March 17, 2011 Ms. Erica M. Hamilton Commission Secretary British - PDF document

BC H YDRO – R EVENUE R EQUIREMENTS F2012 ‐ F2014 E XHIBIT B-2 Joanna Sofield Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 bchydroregulatorygroup@bchydro.com March 17, 2011 Ms. Erica M. Hamilton Commission Secretary British Columbia Utilities Commission Sixth Floor – 900 Howe Street Vancouver, BC V6Z 2N3 Dear Ms. Hamilton: RE: Project No. 3698622 British Columbia Utilities Commission (BCUC) British Columbia Hydro and Power Authority (BC Hydro) F2012 to F2014 Revenue Requirements Application (F12-F14 RRA) Workshop Presentation BC Hydro encloses as Exhibit B-2 its presentation from the Workshop held on March 16, 2011. For further information, please contact Janet Fraser at 604-623-4176 or by e-mail at bchydroregulatorygroup@bchydro.com. Yours sincerely, (for) Joanna Sofield Chief Regulatory Officer ab/ma Enclosure (1) Copy to: BCUC Project No. 3698622 (F12-F14 RRA) Registered Intervener Distribution List. British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com

1 F2012 to F2014 Revenue Requirements F2012 to F2014 Revenue Requirements March 16 Workshop

Agenda  Welcome and Introductions  Workshop Objectives (5min.) Workshop Objectives (5min.)  Overview of Application;  Chapter 1 – Overview (10 min.)  Chapter 2 - Rate Management (10 min.)  Chapter 3 - Load and Revenue (10 min.)  Chapter 4 - Cost of Energy (10 min.)  Chapter 5 - Operating Costs (20 min.)  Chapter 6 - Capital Expenditures (15 min.) Ch 6 C i l E di (15 i )  Chapter 7 - Deferral and Other Regulatory Accounts (10 min.)  Chapter 8 - Other Revenue Requirement Items (10 min.)  Chapter 9 – OATT (5 min ) Chapter 9 OATT (5 min.)  Chapter 10 - Status of Directives (15 min.)  Other Appendices (10 min.)  Appendix A - Financial Schedules  Wrap-Up 2

Introductions  Janet Fraser, Director of Regulatory  Guy Leroux, Manager of Regulatory Business Analysis Guy Leroux, Manager of Regulatory Business Analysis  Wafi Kassam, Manager of Financial Forecasting and Planning  Wayne Taylor, Consultant  Ian Webb, Legal Counsel Ian Webb, Legal Counsel  Andrea Banks, Senior Regulatory Specialist 3

Workshop Objectives  Provide an overview of the Application Provide an overview of the Application  Describe how information is organized and presented  Describe how financial schedules tie into the written sections  Highlight areas of focus Highlight areas of focus 4

What’s included in the Application  What is in the Application What is in the Application  Description of BC Hydro’s business activities, business challenges, and cost drivers.  Support for the rate increases and other approvals requested Support for the rate increases and other approvals requested  Improvements made as a result of stakeholder feedback What is not in the Application What is not in the Application  Request for CPCN or CPCN-like facility approvals  Rate Design  IRP/DSM  USoA 5

Application Overview (Chapter 1) Outlook for F12 to F14 (section 1.3) Presentation of Information (section 1.4) Presentation of Information (section 1.4) Organization of Application (section 1.5) Evidentiary Update (section 1.6) Approvals sought (section 1.7) Approvals sought (section 1.7) 6

Approvals Sought (section 1 7) Approvals Sought (section 1.7) •DSM dealt with separately starting in July (s.1.7.1) DSM dealt with separately starting in July (s.1.7.1) •Rate increases including smoothing mechanism (s.1.7.2)  9.73% increase in each of the next three years  DARR remains at 2.5% •Depreciation rates change (due to IFRS componentization) (s.1.7.3) •Majority of Regulatory Accounts remain (s.1.7.4) •IFRS Regulatory Accounts (s.1.7.5) IFRS Regulatory Accounts (s.1.7.5) •Interest Rate based on current fiscal year (s.1.7.6) •Baselines for Regulatory Accounts (s.1.7.7) •GMS Unit 3 costs to NHDA GMS Unit 3 costs to NHDA 7

