Trends in Benchmarking Evaluating System Performance Prepared for: - - PowerPoint PPT Presentation

Trends in Benchmarking

Evaluating System Performance

Prepared for:

September 26-28,2017

MWU Presentation 9.26-28.17 CONFIDENTIAL

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Today’s discussion

• Introduction
• Topics for Discussion
• Infrastructure Condition
• Utility Personnel
• Financial Tracking
• Benchmarking Process

Agenda

MWU Presentation 9.26-28.17 CONFIDENTIAL

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Today’s discussion

• Introduction
• Topics for Discussion
• Infrastructure Condition
• Utility Personnel
• Financial Tracking
• Benchmarking Process

Agenda

MWU Presentation 9.26-28.17 CONFIDENTIAL

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There are a number of drivers for utilities seeking to pursue system automation programs

• Improve the effectiveness of customer service
• Reduce customer service costs (meter read labor, truck rolls, collections, etc.)
• Increase distribution operations efficiency
• Increase capital efficiency
• Enhance customer satisfaction
• Manage non-revenue water (NRW)
• Support or enhance conservation
• Increasing billing frequency
• Aging meters
• Foundation for utility of the future

AMI/Smart Water

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While many utilities think of the immediate applications, there exists an

• pportunity to significantly transform many utility operations

Next Generation Water Utility

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Leak Detection

For example, AMI-based acoustic leak detection helps non-revenue water management

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Technology

New technologies and service offerings are now changing the nature of water utility automation projects

• Non-moving part meters
• Second generation acoustic leak detection
• Customer portals
• Data analytics
• Hosted software
• Network management
• Meter reading as a service
• Remote control shut-off
• Pressure and temperature sensors

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Key Findings

The new wave of AMI and smart water programs are showing more value returned to utilities

• 60-70% of the value of past AMI projects was left on the table

– Primarily used for simple meter reading – Much valuable data lost in the shuffle

• Today, AMI projects are oriented toward a data centric model

– Complex data management and analysis systems are being designed to maximize benefits and enable more complex functionality. – 10-15% of project costs are now focused on system integration due to the complexity of the system – Projects are being undertaken with the goal being asset management and the data analytics are the drivers

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Current State of Technology

The maturity of newer system is a key driver in returning value to water utilities and the communities they serve

• Deployments have been going on for a long time, and we are in 3rd to 5th generation of technology
• Systems are moving way beyond billing information into utility management
• Cost versus benefits in most cases supports moving to the new systems
• Product constraints/environmental issues require better management of utility systems
• Advanced metering improves customer relationships

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Water AMI

For many, AMI serves as the starting point for broader water system automation initiatives

• Advanced metering should be an asset management tool in the utility segment
• A significant cost reduction in data collection and customer service
• It offers a significant change in the ability to utilize utility staff and capital based on data driven events

– Engineering design issues – Capital budgets outlays

• It is a network that is expandable for other city services, or can connect to existing networks

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Coming Attractions

Emerging technology offers the potential to further increase the potential reach for water utilities

• Pressure sensors build into the water meter
• Water quality AMI sensors
• Composite digital mag meters
• Integrated disconnect meters (no plumbing)
• Improved battery lifecycle
• Acoustic sensors becoming a more integrated part of the smart water systems

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Integrating Systems

One of the challenges that water utilities face is dealing with a water distribution system that is far from uniform

1920 1st Phase

$20M (06 dollars)

1932 2nd Phase

$8M (06 dollars)

1940 3rd Phase

$ 20M (06 dollars)

1960 4th Phase

$160M (06 dollars)

1980 5th Phase

$65M (06 Dollars)

2007

Total Infrastructure= $265M Water Loss = 30%

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Integrating Systems

For an increasing number of water utilities, the AMI network serves as the core of a new asset management system

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Integrating Systems

The new AMI system can now be used to identify water loss and other problem areas

Old pipe from 1920s Leaks near commercial areas with 1960s clay pipe Low-pressure in 1980s Plastic pipes

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Data Analytics

Clear value propositions can be achieved from managing/using the data correctly

• 60-70% of the value of past AMI projects was left on the table
• However, many utilities today are seeking more integrated approaches to capture additional value

