ICBCs Application to Streamline IT Compliance Reporting Requirements - PDF document

6/19/2018 ICBC’s Application to Streamline IT Compliance Reporting Requirements Streamlined Review Process Presentation June 19, 2018 Opening Remarks Overview • ICBC has been filing IT capital reports and IT capital expenditure information in its IT Plan filings for 12 years. • ICBC’s IT capital spend has limited impact on Basic insurance rates. • The impact of IT Spend is provided in the annual Revenue Requirements Application. • Further to the BCUC Core Review Report, it is appropriate to assess whether reporting can be improved. June Elder Manager of • ICBC’s proposals achieve effective oversight Regulatory Affairs more efficiently. 2 1

6/19/2018 Overview Agenda • Application – historical context • ICBC’s proposals • Improvements to ICBC’s internal processes to facilitate BCUC review • ICBC’s responses to written questions • Conclusion • Questions June Elder Manager of Regulatory Affairs 3 APPLICATION IN CONTEXT 4 2

6/19/2018 Context History of IT Capital Reporting • IT capital reporting has seen only 2 changes since 2006. • IT capital reporting currently consists of: 1. Individual IT capital project reports 2. Annual IT Capital Expenditure Plan (IT capital plan) 3. Annual Update to the IT Strategic Plan June Elder (IT strategic plan) Manager of Regulatory Affairs 5 Context 2014 BCUC Core Review Findings 2014 Core Review emphasized proportionality and focusing on areas of greatest impact: “Compliance resources should focus on matters that pose risks of increasing customer costs and rates…” “The BCUC should make additional efforts to ensure all compliance reports are necessary and useful, and eliminate the reporting requirement for those that are not.” “ The BCUC should place more responsibility on regulated entities to report, on an exception basis, June Elder deviations from forecasts that could affect costs and Manager of rates, instead of routine reporting.” Regulatory Affairs 6 3

6/19/2018 Impact of IT Capital on Basic Context Rates Phil Leong Corporate Controller 7 Impact of IT Capital on Basic Context Rates – Recent History Impact to Basic rates has been stable: Basic Revenue Requirements 2013 2014 2015 2016 2017 Application RRA RRA RRA RRA RRA Approved Premium * $2,500M $2,600M $2,900M $3,200M $3,400M IT Capital Depreciation $9.0M $6.7M $6.4M $8.4M $8.6M Expense ** Depreciation as a % of 0.36% 0.25% 0.22% 0.26% 0.25% Approved Premium Phil Leong * Amounts are rounded for illustrative purposes Corporate Controller ** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio) 8 4

6/19/2018 Impact of IT Capital on Basic Context Rates Impact to rates at different IT capital reporting thresholds: 100% 58% allocation Impact to allocation Impact to # of Reporting to Basic Average to Basic Average Projects Threshold Rates * Policy*** Rates ** Policy*** (2015-20) $1 million 0.006% $.06 0.003% $.03 20 $2 million 0.012% $.12 0.007% $.07 15 $3 million 0.018% $.18 0.010% $.10 13 $5 million 0.030% $.30 0.017% $.17 10 Phil Leong * Assumes 100% allocation to Basic insurance (unlikely) Corporate Controller ** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio) *** Based on average Basic insurance policy premium of $1,023 (excludes trailers, ORV and manual policies) 9 ICBC’S PROPOSALS 10 5

6/19/2018 Proposals in Summary Proposals 1. Increase IT capital reporting thresholds 2. Change IT capital plan content to provide better information upfront 3. Exclude certain types of expenditures from IT capital project report requirements (not true “projects”) 4. Reduce frequency of IT strategic plan Gary Eastwood Chief Information and filing to every 3 Years Technology Officer 11 Proposal 1: Increase IT Capital Proposals Reporting Thresholds Proposal 1: a) Increase threshold for the IT capital plan to $3 million. b) Increase threshold for individual IT capital project reports to $5 million. Rationale: Focus on higher impact/risk projects; providing the right balance between efficiency and Commission’s regulatory oversight. Gary Eastwood Chief Information and Technology Officer 12 6

