted cost of the project. The Commission 11

typically addresses major project applications in a single phase proceeding. 12

A two-phase regulatory process was used by the Commission for BC Hydro’s Supply 13

Chain Applications Project. In the first phase, BC Hydro filed an application at the 14

beginning of the Definition Phase seeking acceptance of the costs until the end of 15

the Definition Phase. In the second phase, BC Hydro seeks acceptance of the 16

Implementation Phase costs. 17

The two-phase process may be appropriate for projects where a significant 18

proportion of project expenditures will be undertaken in the Definition Phase and 19

BC Hydro determines that it would be preferable to seek Commission acceptance 20

before incurring those costs. BC Hydro will propose a two-phase process in a 21

section 44.2 application if appropriate given the specific attributes of the project. 22




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5.5 BC Hydro’s Commitment to File Section 44.2 Applications 1

Applies to Projects where the Duty to Consult is Triggered 2

In this section BC Hydro addresses the following question included within the scope 3

of this proceeding: 4

Given that the UCA expressly prohibits a public utility from 5

starting construction in advance of the Commission granting a 6

CPCN, consider the appropriateness of filing section 44(2) 7

applications, which do not have this prohibition, for projects 8

where the duty to consult First Nations is triggered? 9

The duty to consult arises when the Crown has knowledge of Aboriginal rights, 10

whether asserted or established, and contemplates conduct that may adversely 11

affect those rights. For projects where the duty to consult is triggered, the 12

Commission’s practice has been to assess the adequacy of consultation when 13

BC Hydro applies for either a CPCN or acceptance of an expenditure schedule 14

under section 44.2 of the UCA. 15

BC Hydro has committed to apply under section 44.2 for all non-extension projects 16

that exceed the applicable major project expenditure threshold. BC Hydro has 17

applied this commitment to all non-extension projects, whether or not the duty to 18

consult arises. This ensures that all major projects are reviewed by the Commission 19

in either a CPCN or section 44.2 proceeding, unless a legislative exemption applies. 20




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6 Clarity on Programs 1

BC Hydro uses two main types of programs to efficiently implement work, namely 2

Program of Projects and Recurring Capital Programs. These programs are 3

implemented and governed by the following business units and practices: 4

(i) Capital Infrastructure Project Delivery’s (CIPD) Program Management Practice 5

governs the implementation of complex generation and transmission programs. 6

Attached as Appendix H is CIPD’s Program Management Practice. The 7

Program Management Practice describes the types of programs, BC Hydro’s 8

program management definitions, the major differences between programs and 9

projects, the program lifecycle, and program management processes; 10

(ii) The Program and Contract Management group manages and implements 11

Transmission and Distribution work programs and the approach is aligned with 12

the Program Management Practice; and. 13

(iii) The governance for Information Technology programs is the Information 14

Technology Delivery Standard Practices (ITDSP) framework.11 BC Hydro’s 15

Information Technology group undertakes many Recurring Capital Programs, 16

but few Programs of Projects. 17

6.1 Program of Projects 18

A Program of Projects is a group of related projects with common business drivers 19

and or technical characteristics which are managed in a coordinated way to deliver a 20

common business requirement or achieve delivery efficiencies by sharing teams, 21

resources, and information technology environments. The projects are managed 22

together to reduce risk and achieve efficiencies and other delivery benefits not 23

available if managed individually. 24

11 Filed as Attachment 19 to Exhibit B-3 in the Inquiry of Expenditures related to the adoption of the

SAP Platform.




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Programs of Projects usually have long durations (multiple years), a finite end date, 1

and are often flexible in scope with new projects added over time. 2

BC Hydro typically uses one of three approaches for the funding and approval of its 3

Programs of Projects: 4

Each individual project’s need, alternatives, cost, and project execution strategy 5

is assessed independent of other projects in the Program to determine if a 6

project will be initiated and implemented. Each project is initiated and funding is 7

approved with an individual business case. There is no Program cost estimate 8

separate from the forecast cost of the individual projects. 9

The need for the projects within the Program is assessed together in the 10

Identification Phase. Each individual project’s alternatives and forecast cost is 11

evaluated independent of other projects in the Program, and released with 12

separate business cases into the Feasibility Stage or Definition Phase. Program 13

cost is estimated as what would be required to complete the needs 14

assessment. 15

The Program is evaluated and funding is approved with a single business case 16

for all stages of the Program’s lifecycle. This approach is usually used for low 17

risk, repeatable projects. 18

6.2 Recurring Capital Programs 19

There are two sub-types of recurring capital programs – work programs and 20

acquisitions. 21

6.2.1 Work Programs 22

These are usually highly standardized high volume and low complexity asset 23

replacements or improvements. These programs consist of repeatable work units 24

that are grouped to deliver an aggregate benefit, and are annual recurring 25

expenditures. These programs are usually planned and approved as a unit. 26




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Examples include the Wood Pole Replacement program, Information Technology 1

application enhancements and hardware sustainment programs, Fleet Vehicle 2

Capital Replacement program, and Insulator Replacement program. 3

6.2.2 Acquisitions 4

Information Technology has one-time and recurring annual purchases. Examples of 5

this include purchases of data network equipment, data centre equipment, user 6

access tokens, business software licenses, enterprise application licenses, personal 7

computers, and mobile phones. Acquisitions, including, acquisition programs 8

represent about 10 per cent of total Information Technology capital 9

expenditures/plan. 10

6.3 Proposed Guidelines for Programs 11

BC Hydro proposes the following guidelines for reviewing programs. 12

(i) Program of Projects: As projects within the program are initiated, they should 13

be reviewed as individual projects in a revenue requirements application and, if 14

the project exceeds the major project threshold, in a major project filing. 15

BC Hydro will identify in Appendix I of revenue requirements applications 16

projects above the materiality limit that are anticipated to be delivered as part of 17

Programs of Projects, and where available will provide a summary of the 18

program strategy for all identified Programs of Projects.12 The program 19

strategy, which is usually developed in the Identification Phase, will include the 20

program’s description, objectives, scope, schedule, and risk and mitigation 21

strategies, as well as cost estimate, if available. 22

(ii) Recurring Capital Programs: Work Programs and Acquisitions, irrespective of 23

forecast cost, are best reviewed in a revenue requirements application. 24

12 Information Technology programs are governed by ITDSP, which does not require program strategies.




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6.4 Rationale for Proposed Guidelines for Programs 1

6.4.1 Program of Projects 2

As this type of program consists of individual, separate projects, the projects within 3

these types of programs are best reviewed individually in revenue requirements 4

proceedings or as part of a CPCN or expenditure schedule application, if it exceeds 5

the major project threshold. The program strategy for these types of programs will be 6

included in any discussion of individual projects in a revenue requirements 7

proceeding or as part of a CPCN or expenditure schedule filing. 8

A program of projects, which are grouped together to achieve benefits not available 9

if managed individually, is generally not considered to be a single project because 10

Programs of Projects are often flexible in scope and are planned to evolve as 11

required. For example, subsequent projects can be added or removed over time. In 12

contrast, a project has a fixed scope. In addition, because the different projects 13

within the program may be at different stages of maturity with different levels of 14

project definition (for example different levels of cost estimating accuracy), there 15

may be limited ability to meet minimum filing requirements required for an effective 16

review of all projects in the program. Some Programs of Projects are established 17

only to achieve delivery efficiencies, and in some cases the drivers and justifications 18

for projects within program are quite different. 19

In the few exceptions where a Program of Projects includes a fixed scope of work, it 20

may have the characteristics of a single project. However, in BC Hydro’s view it 21

should not be treated as one project as it is in fact a collection of low risk, repeatable 22

projects. BC Hydro considers that such projects do not warrant a major project filing. 23




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6.4.2 Recurring Capital Programs 1

The BC Hydro approval processes for recurring capital programs are streamlined as 2

they comprise low-complexity work and are recurring in nature. These programs 3

often involve work on assets that are put into service in the same year as the 4

expenditure is made. A revenue requirements proceeding is the most efficient way to 5

review these types of programs. 6




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7 Strategies, Plans, and Studies 1

The Ten Year Capital Forecast reflects the capital investments required to meet 2

BC Hydro’s mission to provide reliable, affordable, and clean electricity throughout 3

B.C., safely. As discussed in section 2, the capital forecast reflects the need to 4

replace aging assets, invest in growth, and improve safety outcomes for BC Hydro 5

employees, contractors, and the public. 6

Strategies, plans, and studies are developed to seek solutions to effectively invest in 7

the power system and infrastructure. These strategies, plans, and studies 8

investigate and/or implement broader regional, system, or business unit solutions or 9

policies. 10

7.1 Power System Strategies, Plans, and Studies 11

Strategies, plans, and studies document the identification of system needs and, at 12

times, the development of optimized solutions to address those needs. These 13

solutions are initiated and prioritized annually as part of the Ten Year Capital 14

Forecast planning process. 15

These strategies, plans, and studies assess system needs and develop solutions 16

based on a region or area, a facility or group of facilities, the river systems, and / or 17

asset classes. They are usually implemented over a long duration, with often 18

interconnected solutions. Due to financial and resource constraints, identified 19

solutions are not always addressed as recommended in the strategy, plan, or study. 20

Changes to proposed solutions due to changing underlying factors could change the 21

scope of projects resulting from a strategy, plan or study. 22

7.1.1 Transmission & Distribution Area Plans 23

These area plans are typically prepared, or updated, when capacity additions are 24

required in an area, which is defined by interoperability of the area assets. Other 25




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known needs in the area, including sustaining issues at the area’s substations, are 1

integrated in the Area Plans. 2

7.1.2 Transmission & Distribution Substation Asset Plans 3

These plans are developed when a substation requires major investments to 4

address end-of-life and other sustaining needs. The longer term capacity needed at 5

the substation is also integrated in Substation Asset Plans. 6

7.1.3 Transmission & Distribution Asset Strategies 7

BC Hydro has documented Asset Strategies for most of its Transmission and 8

Distribution asset classes. These Asset Strategies provide a fleet approach to the 9

management of each asset class across the entire system, and over their entire 10

asset lifecycle. 11

7.1.4 Generation Facility Asset Plans 12

Generation facility asset plans summarize the issues, risks, and opportunities faced 13

by a specific facility and outline the proposed long-term investment strategy that is 14

believed to offer the best value at a specific time. Facility Asset Plans are key inputs 15

to the fleet planning process. The investment strategies that are proposed in discrete 16

facility asset plans will be reviewed collectively, and prioritized to provide the most 17

appropriate suite of investments across the fleet given resource and financial 18

constraints, outage planning, and other considerations. 19

7.1.5 Dam Safety System Studies 20

These studies are initiated to identify options that would permit the optimal risk 21

management and investment strategy for the system using a systems engineering 22

approach. A Systems Engineering approach provides a framework to manage 23

complexities within the constraints of the river system to ensure technical 24

coordination across a broad range of disciplines. 25




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7.1.6 Sample List of Power System Strategies, Plans, and Studies 1