– State of the art 24/7 monitoring of accounts worth over $15 million in revenue per year and over $265 MM in fixed asset replacement value – Reduction in customer service costs and service issues by up to 75% within 3 years – Real time emergency response to account issues – Elimination of safety issues in reading meters – Daily sales revenue from key accounts – Continual improvement on asset performance – Proactive customer service

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System Architecture

The Meter Data Management System is typically used as a central repository of data that can be accessed by a myriad of supporting systems

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Business and Data Models

The optimal approach calls for integrating business and data models

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Future State Workflows

Value is created when future state workflows take advantage of the new technologies and systems that have been put in place

Water Meter Data: (Meter Read) MIU Gateway AMI Server (MDM) Operations Billing/CIS Usage Profile Bill Generation/ Customer Calls Water Meter Data: (Tamper Alarm) MIU Gateway AMI Server (MDM) Operations Billing/CIS Site Investigation Bill Generation/ Customer Calls Security Team Water Meter Data: (Leak Detection) MIU Gateway AMI Server (MDM) Billing/CIS Work Management Customer Calls Repair Kits

USER FUNCTIONS DEPARTMENT METER & AMI SYSTEM

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Customers

In addition, water utilities now have new tools to communicate with customers on an ongoing basis

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Potential Programs

There are quite a few different sources of value that water utilities may consider

• Business Process Engineering
• Line Loss Program Implementation
• Business Analysis
• C&I program Management
• Customer Communication
• Cyber Security Implementation
• Data Analytics Design
• Systems Engineering Program
• Water Management
• MDMS Configuration
• Meter Data Mapping
• Meter Specification & Configuration
• Conservation Program
• Theft deterrent program
• Prepay Implementation
• Web-Portal Implementation
• Social Media
• Project Management
• Kiosk Implementation

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Advanced metering applications are the most popular among utilities because of their ability to reduce costs and improve operations, while providing more value to customers

• Many utilities are looking at options in advanced metering to streamline operations, enhance financial

flexibility, and support smart grid potential for the future

• Utilities with a rural component are more likely to pursue advanced metering efforts than purely

urban/suburban utilities due to their rural reach and customer service orientation

Advanced Metering

• Tamper, theft and outage detection
• Consumption patterns can be tracked

and analyzed to provide more accurate forecasting of trends

• Improved customer service
• Value added services can be offered to

customers

• Asset management

OPPORTUNITIES

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Automatic Meter Reading

Advanced metering reduces costs through operational efficiency, more accurate billing, and greater consumption control

• In addition to using this to reduce meter reading costs, utilities are taking advantage of having a sensor on

the distribution network; some are even using it to send reads from gas and water meters

Automatic Meter Reading Prepaid Metering

Basic Facts Benefits

• Automatic, real time data

collection from metering devices transfers data to central database for billing and analysis

• Technologies have included

handheld, mobile and network devices based on wired and wireless, radio, and power line transmission networks

• Attainable data includes tamper

and leak detection, battery life, reverse flow data, interval data, meter events

• Operational efficiency achieved by

preventing the need for employees to visit customer locations each month

• Offer customers actual readings

instead of estimation or self-reads

• Accurate load data from remotely

accessible meters helps to balance the supply portfolio

• Furthermore, data can be used to

control ToU with load profiling and customer usage patterns

Advanced Metering

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Prepaid Metering

With prepaid pricing, consumers pay for service prior to delivery and as they use electricity their balance is reduced each day until exhausted

• This feature is becoming more popular among consumers in many utility territories

Basic Facts Benefits

• Advanced meters support this

customer-controlled usage by providing real time data regarding usage, dynamic costs, etc. via a web-based interface or in-home display

• Prepaid pricing helps to eliminate accounts

receivable and late fees because service is automatically disconnected when the balance runs out

• Cash flow improvement
• Greater customer relationship management as it

helps customers to directly control costs and consumption levels Automatic Meter Reading Prepaid Metering

Advanced Metering

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Smart Pumping

Time-stamped AMI data can be used to improve the accuracy of the current distribution system model, which results in better predictive planning related to water treatment, pressurization, pumping and storage

• The addition of pressure monitors to the system could help a utility reduce pumping when higher

pressures are not needed

Basic Facts Benefits

• One of the benefits of an AMI

system is the ability to leverage the hourly meter data being gathered several times per day