Cost Structure Changes (s.1.3.3) •BCTC Integration (s.1.3.3.1) •Nature View and Transition to International Financial Reporting Standards Nature View and Transition to International Financial Reporting Standards (IFRS) (s.1.3.3.2) •Other Cost Structure Changes (s.1.3.3.3) 8

Approach to Presentation of Information F2011 Including BCTC for 12 Months NSA Nature BCTC NSA-12 Column 16 17 18 19 = 16 to 18 Cost of Energy 1,415.1 (19.3) (71.8) 1,324.0 Operating Costs 946.2 59.1 62.5 1,067.8 Taxes 182.3 0.0 0.9 183.2 Amortization 519.4 (13.8) 16.8 522.4 Finance Charges 500.9 2.8 2.8 506.5 Return on Equity 586.5 0.0 1.9 588.4 Non-Tariff Revenue (44.6) (28.9) (8.2) (81.7) Inter-Segment Revenue (50.8) 0.0 (4.9) (55.6) (0.0) 0.0 9

Table 1-1 F2012 to F2014 Revenue Requirements – Gross View (s.1.3.2) F2011 F2012 F2013 F2014 Increase From Prior Year Schedule ($ million) NSA-12 Plan Plan Plan F2012 F2013 F2014 Reference 1 2 3 4 5 = 2 - 1 6 = 3 - 2 7 = 4 - 3 Cost of Energy 1,324.0 1,118.3 1,104.6 1,192.7 (205.6) (13.7) 88.0 1 1.0 L1 Operating Costs 1,067.8 1,409.9 1,498.1 1,422.4 342.1 88.2 (75.7) 2 1.0 L2 Taxes 183.2 187.8 199.6 211.7 4.6 11.8 12.1 3 1.0 L3 Amortization 522.4 608.5 646.8 667.2 86.1 38.3 20.5 4 1.0 L4 506.5 506 5 603 7 603.7 710.7 710 7 811 6 811.6 97 1 97.1 107.1 107 1 100 9 100.9 Finance Charges Finance Charges 5 5 1 0 L5 1.0 L5 Return on Equity 588.4 610.5 583.5 625.1 22.1 (27.0) 41.6 6 1.0 L6 (81.7) (73.0) (70.0) (72.8) 8.7 3.0 (2.9) Non-Tariff Revenue 7 1.0 L7 Inter-Segment Revenue g ( (55.6) ) (26.1) ( ) (27.4) ( ) ( (28.5) ) 29.5 ( (1.3) ) ( (1.1) ) 8 1.0 L8 Deferral Account Transfers (160.8) 47.4 56.3 67.8 208.2 8.9 11.4 9 1.0 L12 Other Regulatory Account Transfers (426.1) (702.9) (576.5) (350.5) (276.8) 126.4 226.0 10 1.0 L16 Subsidiary Net Income (153.0) (70.4) (76.3) (85.7) 82.6 (5.8) (9.5) 11 1.0 L19 Other Utilities Revenue (17.6) (14.2) (14.6) (15.1) 3.3 (0.4) (0.5) 12 1.0 L20 Deferral Rider Revenue (113.9) (90.2) (98.4) (108.4) 23.6 (8.2) (10.0) 13 1.0 L21 Less Revenue at F2011 Rates 14 1.0 L26 (3,183.6) (3,289.2) (3,269.5) (3,283.1) (105.6) 19.7 (13.7) Revenue Shortfall (0.0) 319.9 666.9 1,054.2 319.9 347.0 387.3 15 1.0 L27 9.73% 9.73% 9.73% Rate Increase 16 1.0 L28 2.50% 2.50% 2.50% Deferral Account Rate Rider 17 1.0 L29 Net Bill Increase 10.13% 9.73% 9.73% 18 1.0 L30 10