Name Systems Addressed

North Burnaby Area Study Transmission & Distribution

Mainwaring Asset Plan Transmission & Distribution

Circuit Breaker Asset Management Strategy Transmission & Distribution

GM Shrum Facility Asset Plan Generating Facilities; Water Conveyance & Retention Structures

Campbell River System Study Water Conveyance & Retention Structures

7.2 Information Technology Plans 2

Each year, Information Technology prepares a rolling Five-Year Strategic Plan that 3

outlines the information technology capital investment needed to meet BC Hydro’s 4

business objectives. The Five-Year Strategic Plan discusses strategic initiatives and 5

drivers; foundational investments required to reduce risk, increase resilience and 6

enable business initiatives; maturity of emerging technologies; and resource 7

constraints that will influence the choice of capital investments. 8

Specific capital investment plans are prepared each year using a portfolio approach 9

that captures business needs and opportunities aligned to the Five-Year Strategic 10

Plan. Progress against the annual plan is reviewed monthly and adjustments made 11

based on emergent needs, increased knowledge of potential net benefits, and 12

available resources. The Five-Year Strategic Plan is updated annually to maintain 13

currency with changing technologies and opportunities. 14

7.3 Properties Capital Asset Strategies 15

Capital investments in the Properties portfolio are driven by the need to address the 16

specific issues and risks associated with each of the existing building assets and 17

infrastructure. Properties capital planning focuses on assessing the health of existing 18

assets and determining safety and operational requirements that cannot be met by 19

the existing asset portfolio to establish an effective long term capital plan. All of 20

Properties capital investments are considered sustaining investments, and result in 21




Page 54

the replacement of existing end of life assets. As such, specific Capital Asset 1

Strategies are not required. 2

7.4 Proposed Guidelines for Strategies, Plans, and Studies 3

7.4.1 Power System Strategies, Plans, and Studies 4

BC Hydro proposes to provide in revenue requirements application: 5

(i) In a column in the list of projects and programs with capital expenditures or 6

additions over a materiality limit (i.e., Appendix I to the 7

Fiscal 2017 - Fiscal 2019 RRA), BC Hydro will indicate the particular strategy, 8

plan, or study to which a project is linked; and 9

(ii) In a new Appendix, summary descriptions of the issues and solutions 10

addressed in any of the identified strategies, plans, and studies. 11

As necessary, BC Hydro will continue to provide any applicable final and approved 12

strategies, plans, and studies in CPCN or expenditure schedule applications. 13

7.4.2 Information Technology Plans 14

BC Hydro proposes to provide in a revenue requirements application: 15

(i) In a column in the list of projects and programs with capital expenditures or 16

additions over a materiality limit (i.e., Appendix I to the 17

Fiscal 2017 - Fiscal 2019 RRA), BC Hydro will indicate the linkage between 18

projects or programs and the Technology Five-Year Strategic Plan; and 19

(ii) A copy of the most recent Information Technology Five-Year Strategic Plan. 20




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7.5 Rationale for Proposed Guideline for Strategies, Plans, and 1

Studies 2

The proposed guidelines will allow for an efficient review of projects linked to 3

strategies, plans, and studies by utilizing revenue requirements applications. 4

Providing an indication of what projects are linked in a project and program listing 5

will allow for the identified strategies, plans, and studies to be included in the same 6

table with other key project or program metrics, like forecast or actual costs, if 7

available. 8

The summaries will provide the context with which to understand the issues or 9

system needs being addressed and the resulting solutions. Please refer to 10

Appendix E to this proposal for the proposed template for this summary. 11

7.6 BC Hydro Led Workshops on Strategies, Plans, and Studies 12

BC Hydro may facilitate workshops with the Commission and interveners on 13

particular strategies, plans, and studies as part of a revenue requirements 14

proceeding or major project application filing to provide further context and insight as 15

appropriate. This could include a discussion of related projects in a system over the 16

ten-year planning period. 17




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8 Compliance Reporting 1

BC Hydro files information on a regular basis to assist in the review of BC Hydro’s 2

capital expenditures and projects. Compliance reporting includes BC Hydro’s Annual 3

Report and project-specific compliance reports filed on a schedule determined by 4

the applicable Commission order. BC Hydro is proposing changes that would 5

improve overall access to information and reduce redundancy. 6

8.1 Annual Report 7

The Annual Report has historically included the following information on capital 8

expenditures and projects: 9

(a) a summary of capital expenditures by capital category; 10

(b) a listing of the planned expenditures in the current fiscal year for projects over 11

the materiality limit ($2 million for Information Technology projects, $5 million for 12

all other capital projects), and Demand Side Management; 13

(c) an indication of which projects are considered extensions, pursuant to 14

section 45(6) of the UCA for all projects over the materiality limit; and 15

(d) a listing of projects over the major project threshold and the anticipated type of 16

regulatory filings. 17

Starting in fiscal 2017, changes to the Annual Report have increased the 18

transparency, improved efficiency, reduced redundancy, and provided more relevant 19

information on capital expenditures and projects. 20

8.1.1 Improved Oversight of Capital in F2017 Annual Report 21

The F2017 Annual Report to the Commission was revised from previous reports to 22

facilitate continued effective oversight of capital expenditures and projects. The main 23

change with regard to capital was with regard to the financial schedules in section 6 24

of the Annual Report which were aligned with the format provided in the 25

Fiscal 2017 – Fiscal 2019 RRA. This provides a comparison between planned and 26




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actual capital expenditures at the end of the reporting period. Annual capital 1

expenditures and additions plan to actual cost variance explanations by business 2

unit are also provided. 3

8.1.2 Proposed Guidelines for Capital Project Information included in 4

Annual Report 5

BC Hydro will continue to provide the Annual Report in a form required by the 6

Commission. BC Hydro has improved the presentation of its financial schedules as 7

indicated above and will continue to look for opportunities to improve the 8

presentation of the Annual Report in discussion with Commission staff. 9

8.2 BC Hydro Will Continue to Make Project-Specific Compliance 10

Filings 11

BC Hydro will continue to make project-specific compliance filings with the 12

Commission in the manner and form of previous project-specific compliance reports 13

or in a manner or form directed to by the Commission. BC Hydro considers the form 14

most commonly directed by the Commission to be effective as it provides the 15

Commission with timely updates on a project’s progress, and changes to the 16

project’s schedule and costs. It also allows BC Hydro to be responsive to issues 17

highlighted in the Commission’s Reasons for Decision for a particular project. 18

8.2.1 Proposed Guidelines for Project-Specific Compliance Reports 19

BC Hydro is proposing some changes to improve consistency in the timing of 20

project-specific compliance reports. 21

8.2.1.1 Periodic Project Progress Report 22

BC Hydro proposes to continue to file semi-annual project progress reports for most 23

capital projects meeting the criteria for CPCN or section 44.2 applications. BC Hydro 24

will request to file only annual project progress reports if it is deemed appropriate 25

given the project’s schedule. BC Hydro does not support quarterly progress 26

reporting. 27




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8.2.1.2 Project Final Report 1

BC Hydro proposes to file with the Commission the Project Final Report three 2

months after receiving Board Approval of the Project Final Report. This milestone is 3

clearer and more aligned with BC Hydro’s governance practices. This milestone is 4

met when the Project Final Report, which is required for all major projects, is 5

reviewed by the BC Hydro Board of Directors and is available for wider distribution. 6

8.2.2 Rationale for Proposed Guidelines for Project-Specific Compliance 7

Reports 8

8.2.2.1 Periodic Project Progress Report 9

In BC Hydro’s experience, there is typically not enough time between quarterly 10

reports for consequential cost or schedule changes to be reflected or a reasonable 11

amount of activities to be completed and reported on. 12

Semi-annual progress reporting is appropriate given the larger scope and the often 13

extended schedule of capital projects. Semi-annual progress reporting would allow 14

for reasonable progress to be made on project scope between reports. Semi-annual 15

reports will be more likely to have relevant and updated information with each new 16

report compared to quarterly reports. 17

Annual project progress reports may be appropriate for a few projects with work 18

occurring in one or two adjacent construction seasons in a single year. BC Hydro will 19

advise the Commission in its application if it believes annual project progress reports 20

are appropriate for a particular project. 21

8.2.2.2 Project Final Report 22

BC Hydro is proposing a more definitive deadline for submitting the Project Final 23

Report than the deadlines commonly outlined in the Commission’s Order granting a 24

CPCN or accepting capital expenditures. 25




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BC Hydro is proposing these changes as the current phrases most commonly used 1

by the Commission (“substantial completion”, “project close”, or “end of project”) in 2

its Orders granting the CPCN or accepting the expenditures of the project is 3

ambiguous and varies depending on the type of project. Also, there may be 4

outstanding contractual issues that would need to be resolved before a final 5

accounting of project costs and a final assessment of the project’s benefits can be 6

completed. BC Hydro has requested a number of extensions to Project Final Report 7

deadlines due to these outstanding contractual issues. These changes will clarify 8

expectations and better align internal and external reporting requirements. BC Hydro 9

will continue to provide updates to the Commission until the Project Final Report is 10

submitted. 11

In the interim period between the project’s in service date and the filing of the Project 12

Final Report, BC Hydro will continue to file project progress reports in a form and 13

manner agreed to with the Commission until the Project Final Report has been 14

submitted. If it is determined that a deviation from the Commission established 15

frequency is appropriate, BC Hydro would seek Commission approval before doing 16

so. 17




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9 Matters Related to the Form and Content of Revenue 1