• Because one of the largest cost

line items in the water budget is its electric bill in support of system operation, utilities can utilize meter data to optimize their pumping schedules

• By avoiding peak electric

consumption periods, utilities can realize electricity consumption savings

• As an electric utility as well, the

benefit is only realized at the wholesale power level Water Operations Smart Pumping Leak Detection

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Leak Detection

The desire to identify and reduce leak adjustments is a main benefit of a dedicated water leak detection program

• An automated system can support the ability to provide customer-side leak detection to improve customer

satisfaction and to reduce costs associated with leak adjustments

Basic Facts Benefits

• One approach involves a

comparison of an interval of time-stamped meter consumption data from a specific area against the data from a district metered area/zone

• Another approach is to deploy

acoustic leak detection devices (ALD) and/or institute a leak detection survey program

• Proactive customer-side leak

notification, “watch dog” service

• Opportunity to provide higher level
• f pressure management, acoustic

leak detection, water quality management Water Operations Smart Pumping Leak Detection

MWU Presentation 9.26-28.17 CONFIDENTIAL

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Today’s discussion

• Introduction
• Topics for Discussion
• Infrastructure Condition
• Utility Personnel
• Financial Tracking
• Benchmarking Process

Agenda

MWU Presentation 9.26-28.17 CONFIDENTIAL

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The utilities industry mirrors a national trend towards work force aging

Situation Complication Key Questions

• In the US, life expectancy has

risen dramatically since the beginning of the century to 78.4 years for the average adult, white male from 47.9 years.

• While the aging workforce is a

national phenomenon, the median age for workers in the Utilities industries is 3.3 years higher than the national average. The Utilities industry is “older” than the national average.

• At stake for Utilities are losses of

critical knowledge and skills due to impending retirements.

• There are not enough young

people to replace the wave of “Baby Boomers” approaching retirement.

• Employers need to find new ways

to retain older workers in order to forestall loss of expertise

• Human Resources report

difficulty in recruiting young people, especially for craft positions.

• Many positions within the Utilities

industry are highly specialized, both managerial and labor, requiring years of intensive training.

• Investments are needed to make

the work place flexible and accessible for older workers.The National Organization on Disability reports a 11.5 percent chance of developing a disability in people aged 45 to 54. This figure jumps to 21.9 percent for those 55 to 64 years.

• Recent years of economic

distress have made the necessary investments hard to actualize.

• Do Utilities companies recognize

the need to act now in order minimize negative consequences

• f an aging workforce?
• What programs can be

implemented to attract younger workers?

• How can incentives be

established to attract and retain experienced workers?

• How can utility companies

establish a succession strategy to ease “passing of the torch”?

• What benefits will Utility

companies realize by addressing the aging work force issue now, before the retirement wave peaks?

Industry Age Demographics Overview

MWU Presentation 9.26-28.17 CONFIDENTIAL

28 Median Age of U.S. Industries

25 30 35 40 45

Agriculture, forestry, fishing and hunting Public Administration Utilities Transportation and warehousing Education and health services Manufacturing Mining Other Services Financial activities Professional business services Information Construction Wholesale and Retail Trade Leisure and hospitality

National Median, 40.4 years

Utilities are among the oldest of US employment sectors

• Only “Agriculture, forestry, fishing and hunting” and “Public Administration” median ages are higher

Industry Age Demographics Overview

Source: US Bureau of Labor Statistics

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The Utilities Industry median age is increasing with time

• Over a period of nine years, the median age of Utilities Industry employees has risen from 41.1 to 43.7 years
• By 2050 the US total over-65 population will swell from its current 30-plus million people to an astonishing 80

million

• By that point a utility worker currently 25 years of age will be 71
• Barring massive retention of older employees, the low rates of employee replacement mean there will be

smaller numbers of people to handle work-load.