Table 1-2 F2012 to F2014 Revenue Requirements – Current View (s.1.3.2) F2011 F2012 F2013 F2014 Increase From Prior Year Schedule ($ million) NSA-12 Plan Plan Plan F2012 F2013 F2014 Reference 1 2 3 4 5 = 2 - 1 6 = 3 - 2 7 = 4 - 3 Cost of Energy 1,138.5 1,177.2 1,195.9 1,286.7 38.6 18.7 90.8 1 3.0 L53 Operating Costs 766.3 754.8 958.3 1,108.8 (11.5) 203.4 150.5 2 3.0 L54 Taxes 183.2 187.8 199.6 211.7 4.6 11.8 12.1 3 3.0 L55 Amortization 532.0 597.0 660.4 716.3 65.1 63.4 55.9 4 3.0 L56 Finance Charges 362.0 530.7 609.0 686.0 168.8 78.3 77.0 5 3.0 L57 Return on Equity 599.7 614.2 577.8 614.1 14.5 (36.4) 36.3 6 3.0 L58 Non-Tariff Revenue Non Tariff Revenue (81.7) (81 7) (73 0) (73.0) (70 0) (70.0) (72.8) (72 8) 8 7 8.7 3 0 3.0 (2 9) (2.9) 7 7 3.0 L59 3 0 L59 Inter-Segment Revenue (55.6) (26.1) (27.4) (28.5) 29.5 (1.3) (1.1) 8 3.0 L60 Subsidiary Net Income (129.3) (49.0) (54.1) (61.3) 80.3 (5.1) (7.2) 9 3.0 L61 Ot e Ut Other Utilities Revenue t es e e ue (17.6) (17.6) (14.2) (14.2) (14.6) (14.6) (15.1) (15.1) 3.3 3.3 (0.4) (0.4) (0.5) (0.5) 10 10 3.0 L62 3.0 L62 Deferral Rider Revenue (113.9) (90.2) (98.4) (108.4) 23.6 (8.2) (10.0) 11 3.0 L63 Less Revenue at F2011 Rates (3,183.6) (3,289.2) (3,269.5) (3,283.1) (105.6) 19.7 (13.7) 12 1.0 L26 Revenue Shortfall (0.0) 319.9 666.9 1,054.2 319.9 347.0 387.3 13 1.0 L27 Rate Increase 9.73% 9.73% 9.73% 14 1.0 L28 Deferral Account Rate Rider 2.50% 2.50% 2.50% 15 1.0 L29 Net Bill Increase 10.13% 9.73% 9.73% 16 1.0 L30 11

Revenue Requirement Components (s.1.3.4) Return on Equity, 14% Cost of Energy, 29% Finance Charges, 14% Amortization, 16% Operating Costs, 22% Taxes, 5% 12

Rate Increase Drivers (s.1.3.5) Finance Charges g 9.0% Operating Costs 5.9% Amortization Amortization 5 1% 5.1% Cost of Energy 4.1% F12-F14 Rate Smoothing F12 F14 R t S thi 3.6% 3 6% Subsidiary Net Income 1.9% Non-Rate Revenue 1.2% Taxes 0.8% Return on Equity 0.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 13

Rate Management (Chapter 2)  Rate Increases Forecast Table 2-2 Rate Increase Forecast Approved Plan Forecast (%) F2011 F2012 F2013 F2014 F2015 Rate Increase 6.11 9.73 9.73 9.73 6.95 Credit per NSA (January to March 2011) (4.71) 0.00 0.00 0.00 0.00 Rate Rider 3.53 2.50 2.50 2.50 2.50 Net Annual Bill Impact 7.29 10.13 9.73 9.73 6.95 Cumulative Bill Impact 7.29 18.16 29.66 42.28 52.17  Rate Management (section 2 3)  Rate Management (section 2.3) 14