Requirements, CPCN and Section 44.2 Filings 2

9.1 Standardized Naming Conventions 3

BC Hydro is implementing the following changes to the naming of projects and 4

programs to ensure consistency, and allow for easier tracking of a project or 5

program throughout its lifecycle and across regulatory filings. 6

9.1.1 Project and Program Naming Guidelines 7

BC Hydro has developed naming guidelines for projects and programs that will 8

reduce the need for name changes later in the project or program’s lifecycle. 9

Where applicable, the project and program name will include three elements in the 10

order specified below. In addition to the three elements, some business units may 11

include additional elements such as work type and fiscal year for differentiation and 12

clarity. 13

1. Location: This will be the regional area, line route, or the station, facility, or dam 14

where the primary work is taking place or the primary asset(s) is situated. Very 15

few Information Technology projects or programs will be situational and, in 16

those cases, location will not apply and will not form part of the name. 17

2. Asset or Service: Asset refers to either a component, such as a turbine or 18

transformer, or a group of related assets, such as a substation or a 19

powerhouse. Service is applicable to projects or programs involving information 20

technology cloud-based services or business capabilities. 21

3. Activity: Activity refers to the type of primary function or work being performed. 22

Activity includes words such as redevelopment, upgrade, reinforcement, etc. 23

Please find in the table below a sampling of the different types of activities. This is 24

not an exhaustive list as not all activities apply to all investment types and each 25




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activity may have a variation in the definition depending upon the asset base of the 1

investment. 2

Table 9-6 Examples of Project Activities 3

Activity Examples of Use Redevelopment Brownfield replacement of facilities or stations Upgrade Replacing end-of-life equipment or components with newer or higher

capacity versions Refurbishment Recondition or rehabilitate equipment or components Reinforcement System reinforcement to increase transfer and transformation

capacity Restoration Restoring service, equipment, component, assets, or buildings to

former condition Installation Implementing or installing a new solution Replacement Replace an existing information technology component or solution Enhancement Improve an existing information technology solution Purchase Purchase IT hardware or software

BC Hydro will endeavour to minimize name changes once a project or program has 4

been included in the capital forecast, but recognizes there may still be a need to do 5

so at the end of the Identification Phase when a preferred alternative is selected. To 6

enable the Commission to track projects and programs, BC Hydro will include in 7

revenue requirements applications and in all project listings across all major 8

regulatory capital filings, the unique planning identification number for projects and 9

programs. The unique planning identification number is issued once a project or a 10

program is included in the capital plan. For most projects and programs, the unique 11

planning identification number remains the same throughout the project’s or 12

program’s lifecycle. BC Hydro will endeavour to notify the Commission if the unique 13

planning identification number or the name of a project or program changes during 14

the evidentiary phase of a regulatory proceeding. 15




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9.1.2 Implementation of Project and Program Naming Guidelines 1

BC Hydro proposes to implement the project and program naming guidelines 2

effective immediately for all projects or programs that have not yet been included in 3

the capital plan (initiated projects). Changing the names of projects and programs 4

that have already been initiated is not recommended, as it would be costly and 5

time-consuming, requiring changing project and program names in the project 6

management and finance systems. Also, it will limit the ability to track projects going 7

forward. As noted in the preceding section, BC Hydro will provide the unique 8

planning identification number for all projects and programs in the next revenue 9

requirements application. 10

9.2 Provide Relevant Project Information for Consistency and 11

Appropriate Reviews 12

To facilitate the review of projects in a revenue requirements proceeding and 13

consolidate key project information, BC Hydro is proposing to provide additional 14

information in the appendices attached to revenue requirement applications. 15

9.2.1 Provide Additional Project Information 16

To assist in the Commission’s review of projects in revenue requirements 17

applications as discussed in section 4, BC Hydro proposes to include in Appendix J 18

a summary of the project’s Implementation Phase risk and risk treatment and 19

impacts and benefits for projects over a specified materiality limit, and the 20

construction start date for projects in the Implementation Phase.13 These summaries 21

will be added to the supporting appendix similar to what was provided in Appendix J 22

in the Fiscal 2017 – Fiscal 2019 Revenue Requirements Application. In Appendix D 23

to this proposal, the template used in the latest filed revenue requirements 24

application has been expanded to include these additional sections. 25

13 The construction start date will be recorded as the date funding is approved to proceed to the Implementation

Phase.




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9.2.2 A Master Source for Capital Project and Program Information 1

BC Hydro is proposing to provide additional data on capital projects and programs in 2

revenue requirements applications. This additional data will be included in 3

Appendix I in future revenue requirements applications. 4

The proposed changes are as follows: 5

A listing of planning identification numbers to allow a projects or program to be 6

more easily tracked throughout its lifecycle and across filings; 7

Annual capital expenditure cost forecast for projects over a specified materiality 8

limit and in the test period; 9

Indication of which projects are considered extension projects; 10

Identification of projects that may require a major project regulatory filing and 11

the type of filing anticipated – CPCN or section 44.2 expenditure schedule 12

application; 13

Indication of which projects are linked to strategies, plans, and studies; and 14

Indication of which projects are part of Programs of Projects.15




Appendix A

Table of Concordance

BC Hydro Revised Proposal Appendix A


Compliance with Commission Order No. G-59-18 Page 1 of 2

Commission Order No. G-63-16 Appendix B Proposed Scope of the Issues

Addressed In:

Item 1: The scope, timing, and process for the Commission’s review of BC Hydro's capital expenditures and projects. This includes consideration of the appropriateness of such reviews as a component of various applications and filings BC Hydro makes with the Commission.

Sections 3, 4, 5, 6, 0, 8, 9

Revenue Requirement Applications (RRA). How should the Commission address:

o Projects approved or started prior to an RRA and expected to enter service in the test period, expected to enter service outside of the test period.

Sections 4.1, 4.2, 9.2

o Projects exceeding the expenditure threshold and not approved or started prior to RRA and

expected to enter service in the test period, expected to enter service outside the test period

Sections 4.3, 9.2

o Projects below thresholds and not approved or started prior to RRA and

expected to enter service in the test period, expected to enter service outside the test period

Sections 4.4, 9.2

Annual Report Section 8.1

Project-specific compliance filings Section 8.2

Applications made pursuant to section 46(1) of the UCA (CPCN Applications

Sections 4.1, 4.3, 5.1, 5.3

Applications made pursuant to section 44(2) of the UCA (section 44.2 expenditure schedule applications).

Sections 4.1, 4.3, 5.1, 5.3

Specifically, it is proposed that the proceeding address the following issues:

Clarity on what constitutes a project. This would consider how to treat and review independent projects or programs that are linked (in function and/or geographic term) and, in aggregate, meet or exceed any prescribed expenditure thresholds.

Sections 5.2, 6

Establishment of a standardized convention for naming projects and programs to ensure consistency and the ability to track projects during their lifecycle.

Section 9.1

Definition of a strategy to review projects that are linked to capital strategies (for example: individual IT projects in relation to the Technology Five Year Strategic Plan).

Sections 7, 9.2

Item 2: The appropriateness of BC Hydro’s 2010 Guidelines for IT capital expenditures and projects or propose separate IT capital project filing guidelines.

Sections 5.1, 5.2, 5.3, 5.4

Item 3: The appropriateness of expenditure thresholds contained in BC Hydro’s 2010 Guidelines.

Sections 5.2, 5.3

BC Hydro Revised Proposal Appendix A



Commission Order No. G-63-16 Appendix B Proposed Scope of the Issues

Addressed In:

Item 4: The circumstances under which it is appropriate for BC Hydro to file an application pursuant to section 46(1) of the UCA versus section 44(2) of the UCA. This will address the following:

Sections 5.1, 5.5

Seek input on the position that under section 46(1) of the UCA, applications need only be filed for “extensions”.

Section 5.1

Evaluate whether it is appropriate to use of the definition of extension to a utility plant or system for general capital expenditures and IT projects.

Section 5.1

Given that the UCA expressly prohibits a public utility from starting construction in advance of the Commission granting a CPCN, consider the appropriateness of filing section 44(2) applications, which do not have this prohibition, for projects where the duty to consult First Nations is triggered?

Section 5.5




Appendix B

2018 Capital Filing Guidelines

BC Hydro Revised Proposal Appendix B



Purpose of 2018 Capital Filing Guidelines 1. These 2018 Capital Filing Guidelines (“Guidelines”) provide guidance to

BC Hydro in preparing and filing applications and compliance reports. They will

also help inform the efficient and effective review of BC Hydro’s capital

expenditures in the course of revenue requirements applications, CPCN or

section 44.2 capital expenditure schedule applications, the Annual Report, and

project-specific progress and final reports.

2. There may be circumstances in which a different approach from what is set out

in these Guidelines is appropriate. These Guidelines do not bind the

Commission in the exercise of its jurisdiction. BC Hydro may propose changes

to these Guidelines. BC Hydro will identify and explain in applicable filings any

departures from the Guidelines.

Revenue Requirements Applications

Review of Projects in Revenue Requirements Applications 3. For projects with a CPCN, accepted expenditure schedule, or an exemption

and that have capital expenditures or additions in the test period, the scope of

review in a revenue requirements proceeding may include consideration of the

execution of projects. Detailed consideration of BC Hydro’s project execution is

best reviewed at project completion when total cost and outcomes are known.

4. For projects subject to a future CPCN or section 44.2 application and that have

capital expenditures or additions in the test period, the scope of review in a

revenue requirements proceeding may include examination of project need and

alternatives to the extent reasonably required to test the forecast capital

expenditures or additions in the test period. A detailed assessment of need and

alternatives should be left to the pending CPCN or section 44.2 application for

these projects.




5. For projects that do not meet the requirements for a CPCN application or have

not and will not be the subject of a section 44.2 application, the scope of review

in a revenue requirements proceeding may include an examination of project

need and alternatives and the reasonableness of the forecast assuming the

project proceeds. Any consideration of project execution will normally await

project completion.

Revenue Requirements Application Filing Requirements 6. BC Hydro will include in its revenue requirements applications for all individual

projects above a specified materiality limit:14

(a) the project’s unique planning identification number;

(b) the project’s driver;

(c) the project’s lifecycle stage or phase;

(d) key project milestone dates;

(e) project forecast capital expenditure and additions;

(f) an indication of whether a project will be subject to a CPCN or expenditure

schedule application;

(g) an indication whether a project is an extension;

(h) if applicable, an indication of which strategies, plans, or studies a project is

linked to;

(i) descriptions of the strategies, plans, or studies identified in (h) above;

(j) If applicable, an indication of which projects are part of Programs of

Projects;

14 Historically, the materiality limits have been determined through dialogue between BC Hydro and the

Commission.