Industry Age Demographics Overview

Source: US Bureau of Labor Statistics, NWPPA

Utilities, Increasing Median Age

39.0 39.5 40.0 40.5 41.0 41.5 42.0 42.5 43.0 43.5 44.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

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Industry Age Demographics Overview

Source: US Bureau of Labor Statistics

Age Distribution among Utility Employees

0.8% 4.4% 15.3% 30.4% 34.5% 12.4% 2.2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 16-19 Years 20-24 Years 24-34 Years 35-44 Years 45-54 Years 55-64 Years 65+ Years

The 45-54 year old age group represents a large percentage of utility population and represents a group whose loss will most severely impact the industry

• For utilities as a whole, 148,000 employees currently fall in the 55-64 years age group, another 26,000 are
• ver age 65
• A combined number of 172,000 utilities employees are eligible for retirement now, or 14.4%
• More significantly, approximately half of the “Boomer” group will be within range of retirement in five years,

another 17.2% Over one-third of workforce lies in the critical “pre-retirement” stage

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The demographics of utility workforce shows a clear image of a wave moving toward retirement

• APPA describes an “Age Bubble”, a ballooning population of workers at one end of the age continuum,

followed by a deep dip in the next generation and a modest rise in the work force’s youngest members

Industry Age Demographics Overview

Sources: US Bureau of Labor Statistics, American Public Power Association

Percent of Workforce Age Curves

0% 5% 10% 15% 20% 25% 30% 35% 40% 16-19 years 20-24 years 25-34 years 35-44 years 45-54 years 55-64 years 65 years and over Utilities US Total

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Chief among concerns dealing with the issue of an aging workforce is the loss of knowledge base

• By far the issue of most concern to all within the utilities industry is the loss of critical knowledge and skills due

to massive numbers of retirements – Losses are anticipated across the entire scope of organizations – Not only are people with unique technical knowledge about to depart, but executive managers and skilled workers as well

• The challenge facing the industry is successful transfer of knowledge from a large number of experienced

people to a limited pool of young replacements, to condense many years of knowledge into digestible form – This must be done in coordination with advancing technologies, that themselves impose increasing demands upon resources – A knowledge objective is finding ways of employing new technologies to ease burdens rather than increasing them

• Unlike other industries, utilities have the added responsibility of protecting the public welfare

– The unique knowledge and skill-sets of utility workers may be considered public assets

Effects of Aging Workforce on Utilities

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Business challenges and opportunities present themselves as the work force ages

• An informed and competent work force is increasingly critical to an organization’s financial well being as

technology advances – Failures in an automated power grid scenario hit the bottom line in terms of loss of immediate revenue, damaged reputation, increased competitive pressure, and possible fines – Managing knowledge transfer and skills development as part of a successful succession strategy clearly impacts utility companies’ future financial viability

• The cost of workforce turnover is significant, typically ranging from 25 to 200 percent of an employee’s

annual compensation – Costs associated with employee replacement will escalate during the next decades – Companies find it is financially advantageous to encourage employees to work past the traditional retirement age, for two reasons; · First to forestall and better manage the cost of employee replacement · Secondly to allow greater time for transfer of knowledge to the younger generations

• It makes good business sense to invest in accessible and assistive technologies allowing older workers to

remain in the work place

Effects of Aging Workforce on Utilities

Source: Energy Pulse, Microsoft, AgeLight Marketing Consultancy

“ Companies that figure out how to manage (the rise in the average age of the work force) will have a clear competitive advantage over those who let the demographic trend wash over them.” George Bailey, Global Director of the Human Capital Group

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Aware, not implementing plans Aware, implementing plans Not aware

U.S. firms are beginning to recognize the need to retain older workers

• 61% of surveyed U.S. firms are aware of the effects of demographic changes

– However, of those aware, 55% reported that they are not actively implementing strategies to retain or attract employees over the age of 50

Survey and Case Studies

39% 34% 27%

Source: Energy Pulse, Microsoft, AgeLight Marketing Consultancy

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Survey responses reveal a strong industry awareness of aging workforce issues

• To the question, “Would you say that there is an awareness in your organization of the current and pending

effects of workforce aging?”, 93% responded that there is an awareness – Thus the survey finds a general industry understanding that demographic aging trends are impacting and will continue to impact, the Utilities Industry – Lack of awareness does not seem to be related to company size

92.9% 7.1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

Survey and Case Studies

Source: UTC Analysis

• Awareness of Workforce Aging Effects -

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Smaller companies tend to be more proactive in addressing aging issues than larger corporations