6/19/2018 Proposal 1: Increase IT Capital Proposals Reporting Thresholds Implications: • Commission will still see information about projects over $3 million threshold in the IT capital plan. • Total IT capital spend will still be shown. • Commission will no longer see projects that have low risk and low impact on rates. Gary Eastwood Chief Information and Technology Officer 13 Proposal 2: Change IT Capital Proposals Plan Content Proposal 2(a): Reduce the forecast period shown in the IT capital plan from three years to two years. Rationale: Provide more meaningful budget information; based on more refined estimates. Reduce potential for skewed forecast trends that can arise from early estimation and changes in Gary Eastwood technology. Chief Information and Technology Officer 14 7

6/19/2018 Proposal 2: Change IT Capital Proposals Plan Content Implications: • Focuses Commission’s oversight on more meaningful budget information and away from “placeholder” figures. • Commission will still have visibility into business strategy and IT trends that drive the longer term expenditures IT Strategic Plan. • Commission will also be notified when there Gary Eastwood are changes. Chief Information and Technology Officer 15 Proposal 2: Change IT Capital Proposals Plan Content Proposal 2(b): Merge the Figures 3 and 4 from the IT capital plan and provide new information (providing information requested by the Commission). Rationale: • Full picture of project lifecycle (better information upfront); • Aligns to information BCUC has requested Gary Eastwood in the past. Chief Information and Technology Officer 16 8

6/19/2018 Current Format (proposing to be Proposals changed) • Limitations: No view of the total project budget; no comparison of actuals at completion to budget. 17 Proposals Proposed Format • ICBC agrees this format is better. • Added columns include the project capital budget, total actuals to date, estimate at completion, and planned and actual schedule. • Removed year over year forecasts. 18 9

6/19/2018 Proposed Format Proposals Implications : • We will not be including year over year project forecasts • Can now see how the project is tracking against initial project budget and schedule. • Explanations of significant variances (estimate at completion vs budget) will still be included in the project summaries in the IT capital plan. • Overall year over year forecast (proposed 2 Gary Eastwood year actual and 2 year forecast) will still be Chief Information and Technology Officer included in the IT capital plan 19 Proposal 2: Change IT Capital Proposals Plan Content Proposal 2(c): Discontinue IT Asset Category Cost Details. Implications: • Removes information that may be redundant. • Excluding the asset category will streamline the IT capital report content. Figure 5 — Depreciation and Amortization of IT Capital Expenditures ($ millions) 2015 2016/17 2017/18 2018/19 2019/20 Line Description Actuals Forecast** Forecast Forecast Forecast No. Gary Eastwood Depreciation and Amortization Chief Information and 1 $ 11.5 $ 16.1 $ 13.4 $ 14.1 $ 15.1 of IT Capital Technology Officer 2 % of ICBC's operating expenses 1.9% 2.4% 2.0% n/a n/a * ICBC’s new capitalization policy, as discussed in paragraph 10, has been applied to 2015 expenditures and beyond. 20 10

6/19/2018 Proposal 3: Confirm Reporting Proposals Requirements for 3 Categories ICBC seeks confirmation that it can exclude the following costs from the requirement to file an individual IT capital project report: a) System enhancement costs b) Hardware/software costs for new employees c) True-up costs Phil Leong Corporate Controller 21 Proposal 3(a): System Proposals Enhancement Costs Proposal: Exclude System Enhancement costs from IT capital project reporting Rationale: • This is not a single project but an aggregate of costs for discrete enhancement work. • Not practical or useful to prepare an IT capital project report. Implications: • Aggregated costs will be shown in the IT Phil Leong capital plan. Corporate Controller 22 11

6/19/2018 Proposal 3(b): Hardware/Software Proposals for New Employees Proposal: Exclude Hardware/Software Costs for New Employees from IT capital project reporting. Rationale and implications: • Bulk purchase of routine equipment for new employees. • No additional risk to warrant additional reporting. • BCUC already sees rationale for new staff in RRA. Phil Leong Corporate Controller • Costs will be reported in the IT capital plan. 23 Proposal 3(c): True-up Costs Proposals Proposal: Continue to exclude True-up Costs from IT capital project reporting. Rationale and implications: • Not a new project but contractual true-up of an existing project. • No additional planning, analysis of risks, examination of alternatives, etc. • Going forward, these costs will be included as part of the projects costs (at onset). Phil Leong Corporate Controller 24 12