(k) description, objectives, scope, schedule, risk and mitigation strategies,

and, if available, cost estimate for the programs identified in (j) above.

7. BC Hydro will continue to provide relevant information on project justification

and alternatives for major projects over a specified materiality limit. In addition,

BC Hydro will include information on Implementation Phase risk and risk

treatment and impacts and benefits.

8. Recurring Capital Programs may be reviewed in the appropriate section(s) in a

revenue requirements application.

Applications Pursuant to Sections 46(1) and 44.2 of the Utilities Commission Act (UCA)

Expenditure Thresholds 9. A Major Project is a capital project that has an authorized cost estimate that

exceeds one of the following thresholds:

a. $100 million threshold for Power System projects;

b. $50 million threshold for Buildings projects; and

c. $20 million threshold for Information Technology projects.

10. The authorized cost estimate is the requested funding for a project, inclusive of

all contingencies and reserves, and based on a fixed scope and in-service date.

Certificate of Public Convenience and Necessity and section 44.2 Expenditure Schedule Acceptance 11. BC Hydro will file an application for a CPCN pursuant to subsection 46(1) of the

UCA for Major Projects that are extensions. An extension is a project initiated

with the intent to expand the service area or capacity of a utility plant or system.

12. Extension projects may include: facility end-of-life replacement projects (as

opposed to individual component(s) that have reached end-of-life); new projects




designed to serve incremental energy and/or peak load growth; and

refurbishment projects that are not undertaken to serve incremental load

growth, but through efficiencies result in additional MWs and/or GWhs/year on

a planning basis.

13. Under section 44.2 of the UCA, a public utility may file an expenditure schedule

for acceptance of capital expenditures that it has made or plans to make.

Although the Commission cannot require BC Hydro to file a section 44.2

application for acceptance of a capital expenditure schedule, BC Hydro

commits to filing a section 44.2 applications for Major Projects that are not

extensions.

New Service Area 14. BC Hydro will file for a CPCN pursuant to subsection 46(1) of the UCA with

respect to public utility plant or system required to serve a new service area and

that is not an extension of BC Hydro’s existing system. There will be no

expenditure threshold trigger for these filings.

Compliance Reporting

Annual Report 15. Capital Expenditures: The financial schedules in section 6 of the Annual Report

to the Commission will provide a comparison between planned and actual

capital expenditures at the end of the reporting period. Annual capital

expenditures and additions plan to actual cost variance explanations by main

asset category will also be provided.

16. Extensions: In the Annual Report, BC Hydro will continue to provide a listing of

all projects which are considered extensions pursuant to section 45(6) of the

UCA.




Project-Specific Compliance Reports 17. Manner & Form: BC Hydro will continue to make project-specific compliance

filings with the Commission in the manner and form of previous project-specific

compliance reports or in a manner or form directed by the Commission.

18. Periodic Project Progress Report: BC Hydro will continue to file semi-annual

project progress reports for most capital projects meeting the criteria for CPCN

or section 44.2 applications. Semi-annual progress reporting is appropriate

given the larger scope and the often extended schedule of capital projects.

BC Hydro will advise the Commission if it believes annual project progress

reports are appropriate for a particular project..

19. Project Final Report: BC Hydro will submit the Project Final Report

three months after receiving Board of Director Approval of the Project Final

Report.




Appendix C

2010 Capital Project Filing Guidelines

BC Hydro Revised Proposal Appendix C



1 Background In Directive 31 of the 2008 Long-Term Acquisition Plan (LTAP) Decision,15 the

Commission requested that BC Hydro develop a set of guidelines for the filing and

review of capital projects by the Commission. This document sets out BC Hydro’s

Capital Project Filing Guidelines (Guidelines). With the integration of British

Columbia Transmission Corporation (BCTC), a single regulatory filing approach is

being established for all BC Hydro capital projects, including transmission.

2 Expenditure Thresholds BC Hydro has established three different expenditure threshold levels for capital

projects, as follows:

$100 million for generation and transmission (including Substation Distribution

Asset (SDA) components16) projects;

$50 million for distribution and building projects; and

$20 million for information technology and telecommunication (IT&T) projects.

The expenditure threshold trigger is the Authorized cost estimate. There may be

exceptions to this approach; BC Hydro may file applications with the Commission for

capital projects below these expenditure threshold levels.

15 In the Matter of British Columbia Hydro and Power Authority and An Application for Approval of the

2008 Long- Term Acquisition Plan, Decision, July 27, 2009 (LTAP Decision), page 183. 16 SDA projects will not typically be filed as stand-alone applications; rather, the SDA expenditures will be

included as part of a transmission project. The Vancouver City Central Transmission Project CPCN filing is a recent example.




3 CPCN and Section 44.2 Expenditure Schedule Acceptance

3.1 Background

The Commission can require that BC Hydro file for CPCNs in two instances:

1. To construct and operate plant or system required to serve new service areas.

BC Hydro will file for a CPCN pursuant to subsection 46(1) of the UCA with

respect to BC Hydro plant or system required to serve a new service area (e.g.,

not part of the existing BC Hydro integrated system). There will be no

expenditure threshold trigger for these filings. This instance is not addressed

any further in the Guidelines.

2. To construct and operate “extensions” to the existing BC Hydro plant or system.

As a result of subsection 45(2) of the UCA, BC Hydro is deemed to have a

CPCN authorizing it to operate the plant or system that existed on

September 11, 1980, and subject to subsection 45(5) of the UCA, to construct

and operate extensions to that plant or system. Subsection 45(5) of the UCA

empowers the Commission to order that subsection 45(2) no longer applies to

certain extensions to the BC Hydro plant or system; such an order must be

made not later than 30 days after construction of the particular extension has

begun. The term extension is not defined in the UCA. This instance is

addressed below under “BC Hydro Approach”.

Section 44.2 of the UCA provides that a public utility “may” file with the Commission

an expenditure schedule with respect to capital expenditures. If BC Hydro files an

expenditure schedule for a capital project, subsection 44.2(3) gives the Commission

the discretion to either accept the schedule if the Commission considers making the

expenditure “would be in the public interest”, or reject the expenditure schedule.




There are two key differences between section 44.2 and the UCA’s CPCN

provisions (sections 45 and 46): (a) Where a CPCN is required BC Hydro is not able

to start construction in advance of the Commission granting a CPCN; and (b) In the

event that the CPCN is not granted, BC Hydro is unable to construct the project.

There is no difference in the cost recovery protection afforded. In both cases, the

need for the project will have been proven if accepted by the Commission; the

subsequent cost recovery issue is a prudency (execution of project) issue.

3.2 BC Hydro Approach With respect to instance (2) above, in general BC Hydro will file for:

1. A CPCN pursuant to subsection 46(1) of the UCA for capital projects which are

clearly extensions and which are above the expenditure thresholds set out in

the Guidelines. Examples include facility end-of-life replacement projects (as

opposed to individual component(s) that have reached end-of-life), and new

projects designed to serve incremental energy and/or peak load growth.

2. Expenditure schedule(s) acceptance pursuant to subsection 44.2(1)(b) of the

UCA for capital projects that are not extensions and that are above the

expenditure thresholds. Examples include IT&T and buildings, and seismic and

environmentally-driven refurbishment generation and transmission projects that

do not result in additional Megawatts (MW) and/or Gigawatt hours per year

(GWh/year) of output on a planning basis. These capital project filings will be

supported by “CPCN-like” evidence; BC Hydro will follow the content

requirements of the BCUC’s 2010 CPCN Application Guidelines and the

2010 First Nations Information Filing Guidelines,17 to the extent applicable.

17 Adopted by the Commission pursuant to Order Nos. G-50-10 and G-51-10, March 18, 2010.




3. Either a CPCN or expenditure schedule(s) acceptance for projects that are

above the expenditure thresholds and that may be extensions. Examples

include refurbishment projects that are not undertaken to serve incremental

load growth, but through efficiencies may result in additional MWs and/or

GWhs/year on a planning basis.

There may be exceptions to this approach. In each application to the Commission,

BC Hydro will set out its rationale for why it has filed for either a CPCN or

expenditure schedule(s) acceptance. In addition, BC Hydro will use its

subsection 45(6) UCA filing contained in its annual report to the Commission to

provide an early indication as to whether BC Hydro considers upcoming capital

projects to be the subject of CPCN or section 44.2 filings. The subsection 45(6) filing

will set out capital project expenditures at or above $5 million for the upcoming year,

and for capital projects above the expenditure thresholds, will provide information as

to why BC Hydro expects to make a CPCN or section 44.2 filing. BC Hydro will copy

interveners with its annual reports.

4 Project versus Program

4.1 Background In its 2008 LTAP Decision, the Commission indicated its preference that programs

(individual projects linked in functional and/or geographic terms) be subject to a

capital project review where the aggregate expenditure within a three-year period

exceeds the threshold.18 In addition, the Commission indicated that having capital

projects receive “formal” BC Hydro Board approval or “approval-in-principle” (with an

explanation as to the circumstances for the approval- in-principle) prior to a

Commission filing is in accordance with proper corporate governance principles and

practice.19

18 Supra, note 1, page 145. 19 Ibid.




4.2 BC Hydro Approach Rather than focus on the definition and distinction between projects and programs,

BC Hydro will use individual BC Hydro Board approvals as the trigger for capital

project filings, irrespective of the characterization of the capital expenditure. When

the initial BC Hydro Board approval to proceed with implementation phase funding is

sought for any capital expenditure above the threshold, the capital project filing

requirement would be triggered.




Appendix D

Revised Capital Project Information Template – “Appendix J”

BC Hydro Revised Proposal Appendix D



Below is a template similar to that included as Appendix J in the

Fiscal 2017 - Fiscal 2019 RRA, expanded to include additional information on

Implementation Phase risk and risk treatment and impacts and benefits. The

information included below is for illustrative purposes only.

20

Start Date of Construction is the Implementation Approval Date.

Investment Planning

ID: 54321

Project Name: XYZ Substation Upgrade Project

Forecast Capital Cost:

$35 million

Forecast In-Service Date:

2020-10-29

Start Date of Construction:

20

2018-08-29

Development Phase:

Implementation

Filing Reference: N/A

Description: This project will rebuild the existing XYZ Substation, increasing the firm load capacity from 56.5 MVA to 100 MVA and the distribution voltage from 12 kV to 25 kV.