• Of the companies aware of age demographic trends, to the question, “Does your company have in place

procedures to minimize the detrimental effects of lost experience by retirement?”, 56% answered ”Yes” – The smaller companies tend to be more proactive about tackling the issues

Survey and Case Studies

Source: UTC Analysis

56.4% 43.6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

• Procedures in Place to Minimize Retirement Effects -

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Most utility companies do not specifically address retention of older workers

• Of the companies aware of demographic trends, to the question, “Does your organization have in place

procedures to retain or attract employees over the age of 50?” 28% answered “Yes”

Survey and Case Studies 28.2% 69.2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Yes No

Source: UTC Analysis

• Program in Place for Retention/Attraction of Employees -

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As to those facing retirement shortly, the survey indicates percentages in keeping with the statistics for the entire nation

• To the question, “Within the next five years what percentage of your workforce will be eligible for retirement?”

most respondents, over half expect to lose 16-30 percent of their work force to retirement within five years

• BLS statistics indicate that 14.4% of Utility employees are within retirement range now, with another 17.2% of

Baby Boomers eligible in five years.

Survey and Case Studies

Sources: US BLS and UTC Analysis

Percent of Utilities Work Force Eligible for Retirement in Five Years

<5% (3%) 6-10% (9%) 11-15% (11%) 16-20% (28%) 21-30% (26%) 31-40% (11%) 41-50% (9%) 51-60% (3%)

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Answers varied widely regarding individual company expectations in retirement patterns and preparations

• One respondent reported that 60% of the company’s employees are facing retirement within 5 years

– This company does not have in place program to address the problem

• Similarly, a large utility expects 50% of its work force to retire within the 5 year window, but it has programs in

place to address the transition

• A third company of note is a small water company with 32 employees that expects to lose 50% of its work force

within 5 years – This company has no contingency plan in place

Survey and Case Studies

Sources: UTC Analysis

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Position Categories likely to be Impacted by Loss of Skills Due to Retirements

2% 2% 34% 62% Across Entire Organization Executive Management Non-Union, Professional Bargaining Unit, Craft

Respondents expressed the most concern over losses in craft positions

• When asked to name business areas in which losses of experienced personnel are likely to impact operations, the

majority of survey respondents named bargaining unit, craft positions – By contrast, AWWA studies named executive management as the top area of concern

• Of the Non-Union, Professional group the positions of concern were mainly in Engineering and IT. Also mentioned

were Long Term Planning, Human Resources and Design

Survey and Case Studies

Sources: UTC Analysis

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• A number of companies have

formed “Employee Project Development Teams” and are currently studying internal work force aging issues

• Several company respondents

stated that “intern” or “apprentice” programs have been implemented with local technical schools. Upon completion of two year programs the students stand to be hired by the utility company

• Of interest are the efforts of a large

electric and gas company to work closely with several local schools, mainly in urban areas, to improve basic math and reading skills so that pre-employment tests might be passed

Survey responses were enlightening in regards to self assessment and mitigation actions taken

Chevron

• Many companies expressed deep

appreciation of the impending loss of knowledge and experienced workers

• One respondent stated firmly that (s)he

foresees no problems with age demographics and that the strengths of the company will be sufficient to attract young workers for years to come

• A large company stated that despite

proactive mitigation efforts they anticipate impact to service levels to customers, both in response time and the ability to fix a problem right the first time

• An experienced planning engineer

facing retirement himself in 12 months stated that the engineers being hired in his company are technician/clerk level rather than qualified engineers and “…lack the sense of what is possible and advisable”

• Concerns over the loss of corporate

culture were expressed. This is a significant point as older workers may wish to preserve strong ethical values and a heightened sense of responsibility towards public welfare

• There was an expression of doubt

about a company’s ability to retain employees in the wake of work force reductions, that is, employee loyalty has been shaken Survey and Case Studies

Sources: UTC Analysis

Self Assessment Mitigation Other Issues

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Retirement Projections: mitigation plans should be designed around a utility’s unique workforce needs

• Utilities should not rely on general data to understand their possible employee loss
• Before a mitigation plan can be developed, utilities should engage in a number of efforts

– Identify the number of workers that will be retiring over a certain period – Retirement numbers can be obtained by tracking retirement patterns as well as employee age – Identify what specific positions will be vacant and when they are likely to be vacated – Some companies have found success through employee surveys asking employees when they plan to retire

Source: APPA

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Projected knowledge loss involves identifying what skills retiring employees will be taking with them

• Retirement projections should be more that pure numbers

– Utilities should develop a clear picture of the void in skill set that will occur as their older, more experienced workers retire – Understanding what skills will be lost is essential in accurately determining what skills must be cultivated in the new workforce

Determining skill loss may be a matter

• f asking the right questions

At least one utility has found success in conducting interviews asking employees to identify their most valuable contributions to the company as well as what unique tasks they perform

Utilities have also initiated open meetings where employees discuss problem-solving techniques

Such communication forums enable management to determine what specific skills need to be replaced with human capitol and what should be replaced with new technology or outsourcing

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• Benefits Packages

– Utilities should develop a clear picture of the void in skill set that will

• ccur as their older, more

experienced workers retire – Signing bonuses – Flexible scheduling options, such as flextime or telecommuting – Tuition reimbursement

• Family-friendly work environments

– Utilities should develop a clear picture – Family-leave programs – Workplace daycare options – Financial counseling – Wellness programs

As the population ages, attracting younger workers from an increasingly small workforce pool will require competitive practices

Mitigation Actions

Source: APPA, Social Funds

• Attracts younger, more talented workers
• Encourages employee loyalty and

reduces turnover

• Reduces absences

Competitive Benefits

Implications

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Internship programs allow utilities to get a jump-start on training while giving students an opportunity to gain work experience

• Utilities can form alliances with local communities to begin recruiting from universities as well as community

colleges and technical schools

• Internships enable utilities to train and mentor future employees
• Students also have the unique and valuable opportunity to gain work experience prior to graduation
• Certain positions open to full-time students
• When students have graduated and worked as interns for two full school years, they can be hired

without the usual competitive process facing new employees

• Since the inception of the formal internship program in 2001, no job offers extended to interns have

been rejected Success Story: Colorado Springs Utilities

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Companies that spend significantly more than average on employee training through “Fast Track” programs often find improved results

• Fast Track Development programs are designed to identify future leaders and groom them to take over

leadership positions

• Different from the traditional philosophy of waiting until upper management retires and hoping to fill vacant

positions, fast track development enables utilities to more quickly prepare younger employees to take over leadership roles

• Classroom teaching and job-related assignments give hiring management an
• pportunity to watch employees in action
• Management has the opportunity – and the need – to identify strong leadership

candidates

• Employees who are identified as future leadership candidates are then rotated into

further development and mentoring programs or trained to takeover specific positions

Key Issues

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Fast Track Development is increasingly seen as a critical component to ensuring that maximum talent and capabilities are kept in house

• Identifying specific talents within the organization not only enables a company to identify who its future leaders

may be, but also provides feedback on how to improve efficiency within the organization

• Utilities that have established a fast track development program report improved communication between

supervisors and employees as well improved customer service

• Some programs focus on overall leadership skills, rather than preparation for a particular position

– They include intensive leadership study for new employees to develop such skills as problem-solving and team building

Mitigation Actions

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As health care costs rise, a great majority of those nearing retirement age say they plan to continue working to help off-set costs as well as to find fulfillment, leading to issues concerning gradual retirement practices

• One alternative to the loss of expertise resulting from retiring employees to delay retirement or rehire certain retired

employees, enabling utilities to retain certain skill sets for a longer period of time

Mitigation Actions

Opportunity Programs Gaining additional access to retiring workers through mentorship initiatives

• Flexible schedules
• Part time work
• Job sharing

Preventing physical impairments from limiting the access to valuable expertise

• f experienced workers
• Technology-assisted workplace

Utilizing technology to capture decision- making skills of more experienced workers

• Use of automated tools

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Today’s discussion

• Introduction
• Topics for Discussion
• Infrastructure Condition
• Utility Personnel
• Financial Tracking
• Benchmarking Process

Agenda

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Internal Operations

Internal operational issues addressed the potential to streamline the day-to-day activities