Key Drivers: Load growth, aging assets

Issues Being Addressed: Most of the major equipment at XYZ Substation is at or near end-of-life and needs immediate replacement. In particular, the 60 kV bulk-oil and 12 kV air-blast circuit breakers are obsolete, and pose safety, reliability, and environmental risks. The area load and load density is growing with the current load forecast exceeding the current capacity in FY22.

Discussion of Alternatives: Rebuild XYZ Substation – this alternative was selected as it provides capacity sufficient to supply the area load for a predicted 30 years. Add one 12 kV Feeder Section and one transformer – would meet immediate area load requirements but does not address pressing end of life issues and does not align with the 25 kV supply requirement to address long term load growth. Do Nothing: Negative impacts on customer reliability and worker safety due to aging equipment. Does not address the area load growth nor facilitate the planned voltage conversion required to meet same.

BC Hydro Revised Proposal Appendix D



Project Impacts & Benefits:

Project will reduce annual sustainment investment over next ten years.

Project will eliminate all existing electrical clearance violations.

Project will increase station capacity from 56.6 MVA to 100 MVA.

Project will provide a 25 kV source to supply area loads, where none is currently available.

Project Implementation Phase Risk Risk Treatment

Due to close proximity of the XYZ Substation to surrounding homes and businesses, there is an increased likelihood of negative publicity and adverse reactions to the Project.

Early, careful, and continuous stakeholder engagement processes will be utilized to minimize any negative perceptions and impacts of the project. A Stakeholder Engagement Representative has been assigned, and

three meetings have been conducted with area

businesses and residents. Engagement with the broader community and with local representatives has commenced as well.

Risk of electrical contact during construction work required near energized equipment as

transmission lines and the 12 kV substation must

remain operational during construction.

The west side of the substation will be electrically and physically isolated from the live operational

12 kV. Working in and around the overhead

transmission lines will require training, signage, and flagging to minimize the risk of electrical contact.

Impact to schedule due to delays to procurement for major equipment such as GIS apparatus and transformers.

To mitigate this risk, the schedule will consider enough lead time for critical equipment (e.g., transformer and GIS) based on the vendor promised lead time. Early procurement and market sourcing options during the Definition Phase may be considered to avoid potential delays.

Additional Information:

Review of the Regulatory Oversight

of Capital Expenditures and Projects



Appendix E

Strategies, Plans and Studies Template

BC Hydro Revised Proposal Appendix E



Below is a new template to summarize strategies, plans, and studies as noted in

section 7.5. The template summarizes key points in a sample Substation Asset Plan.

The information included below is for illustrative purposes only.

Capital Strategy Name: Asset Plan – ABC Substation

Summarize Issue:

ABC is a 60 year old substation in Vancouver which serves over 60,000 customers. It is considered a high criticality station. The firm load capacity of the station is expected to be exceeded in 2025. The existing 12 kV feeder sections are at end of life and require replacement. In addition they have significant safety issues including limits of approach violations, high fault levels imposing operational constraints (split bus) when workers in the station, and underrated feeder breakers. In addition, the following assets are at or near end-of-life and will need to be replaced:

Two of the three power transformers are near end-of-life and expected to fail within five years;

Two of the over 40-year old 230 kV Capacitive Voltage Transformers are at end of life;

Six of the ten 12 kV bus circuit breakers are obsolete bulk oil breakers in end of life condition, and represent a fire and environmental risk;

The 12 kV voltage regulators are at end of life;

The two station service transformers are 40 years old and approaching end-of-life;

The control building contains asbestos and does not meet seismic standards;

The standby diesel generator is at end of life; and

Unsafe pin and cap style insulators on the 230 kV disconnects and bus supports.

Summarize Solution:

The following investment staging is anticipated to address these issues and ensure the integrity of supply from ABC Substation.

Short term

Initiate project to address the following:

- Replace existing transformers with new 150 MVA transformers with dual secondary windings of 12 kV and 25 kV

- Upgrade substation security

- Decommission and remove old equipment

Add scope to Work Programs to address the following:

- Address end-of-life feeder sections

- Upgrade station service

Medium Term

- Add an additional feeder section

Long Term

- Convert feeders to 25 kV

- Upgrade P&C & Telecom equipment including replacing the existing control building




Appendix F

Draft Order

Suite 410, 900 Howe Street Vancouver, BC Canada V6Z 2N3 P: 604.660.4700 TF: 1.800.663.1385 F: 604.660.1102

ORDER NUMBER G-xx-18

IN THE MATTER OF the Utilities Commission Act, RSBC 1996, Chapter 473

and

British Columbia Hydro and Power Authority (BC Hydro) Review of the Regulatory Oversight of Capital Expenditures and Projects

BEFORE: K.A Keilty, Commissioner/Panel Chair

W.M. Everett, Commissioner R.I. Mason, Commissioner

on Date

ORDER

WHEREAS:

A. On May 3, 2016, the British Columbia Utilities Commission (Commission) issued Order G-58-16 establishing a proceeding to review the regulatory oversight of British Columbia Hydro and Power Authority’s (BC Hydro) capital expenditures and projects;

B. On May 10, 2016, the Commission issued Order G-63-16, which set out a preliminary regulatory timetable, including a procedural conference and submissions on a Proposed Scope of the Issues and Timing document attached as Appendix B to that order;

C. The procedural conference was held on November 17, 2016, and submissions were made by BC Hydro, B.C. Old Age Pensioners’ Organization et al., Commercial Energy Consumers’ Association of British Columbia, Canadian Office and Professional Employees Union, Local 378, Association of Major Power Customers of BC and BC Sustainable Energy Association and Sierra Club of British Columbia and Commission staff;

D. On November 30, 2016, the Commission issued Order G-174-16, which set out a further regulatory timetable, including a BC Hydro guidance document, Commission and intervener questions, transcribed workshop and a procedural conference regarding further process, to commence following the issuance of the Commission’s final decision on the BC Hydro Fiscal 2017 - Fiscal 2019 Revenue Requirements Application (Fiscal 2017 – Fiscal 2019 RRA);

E. By Order G-47-18 dated March 1, 2018, the Commission issued its final decision on the BC Hydro Fiscal 2017 – Fiscal 2019 RRA;

F. By Order G-59-18 dated March 15, 2018, the Commission issued an updated regulatory timetable;

BC Hydro Revised Proposal Attachment F



Page 1 of 2

Order G-xx-18 Page 2 of 2

G. On April 3, 2018, BC Hydro filed its initial proposal responding to the items in the scope of the proceeding (Initial Proposal). By April 24, 2018, the Commission and interveners submitted clarifying and technical questions on the Initial Proposal;

H. On May 11, 2018, the Commission issued Order G-89-18 establishing a date for the Procedural Conference;

I. On May 18, 2018 BC Hydro submitted its responses to the clarifying and technical questions from the Commission and interveners on the Initial Proposal;

J. On May 23, 2018, a transcribed workshop was held at which BC Hydro provided a presentation explaining its Initial Proposal and responded to clarifying questions from the Commission and interveners;

K. On June 1, 2018, BC Hydro filed written responses to requests made at the workshop;

L. On June 13, 2018, BC Hydro filed its Revised Proposal;

M. On June 27, 2018, a procedural conference was held to determine process steps for the remainder of the proceeding;

N. On XXX, 2018, the Commission issued Order G-XX-18 setting the process steps for the remainder of the proceeding;

O. On July XX, 2018, interveners filed comments on the Revised Proposal and on August XX, 2018, BC Hydro filed comments in reply; and

P. The Commission has considered the Revised Proposal and the comments of interveners and BC Hydro, and has determined that the proposed 2018 Capital Filing Guidelines should be approved.

NOW THEREFORE the Commission orders as follows pursuant to sections 45 to 46 and section 59 to 61 of the Utilities Commission Act:

1. The Commission approves BC Hydro’s 2018 Capital Filing Guidelines included as Appendix B to BC Hydro’s Revised Proposal.

DATED at the City of Vancouver, in the Province of British Columbia, this (XX) day of (Month Year).

BY ORDER

K. A. Keilty Commissioner

Attachment

BC Hydro Revised Proposal Attachment F



Page 2 of 2




Appendix G

Summary of the Key Questions and Topics Raised in the Workshop

BC Hydro Revised Proposal Appendix G



Question/Comment Party Transcript, Volume 2

Reference to BC Hydro's Response

Page No. Line No. Interested in how BC Hydro allocates capital, in particular to maximize revenue.

CEABC 39, 41 6-8 Cover Letter - Capital Planning

Impact of adopting a PBR approach on BCUC's oversight of BC Hydro's capital expenditures.

CEABC 41 17-20 Cover Letter - Performance Based Ratemaking

Looking for improved transparency and accountability in BC Hydro’s capital expenditure process, and to avoid potential concerns or ambiguities about the possibility that some projects have been structured around the review thresholds.

MoveUp 42 7-12 Proposal - Clarity on Programs; 2018 Guidelines

Increase utilization of private sector initiatives in terms of cost/benefit analysis of investments.

CEC 44 14-16 Cover Letter - Project Selection and Approval

Need understanding of how BC Hydro has factored in shareholder directives to freeze rates and create affordability in the context of the planned expenditures over the coming years.

CEC 44 4-8 Cover letter - Government Policy Directions

If BC Hydro moves to performance-based regulation why would revenue requirements applications be relevant?


Would the capital filing guidelines require an adjustment if a PBR approach is adopted?


What authorization does BC Hydro get through a section 44.2 process?

MoveUp 73 4-9 Cover letter - Expenditure Schedule Authorization

Give examples of what kinds of projects would be strung together as a program of projects and explain when, if ever, would there be any oversight of the program itself and its appropriateness or prudency.

MoveUp 74 20-24 Proposal - Clarity on Programs; 2018 Guidelines

When and how is the decision to adopt a PBR approach being made?

BCSEA 84 7-12 Cover Letter - Performance Based Ratemaking






Page No. Line No. Will the PBR report filed in June be circulated to the participants in Fiscal 2017 – Fiscal 2019 RRA?

BCSEA 85 23-25 Cover Letter - Performance Based Ratemaking

Request for/comments on compliance filings being available on BCUC's site.

BCSEA 86-89 Cover Letter - Public Version of Capital Compliance Reports

Are new guidelines responsive to objective of improving affordability and energy costs or government policy direction? Is there anything in guidelines that improve the ability of the Commission to oversee and the ability of stakeholders to challenge BC Hydro’s capital initiatives?

CEC 90-92 Cover letter - Government Policy Directions

Explain why most programs are not reviewed in a single business case.

CEC 94 8-10 Proposal - Clarity on Programs; 2018 Guidelines

Is the proper conclusion that most of BC Hydro's capital investments are not justified by a financial cost/benefit analysis?


Confirm that major project thresholds will not apply to new service areas under the 2018 Guidelines.

BCUC 108 15-21 2018 Guidelines - New Service Area

Are there any examples of IT projects or Building projects that would also fall under the classification of new service area?

BCUC 109; 110 21-26; 1 2018 Guidelines - New Service Area

Why does BC Hydro consider it appropriate to focus on capital additions rather than expenditures in a RRA?

BCUC 110 17-19 Cover Letter - Review of Capital Additions in Revenue Requirements Proceedings

Explain on your proposal and the nature of the project-specific reporting that would follow the in-service date and under what typical time-scale.

BCUC 112 4-7 Proposal - Compliance Reporting

Explain expenditures for Properties group and clarify what relates to the threshold for Buildings.

BCUC 113; 114 11-14; 4-8

Proposal - Guidelines for Major Project Applications






Page No. Line No. What information about programs of projects would be in an RRA?

BCUC 117-119 7-10 Proposal - Clarity on Programs; 2018 Guidelines

How would programs of project, and the projects in a program of projects, be treated with regard to the threshold?

BCUC 120 1-7 Proposal - Clarity on Programs; 2018 Guidelines

Scenario: the Commission approves additions in the test period and the Commission tests project execution after the Project Final report comes outside the test period. If there is a difference in amortization that results from a subsequent decision outside the test period, does that get picked up in the existing regulatory account?

BCUC 120; 121 22-26; 1 Cover Letter - Timing and Effectiveness of Prudence Reviews

BC Hydro's capital program's objectives should be to spend capital to build the business, facilitate economic development in the province, and facilitate the fight against climate change.

CEABC 126-127 Cover Letter - Capital Planning

Explain the enterprise-wide investment framework and how it helps BC Hydro pick the investments that will make it the most money.

CEABC 130 3-5 Cover Letter - Capital Planning

Guidelines approved by a Commission Order will be an important step forward.

BCSEA 131 6-8 Proposal - Order Sought

Request that subset of compliance reports to do with capital spending be routinely available on BCUC or BC Hydro's site.

BCSEA 132 4-7 Cover Letter - Public Version of Capital Compliance Reports

Comment that addressing system growth covers supply-side and question whether demand side should be in capital expenditure types.

CEC 133 19-21 Cover Letter - Capital Planning

Proposal does not appear to be responsive to present policy directions of the last two governments and the present government’s review of BC Hydro.

CEC 133 5-8 Cover letter - Government Policy Directions






Page No. Line No. Comments that there needs to be a decision criterion for governance and oversight to properly qualify the process.

CEC 134 5-7 Cover Letter - Capital Investment Governance

Cost approvals focus needs to be complemented with benefits approval and accountability. Concern that the cost/benefit analysis is not as prevalent in BC Hydro.


Regarding capital investments and portfolio performance, would like to see complementary table with benefits achieved and an aggregation of results.

CEC 134 14-17 Cover Letter - Project Outcomes & Benefits Performance Index

CEC submits that the Appendix D template has adequate detail on benefits and risks.

CEC 135 1-3 Cover letter - Risk and Benefit Information included in Revenue Requirement Applications

Excluding/deferring review of future projects/reviewing capital additions in the test period is ineffective for capital review/ poor process for review /poor criteria for review or oversight.

CEC 135 4-6; 14-19

Cover Letter - Review of Capital Additions in Revenue Requirements Proceedings

BC Hydro should improve upon as part of these guidelines the effectiveness of risk information and benefits.

CEC 135 8-11 Cover letter - Risk and Benefit Information included in Revenue Requirement Applications

Submits the defining of projects should be based on outcomes and benefits for the future.


Grouping projects by program and strategies is necessary, as is evaluations of programs and strategies of significant size.

CEC 135; 136 24-26; 1 Proposal - Clarity on Programs; 2018 Guidelines

In CEC's view, the thresholds are likely too high for adequate oversight and review, and thus our information request or undertaking request.

CEC 136 13-17 Cover Letter - Major Project Application Thresholds; Filed Undertaking Request June 1, 2018 (Exhibit B-6)






Page No. Line No. Submits there needs to be a definition of a benefit for projects, and a complementary benchmark of tracking and accountability for Information Technology projects.

CEC 136 20-23 Cover Letter - Benefits Tracking for Information Technology Projects

There is a need for definition of effectiveness criteria for management of those projects which do not exist in the guidelines.

CEC 136; 137 24-26; 1 Proposal - Clarity on Programs; 2018 Guidelines

Cost benefit analysis for strategies. CEC 137 2-4 Cover Letter - Standalone Review of Strategies, Plans or Studies

Identifying projects linked to strategies in Appendix I is inadequate and too late for capital review.

CEC 137 6-8 Cover Letter - Standalone Review of Strategies, Plans or Studies

Annual report should also focus on outcomes, not just lists and costs.

CEC 137 9-10 Cover Letter - Project Outcomes in Annual Report




Appendix H

Program Management Practice

Doc ID FN# Released 2016 June 30

Version 2.0 (Printed copies are not version-controlled)

PROGRAM MANAGEMENT PRACTICE

Disclaimer This document was prepared solely for internal purposes. All parties other than BC Hydro are third parties. BC Hydro does not represent, guarantee or warrant to any third party, either expressly or by implication:

(a) The accuracy, completeness or usefulness of, (b) The intellectual or other property rights of any person or party in, or (c) The merchantability, safety or fitness for purpose of,

any information, product or process disclosed, described or recommended in this report.

BC Hydro does not accept any liability of any kind arising in any way out of the use by a third party of any information, product or process disclosed, described or recommended in this report, nor does BC Hydro accept any liability arising out of reliance by a third party upon any information, statements or recommendations contained in this report. Should third parties use or rely on any information, product or process disclosed, described or recommended in this report, they do so entirely at their own risk.

BC Hydro Revised ProposalAppendix H

Review of the Regulatory Oversightof Capital Expenditures and Projects


Page 1 of 19

Doc ID FN# i

Released 2015 February 25 Version 2.0 (Printed copies are not version-controlled)

DOCUMENT INFORMATION AND REVISION HISTORY

Filename: Program Management Practice

Document ID: tbd

Document Owner Mark Leng

Version Release Date Comments

1.0 2010 June 28 Original draft

2.0 2015 Feb 25 Major revision to Original Draft –Terry McColl

3.0 2015 March 23 Revised Draft – Practice Leads

3.1 2016 July 5 Revised for Workflow Updates – Mark Leng

4.0 2016 Nov 18 Revised with Practice Leads input – Mark Leng




Page 2 of 19

ii

TABLE OF CONTENTS

1. INTRODUCTION 1

1.1. Objectives 1

1.2. Scope 1

1.3. Relationship to Other Practices/Procedures 2

1.4. Relationship to Other Procedures 3

1.5. Related Corporate Policies 4

2. PROGRAM MANAGEMENT DEFINITIONS 5

2.1. Definition of a Program 5

2.2. Definition of a Program of Projects 5

2.3. Definition of a Program of Work 6

2.4. Other Definitions 6

3. PORTFOLIO, PROGRAM AND PROJECT RELATIONSHIPS 7

3.1. Portfolio versus Program versus Project 7

3.2. Portfolio, Program, and Project Lifecycles 8

4. PROGRAM LIFE CYCLE 10

4.1. Program Initiation 10

4.2. Program Planning 10

4.3. Program Delivery 11

4.4. Program Closure 11

5. PROGRAM MANAGEMENT PROCESSES 12

5.1. Program Initiation 12

5.2. Program Planning 13

5.3. Program Delivery 15

5.4. Program Completion 15




Page 3 of 19

Program Management Practice Page 1

1. INTRODUCTION

1.1. Objectives The specific objectives of the Program Management Practice are to:

Integrate program management with other Project Delivery practices including portfoliomanagement and project management

Provide a common approach to the management of programs within BC Hydro.

Support the planning and delivery of programs, including objectives, outcomes and benefits

Support program managers with processes, techniques and templates

1.2. Scope The scope of the Program Management Practice includes all processes involved in the initiation, planning, delivery and completion of Programs. Program Management is the centralized and coordinated management of a Program of projects to achieve its objectives or benefits, including:

Planning the overall delivery of the program including costs, schedule, procurement, resources,quality, risk management, and stakeholder and First Nations engagement

Identification of intended program benefits including benefit metrics and targets

Monitoring and controlling the delivery of the program including interdependencies, outputs,issues, risks, costs, schedule, resources, and procurement

Verification of program performance and formal closure of the program.

“Program of Work” programs are not included in this Program Management Practice. See Section 2 Program Definitions.

In general, deliverables are supplied through the projects that comprise a Program. The key exception is the Program Strategy. The Program Strategy template is used for this delivery. If necessary, existing PPM project management practice templates are re-used where possible and applicable. When necessary, minor modifications can be made to these templates in order to suit the associated Program Management deliverables. Deliverables commonly created during the management of a program are described in section 5 Program Management Lifecycle.




Page 4 of 19


1.3. Relationship to Other Practices/Procedures Effective program management relies on the support of several other practices and procedures. The following is a brief overview of these interdependencies.

Program Management Receives Program Management Provides Practice/Procedures

Aboriginal Relations Level of First Nation’s engagement by project

for the roll-up of project information to the

program level

Importance of First Nations engagement

issues by project for the roll-up of project

information to the program level

Impact of First Nations engagement issues by

project for the roll-up of project information to

the program level

Program-wide view of all First Nations

engagements

Program-wide view of First Nations

procurement and employmentopportunities

Estimating Project estimates for scope within the

Program.

Program cost estimates including work

packages specific to the management of the

program.

Performance

Management

Performance measurement definitions and

guidelines for the roll-up of project data to the

program level

Approved metrics and targets for program

performance management

Procurement Identification of opportunities for strategic

procurement agreements to reduce program

commodity costs

Forecast of changes in commodity prices

Forecast of anticipated procurement

requirements in the program

Guidance for project and program level

procurement strategies

Forecast of aggregate commodity demand in

the program

Supply Chain Strategy for the Program

Portfolio

Management

Identified opportunities for programs

Changes to projects/programs to address

portfolio issues and metrics

Program Plan and formal justification of

programs (business cases)

Program view of the project investments under

its management

Project Management Performance reporting on active projects

within a program

Review of completed projects to confirm

anticipated impacts and benefits

Strategies and initiatives to be executed at the

project level in order to meet Program and

Project objectives.