Issues Raised

• Limited ability to use

current system to engage in detailed system modeling

• Scheduling and logistics are

limited in today’s environment

• Billing and metering
• perations impact

distribution operations as well Key Considerations

• Reduction in bill auditing

can reduce operating requirements

• Enhanced system data can

improve system modeling

• Can improve scheduling

and logistics

• Reduced challenges

resulting from metering delays

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Billing

Billing issues extend beyond just the need to send accurate bills to customers

Issues Raised

• Metering delays from last

February still causing drag

• n operations and

receivables

• Bi-monthly billing a burden
• n water and wastewater

departments as well as customers

• High degree of re-reads and

audits Key Considerations

• Reduction in read-to-bill

cycles can improve

• rganizational cash flow
• Customers would welcome

switch to monthly billing

• Reduced and/or eliminated

need for re-reads and audits

• No further need to catch up
• n metering backlog

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Connect/Disconnect

The cost of disconnects and reconnects coupled with the risks associated with bad debt make the continued development of solutions in connect/disconnect appealing

Issues Raised

• Significant cases of meter

theft

• Operational procedures

result in repeated offenses and long cycles to address

• Potential bad debt issue

present

• Significant percentage of

transient customers Key Considerations

• Reduced operational

demand placed by non-pay customers

• Reduced bad debt
• Reduced incidents of stolen

meters

• Need to establish/refine
• perational procedures
• Ability to more quickly

respond to turn on/turn off

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Customer

Each utility always strives to deliver high customer service

Issues Raised

• Customers operate on bi-

monthly billing cycle today

• Limited information

provided to customers on consumption or billing

• Legacy metering platform

leads to certain level of read errors

• Higher than desired call

abandonment rates Key Considerations

• Establishment of customer

portal to empower customers and deliver information

• Reduction/elimination of

read errors

• Lower demands on call

center due to bill complaints/special reads

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On Cycle/Off Cycle Reading

In addition, we also unearthed a number of issues related to on cycle/off cycle meter reading

Issue Notes Potential billing on one date Need to avoid bottlenecks; might want to stagger billing dates Move in/move out Can use system to grab billing data on exact date requested System interaction Need to consider impacts to existing systems; need to account for portions Deployment timing Might want to select certain routes for early stage deployment Bill audits Need to consider impacts to implausibles, re- reads, work orders, outsorts, EMMAs High bill inquiries How can we use system to make inquiries; any changes to policy?

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Collections/Move In & Out/Non-Pay

Collections and other issues also often plague water utilities

Issue Notes Leak detection $1-1.5M per year in leak adjustments; could be reduced by as much as 75% Connect/disconnect Delays exist in cut-on/cut-off due to order volume and geography Retail services Potential to work with plumbers to deliver home inspection services Third party Dunning Provide cut off of water service for non-pay of sanitation fees Stolen meters Need to address issue of stolen and relocated meters Inspections Switch to AMI may result in lower ability to monitor field conditions Billing and collections Customers may be able to maintain current status better due to portal data Billing date Ability to select billing date could help customers meet billing obligations Billing date flexibility Potential to charge customer fee to self-select billing date

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Project Scope Example

A number of technical, operational, and financial characteristics need to be addressed to make sure the optimal strategy is uncovered

Technology Drivers

• Operating Costs
• Customer Service
• Non-revenue

Water Mgt.

• Conservation
• Etc.

Vision, Goals & Objectives Financial Situation Requirements

• Interval Meter

Reading

• Data Reporting

Interval

• Tamper, Leaks,

Backflow, etc.

• RC Shutoff

Ownership and Implementation Plan Deployment Strategy Economic/ Financial Impact Existing Systems

• Meter Reading
• CIS
• SCADA
• GIS
• Etc.

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Financial Modeling

It is always wise to develop a financial assessment of the proposed program to make sure the system you deploy is designed accordingly