Page 5 of 19


Practice/Procedures Program Management Receives Program Management Provides

Resource

Management

Strategic Resource Management plans

Long term resource needs and gaps for

program forecasts

Identified program resource issues and

opportunities

Program strategies to address critical resource

constraints and related work and resource

requirements

Tactical Resource Management

Integrated performance reporting to allow for

continuous improvement of resource

forecasting processes

RESP Strategies to optimize stakeholder

engagement and regulatory compliance and

to improve environmental performance across

the program

Program-wide view of regulatory and

engagement activities and initiatives

Risk Management Tools from the Project Risk Management

procedures to support program management

needs

Risk assessment tools to measure pre

investment risk, planned post investment risk

and post implementation residual risk scores

Program Risk Register (procedure development

in progress)

Risk Management strategies and mitigations for

common project risks

Scheduling Project schedule information – plan and

performance

Program schedule

Program-wide view of milestones, objectives

and for projects in the program

1.4. Relationship to Other Procedures Five key supporting procedures have been identified, including: Scheduling; Estimating; Project Finance; Structured Decision Making; and, Risk Management. All of these procedures include elements of risk management, and should be applied in that context.

1. The Scheduling Procedure ensures that generally recognized scheduling methods are appliedduring the development, base-lining, progressing, updating, and maintenance of programschedules throughout the program lifecycle.

2. The Estimating Procedure establishes guidelines and standards, consistent with industry practice,to be followed for the development, preparation, review and transmittal of cost estimates.

3. The Finance Procedure (under development) guides the Program Manager through the processof getting a program funded at different stages of the lifecycle. Financial and Accounting duediligence is completed on expenditures to ensure initiatives are appropriately justified andsupported.

4. The Structured Decision Making Procedure guides the Program Manager in identifyingrequirements, and evaluating alternatives and solutions in the context of environmental, socialand financial objectives (Structured Decision Making (SDM)).




Page 6 of 19


5. The Program Risk Management Procedure provides guidance to the Program Manager for theassessment of risks, and to make informed decisions about treatment of those risks.

1.5. Related Corporate Policies

This practice is intended to satisfy the requirements of the following Corporate Policy Statements, Practices and Procedures:

CPS on Project Management CPS on Financial Responsibility CPS on Safety CPS on Risk Management CPS on External Relations & Communications CPS on Environmental Responsibility CPS on Social Responsibility CPS on Environmental Responsibility General Procurement Policy Management and Accounting Policies and Procedures (MAPP) Financial Responsibility Policy and Financial Approval Procedure. Project and Portfolio Management Practices Overview RESP Practice




Page 7 of 19

http://hw/emp_ess/pol_proc/corp_pol/ops_proc/pages/proj_mgmt.aspx

http://hw/emp_ess/pol_proc/corp_pol/ops_proc/pages/proj_mgmt.aspx

http://hw/emp_ess/pol_proc/corp_pol/fin_resp/Pages/default.aspx

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2. PROGRAM MANAGEMENT DEFINITIONS

2.1. Definition of a Program Programs are designed to obtain benefits by placing a group of similar but discrete projects or work packages under a program with a common business driver. Programs are generally planned and approved as a unit to ensure clarity in comparing program costs to benefits. A program typically:

has a long duration, usually multiple years, and generally has a defined end date

has at least two projects (a project cannot be part of more than one program) under its management

is specifically designed to achieve a business objective or outcome

is designed to obtain benefits by managing similar projects or work packages in acoordinated manner

is flexible in scope so it can evolve as required (for example, subsequent projects can beadded to the program)

has a program manager responsible for overseeing and coordinating its components, and forachievement of the planned benefits

has a program plan, describing how its components will be managed using standardprocesses applied consistently; what benefits will be obtained and how they will be achieved.

is dependent on each component successfully delivering its outputs

For example, the replacement of transformers with a standard transformer at a number of facilities could be justified with a program level business case. In this example, benefits may be obtained by using a common team to implement the projects (thereby gaining efficiency benefits) and also by pursuing a common procurement strategy and design plan.

2.2. Definition of a Program of Projects A “Program of Projects” is a group of related projects with common business drivers and or technical characteristics which are managed in a coordinated way to reduce risks, obtain benefits and control not available from managing them individually.

As projects are initiated over a program’s life cycle, the Program Manager oversees and provides direction and guidance to the Project Managers. Program Managers coordinate efforts between projects. In some cases, a Program Manager may also project manage one or more of the projects within the program. Program Managers ensure projects are organized and executed in a consistent way, and according to established program standards.




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2.3. Definition of a Program of Work A “Program of Work” is a program of high volume, low complexity work packages which utilize simple work flows on highly standardized & repeatable work units to deliver an aggregate benefit. These are generally used for Operation & Maintenance (O&M) and Recurring Capital initiatives.

For “Program of Work” programs, the Program Manager provides direction and guidance to the program team, which is generally comprised of Work Package Managers. The Program Manager is often accountable for scope prioritization within the program.

As stated in section 1.2 Scope of this document, Program of Work programs are not included in this Program Management Practice

2.4. Other Definitions Project: a one-time, time-limited undertaking carried out by a project manager supported as required by a project team to achieve a unique, specified set of objectives.

Portfolio: A collection of projects and programs that are grouped together to facilitate effective management of that work to meet strategic business objectives. The projects and programs of the portfolio are not necessarily interdependent or directly related, and may have diverse business drivers and technical characteristics.

BC Hydro Revised Proposal Appendix H



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3. PORTFOLIO, PROGRAM AND PROJECT RELATIONSHIPS

3.1. Portfolio versus Program versus Project The terms portfolio, program and project are often used inconsistently. The Portfolio Management and Program Management practices have established definitions to facilitate consistent understanding and usage. The diagram below illustrates their relationship.

Portfolios can be divided into sub portfolios. Portfolios and sub portfolios can contain both programs and projects. Program Initiation, including preliminary program objectives and an assumed funding model is performed at the Portfolio Management level.

Programs can contain sub programs, projects and work packages, i.e., program level related activities. A program must contain at least two projects or work packages.

Portfolios versus Programs Programs differ from portfolios in two distinct ways: (i) Programs include related scope that collectively contributes to the achievement of the overall program; and (ii) Programs have a time limit or schedule limit by which benefits and/or milestones are achieved and measured. On the other hand (i) Portfolios include scope that may not be related and may be ongoing without necessarily having an end date, and (ii) Portfolios provide a convenient way for the organization to manage a collection of scope where the achievement of the scope meets an organizational objective.




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Programs versus Projects The major differences between programs and projects are as follows:

Criteria Program Project

Focus Strategic outcome focus – delivering portfolio and organizational value

Tactical, end feature focus – producing project deliverables and organizational value

Duration Long duration, usually multi-year Usually shorter duration

Benefits Benefits derived from achieving strategic outcome or project synergies

Benefits derived from project deliverables or outputs (end features)

Scope Scope definition is flexible to allow program evolution, e.g., add new projects

Tight scope control is crucial for success

Management Program manager focuses on horizontal coordination and integration across projects, managing project interdependencies and business context

Project manager focuses on vertical team management, process management and deliverables.

Risk Focus on business risk Focus on project risk

Governance Structure

More complicated governance structure with more stakeholders and greater executive involvement

Usually simpler governance structure

3.2. Portfolio, Program, and Project Lifecycles

3.2.1. Portfolio - Program Lifecycle Relationship

Portfolio management consists of three main functions

1) Portfolio Planning. The Portfolio plan is created periodically as required by Asset Management and Planning processes. The key deliverable is a Portfolio Strategy.

2) Portfolio Delivery Plan. The execution of the Portfolio Strategy consists of two main stages: Release and Approval; followed by, Monitoring and Reporting.

3) Portfolio Closure. Aspects of the Portfolio may be closed periodically based on changes in business direction or objectives.

The Program Lifecycle has a close relationship with the Portfolio Delivery Strategy and the Portfolio Delivery Plan. The Program Lifecycle is comprised of four main phases: Initiation; Planning; Delivery; and, Closure. The Portfolio Lifecycle directly influences the Program Management Lifecycle at three points: Program Released; Program Strategy Approved; and, Program Completion. At these points, Portfolio Management is a stakeholder in the decision to proceed.




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3.2.2. Program - Project Lifecycle Relationship

The program life cycle differs from the project lifecycle as program management focuses more on coordination across projects than on the specific delivery of project outputs. In other words, program management focuses more on broad outcomes and benefits, where project management is more generally focused on specific outputs. Once a program is approved, component projects can be initiated as outlined in the approved Program Plan, while using existing PPM Project Delivery processes. The Program Manager continuously monitors progress in relation to the overall Program Plan and the individual Project Plans. Project Managers report to the Program Manager, providing regular project status reports, which are consolidated to provide a program status report view.




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4. PROGRAM LIFE CYCLE

The program life cycle describes the phases and processes that all programs follow from Initiation through to Completion, and the major decision points, or ‘gates’ that the program must pass to continue. The program life cycle comprises four phases: Program Initiation; Program Planning, Program Delivery, and Program Closure, with at least two formal gates: Program Release; and, Program Strategy Approved. A final gate to formally close the program can also be undertaken. This requirement needs to be identified in the Program Plan.

4.1. Program Initiation Program Initiation identifies the preliminary program objectives, business risks to be addressed, and sets out the assumed funding model. These are documented in a Program Executive Summary or a Handover document. At this time, a Program Manager is assigned.

4.2. Program Planning Once a potential program has been released, the Program Planning phase is undertaken in order to produce a Program Strategy. This may include a business case or justification for the program, and gain approval for the Program Strategy. If required, funding approval to support specific program deliverables would be obtained at this point.

The benefits of a Program must outweigh the business and project risks and costs associated with grouping multiple projects. The Portfolio Directors and Functional Managers must consider the following criteria when deciding to create a program:

Is there a common business driver and/or technical characteristics among the group of projects proposed to become a program

Are there realizable schedule, resource coordination or cost benefits through delivering the proposed scope through a program

Are there control benefits (risk, cost, resource allocation, etc.) by managing a group of work or projects as a program

Program approval involves a review of the Program Strategy to ensure the program is the most suitable means of achieving the proposed benefits or outcomes, and that the Program can be justified from a cost and resource perspective. For a program to be approved it must meet the following criteria:

The program aligns with the organization’s strategic objectives and priorities

There is a Program Sponsor to provide executive oversight




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The Program Strategy is complete

There is a compelling cost-benefit justification

Within the Program Strategy Approval gate, the funding model is confirmed. While funding models are out of scope of the Program Management Practice, the following are common options for how Portfolio Management can fund a Program:

Program costs covered by the collection of individual projects (e.g. Spillway Gates Program).Each individual project would have its own Expenditure Authorization Request (EAR).

Program costs captured in a single Identification phase project with its own EAR. SeparateDefinition phase projects are planned and released out of the Identification phase Program withtheir own specific funding EAR (e.g. Station Service Circuit Breaker Replacement Program,Protection and Control Replacement Program)

Program funding and all project costs within the program captured in a single EAR

At completion of the Program Planning phase, there is a gate review to approve the program strategy. The purpose of the Program Strategy Approval Gate is to confirm that there is a viable cost-benefit justification for proceeding to deliver the program. The Gate occurs at the completion of the Program Planning process. Once the Program Strategy is approved, the program can start the Program Delivery Phase.

4.3. Program Delivery The key interface between the Portfolio Lifecycle and the Program Management Lifecycle occurs during the management and reporting of Program Benefits. Program Management provides the Portfolio with a consolidated view of all projects and work packages within the program, including regular status reports on the program’s performance.

4.4. Program Closure The purpose of the Program Completion decision is to formally confirm that the expected program benefits have been or will be achieved. At the completion of the program, a formal program closure review is conducted by the Portfolio manager, the Program Sponsor and the Program Manager to assess the performance of the Program. Program performance information influences future Portfolio planning. In cases where benefits will be realized after program closure, the report should specify how and when the benefits will be measured and monitored.




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5. PROGRAM MANAGEMENT PROCESSES

The four key phases of Program Management are Initiation, Planning, Delivery and Completion. The key deliverables of the Initiation Phase are an Executive Summary or Handover document and Seed funding to support the Planning phase. The key deliverable of the Planning phase is an approved Program Strategy. Depending on the Program Strategy, the delivery phase could include further Program Strategy development. In general, deliverables and end-feature implementation activities should be completed within the projects that make up the program. The extent of any implementation activities included in the delivery phase is governed by the last approved Program Strategy. Common to all Program Strategies, the key deliverable of the Delivery phase is verified benefits realization. The key deliverable of the Completion phase is the completion report that assesses the performance of the Program.

5.1. Program Initiation

5.1.1. Program Release Process

Annual Release Process Potential programs are identified in the portfolio planning cycle where a Program approach is identified as the most effective means of achieving objectives and benefits from a group of similar projects. In the third quarter of each fiscal year Asset Management issues a prioritized list of capital programs for the following fiscal year to Functional Managers, Project Delivery Team Leads and Portfolio Management. Portfolio Management coordinates a review session with Portfolio Directors, Engineering and other concerned functional groups. Issues such as technical concerns, key resource availability, business and potential project risks, and operational requirements can all influence how the Programs are scheduled to be initiated over the fiscal year. Key resource decisions are made at that time, including assignment of the Program Manager, Engineering Work Package Manager, Asset Management Work Package Manager, and Aboriginal Relations Work Package Manager. Portfolio Directors estimate seed funding requirements. The output of these efforts is the Fiscal Year Release Plan.

5.1.2. Process Seed Funding Programs begin with the Initiation Phase. During this phase, the problem or opportunity is articulated by the Program Initiator and a Program Manager is chosen and assigned to the project. Seed Funding will be authorized during initiation of the program with the Executive Summary/Handover Document being the primary supporting documentation. A project number, Needs stage WBS setup and chargeable activity will also be assigned by Project Services along with the Seed Funding. Once Seed Funding has been approved by Finance and the Project Brief has been issued by Project Services, the Project enters IDN Phase.

Seed Funding is intended to be used by the new Program Manager to set up a team, prepare a Statement of Objectives (SOO) and Project Plan for the Delivery Phase.




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5.1.3. Assign Program Manager The responsible (Portfolio) manager assigns a Program Manager to the Program based on various factors including the outcome of the Project Complexity Screening Tool evaluation.

5.2. Program Planning

5.2.1. Clarify Program Requirements & Scope The Program Manager works with the Program Initiator to transfer early stage knowledge of the problem/opportunity and to determine if there are any inconsistencies, ambiguities, or uncertainties with how the work will be defined and executed. The key outcome of this step is to gain a shared understanding between the Program Initiator and the Program Manager of the Program and to define high-level requirements in order to facilitate planning the scope and assembling a full Program Team.

Existing program information to this point in the life cycle includes:

Problem or Opportunity Statement.

Program Initiator’s Summary Requirements.

An understanding of the anticipated complexities of the program as described by the ProjectInitiator.

The process for developing and maturing Program Requirements throughout the Program Lifecycle is similar to how project User Requirements are matured during the Project Lifecycle. These requirements are typically captured in the Program Strategy document.

A copy of the draft Program Strategy is provided to the applicable Environmental, Aboriginal Relations, Stakeholder Engagement and Communication staff, to open lines of communication and to integrate their requirements into the program objectives. A completed Project/Program Information Questionnaire must also be provided to AR with the SoO.

5.2.2. Create Program Strategy A Program Strategy is created for each Phase or Stage (as required) of the program and updated if necessary at each Stage, as described in the initial Program Strategy. The Program Strategy template is standardized. However, the content and level of detail of each area will depend on the phase/stage of the Program and the information available at the time. The Program Strategy sets out the strategy and course of action for meeting the Program objectives and is used for executing and managing the Program. It includes the objectives of the Program and incorporates input from the entire Program Team. The Program Strategy may include a compilation of several plans developed from other practices.

A completed Program Strategy may contain the following sections, which evolve throughout the lifecycle of the Program. Detailed explanations of sections, which are the responsibility of the Program Manager to create, appear in the sub-sections following this list. Some sections are described in other Practices as indicated.

WBS and project schedule of activities

Identification and confirmation of resource needs




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Program Risk Register

Program Hazard Log

Program Quality Strategy

Program Design Strategy

Program Supply Chain Strategy

Stakeholder Engagement Strategy (RESP)

Environmental Strategy (RESP)

First Nations Engagement Strategy (AR)

Checking and Reviewing Strategy

Internal Communication Strategy

Estimating Strategy

Program Cost Estimate

5.2.3. Develop Program Business Case If the Program Strategy indicates that a Program Business Case is required, it will be created during the Planning/Identification Phase and then updated as outlined in the Program Strategy (where necessary). The business case provides business justifications for the Program Strategy. This can be supported by evaluation of program risks, costs, and schedule implications.

The Business Case is a compilation of the information in the latest Financial and Economic analysis, Design Reports, Program Requirements and Program Objectives.

5.2.4. Prepare and Present for Gate If the signed off Program Strategy calls for a separate Gate for the program, over and above the Project Gate per the project management practice, the Program Manager would ensure that all required Gate materials (program key deliverables) are complete, stored on the Program’s PPM Workspace site and reviewed for PPM Practices compliance by the Independent Reviewer (IR) prior to the gate. The Program Initiator, Program/Project Director and Program Manager will jointly present the request for gate approval to the Gate Board. Prior to the Gate Board the Program Manager and the Program Initiator will meet and prepare the request for gate approval documentation and provide this documentation to the Chairperson. The expectation is that the presentation materials are distributed to the Gate Board one week prior to the meeting.

A Gate Board presentation will be prepared using the applicable phase gate presentation template and used to inform the Gate Board of key aspects of the program that are relevant to determining a go/no go decision. The Gate Governance Guide for the Project Management Practice already outlines the purpose of the gate and key considerations, which can be reused for the purposes of a Program Gate.

Gate Board meetings are scheduled by the Gate Board Chair and are defined as follows:

for Generation programs;

less than $20 Million, and

greater than or equal to $20 Million.




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for Transmission programs;

less than $10 Million and

greater than or equal to $10 Million

For Low Complexity programs, where the Program Estimate at Completion (EAC), including all projects associated with the Program, is less than $1 Million and Program risk is considered low, gate review(s) can be fulfilled with a meeting between the Program Manager, Engineer and the Initiator and Sponsor. For External Service Provider (ESP) delivered projects, Gate Review(s) should be accomplished by including the BCH Program Initiator, BCH Program Manager, BCH Portfolio Team Lead or Portfolio Director (as appropriate), ESP Project Manager and ESP Project Engineer.

Where this simplified gating process is applied, it should be documented in the Program Strategy. In special cases where there is higher risk, the gate meeting may include the Program Sponsor

Documentation of the outcome of this meeting must be filed on the Program’s PPM Workspace site.

5.3. Program Delivery The Implementation phase, or Delivery of the Program, follows the detailed strategy outlined in the Program Strategy. In many cases, this will involve delivering multiple projects under the guidance and strategies as outlined in the Program Strategy.

To support the delivery of the Program Strategy, the following Project Management tools and processes are followed:

Manage Program Workspace

Progress Program Schedule

Manage Program Risk

Monitor & Report Status

Update and Review Lessons Learned

Manage Program Change Control

5.4. Program Completion

5.4.1. Prepare Program Completion Report At completion of Program work, the Program Manager prepares the Program Completion Report.

Related closeout activities include the following:

Documenting program delivery outcome

Verification that requirements, as identified in the Program Strategy, were met

Review of Program Risk Register, Change Log and Program Schedule. This should include asummary of key risks realized, whether or not they were identified and a description of theeffectiveness of the risk management responses.

Releasing Program Team resources subject to completion of any deficiencies

Obtaining feedback from the Program Initiator, Program Manager and key stakeholders




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Consolidating and finalizing all program documentation

Performing post program appraisal (Value Review Workshop) to identify and documentlessons learned

The Program Initiator and Sponsor have the accountability and responsibility for approving the Program Completion Report. By acceptance (signature) of the Program Completion Report, the Program Initiator certifies that the requirements have been met in accordance with the signed Statement of Objectives for the Program.

The Program Manager shall review the program's updated Risk Register with Asset Management. Specific items identified in this review permit Asset Management to update the Consolidated Facility Log.

5.4.2. Program Financial Closure This activity is initiated by the Program Manager. The Program Manager then hands it off to Finance for completion.




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