System Automation Business Model Prepared for: Prepared by: Business Case Results 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Benefits Meter Reading 148,205 $ 300,857 $ 458,055 $ 440,249 $ 446,853 $ 453,555 $ 460,359 $ 467,264 $ 474,273 $ 481,387 $ Engineering & Planning 16,320 $ 33,129 $ 50,439 $ 51,196 $ 51,964 $ 52,743 $ 53,535 $ 54,338 $ 55,153 $ 55,980 $ Leak Detection 80,200 $ 162,807 $ 247,873 $ 251,591 $ 255,365 $ 259,196 $ 263,084 $ 267,030 $ 271,035 $ 275,101 $ Smart Pumping 4,601 $ 9,341 $ 14,221 $ 14,435 $ 14,651 $ 14,871 $ 15,094 $ 15,320 $ 15,550 $ 15,783 $ Total Benefits 333,998 $ 977,174 $ 1,651,643 $ 2,382,056 $ 3,180,684 $ 3,590,800 $ 3,678,645 $ 3,758,318 $ 3,838,997 $ 3,913,652 $ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Pro Forma Financials Benefits 249,327 $ 506,134 $ 770,589 $ 757,471 $ 768,833 $ 780,365 $ 792,071 $ 803,952 $ 816,011 $ 828,251 $ OpEx

• $

132,485 $ 182,831 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ EBITDA 249,327 $ 373,648 $ 587,758 $ 524,294 $ 535,656 $ 547,189 $ 558,894 $ 570,775 $ 582,835 $ 595,075 $ Depreciation 132,485 $ 182,831 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ 233,176 $ Net Income 116,841 $ 190,817 $ 354,581 $ 291,118 $ 302,480 $ 314,012 $ 325,718 $ 337,599 $ 349,658 $ 361,898 $ CapEx 1,324,855 $ 503,455 $ 503,455 $

• $
• $
• $
• $
• $
• $
• $

Cash Flow (1,075,528) $ (129,806) $ 84,303 $ 524,294 $ 535,656 $ 547,189 $ 558,894 $ 570,775 $ 582,835 $ 595,075 $ (3,199,042) $ (653,140) $ (229,263) $ 198,876 $ 659,932 $ 2,074,486 $ 2,086,914 $ 2,083,082 $ 2,094,971 $ 23,887,224.37 $ Financial Metrics NPV 3,461,285 $ IRR 33.9%

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Implementation Support

The roadmap and implementation scenarios developed help to ensure project success Integration / Architecture Business Transformation Customer & Stakeholder Engagement Implementation Services

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Benefits

Cumulative ten-year benefits come to $11.5 million

AMI, $5,168,337 Prepaid Metering, $3,128,199 Electric Operations, $2,849,775 Water Operations, $324,273 Gas Operations, $0

Ten Year Benefits

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Earnings

The forecast calls for strong earnings impact

$- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Net Income

Total Benefits Total OpEx EBITDA Net Income

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Cash Flow

Annual cash flow turns positive after the deployment period and full payback is achieved in year 8

$(4,000,000) $(3,000,000) $(2,000,000) $(1,000,000) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Cash Flow

Cash Flow Cum Cash Flow

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CapEx

Total CapEx over the deployment period is estimated at $7.3 million

$- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

CapEx

AMI Prepaid Metering Electric Operations Water Operations Gas Operations

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Business Case

By targeting only programs that offer positive value, we can reduce CapEx by 21% and increase program value by 67%

Full Deployment Optimized Deployment Ten Year Benefits $12.3 $11.5 Ten Year CapEx $9.8 $7.7 NPV $2.4 $4.0 IRR 15.8% 24.2%

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Direct Benefits

Benefits can be evaluated over the life of the forecast period based on the characteristics of program design

AMR AMI Enhanced AMI Internal Operations Meter Reading Labor 7,002,295 $ 14,004,590 $ 14,004,590 $ Smart Pumping

• $
• $

425,521 $ Leak Detection - System

• $
• $

93,331 $ Displaced Capital 7,140,000 $ 7,140,000 $ 7,140,000 $ Meter Accuracy 9,148,001 $ 9,148,001 $ 9,148,001 $ Accidents 709,202 $ 2,836,810 $ 2,836,810 $ Salvage 465,888 $ 465,888 $ 465,888 $ Billing Read-to-Bill 324,385 $ 648,770 $ 648,770 $ Bill Audit Reduction 298,858 $ 398,477 $ 398,477 $ Re-Read labor

• $

597,716 $ 597,716 $ Connect/Disconnect Bad Debt Reduction

• $
• $

1,202,807 $ Field Collection Reduction

• $
• $

1,772,628 $ Cash Flow Acceleration

• $
• $

4,525 $ Customer Call Center Support 2,608,821 $ 3,261,026 $ 3,261,026 $ Leak Detection - Customer

• $
• $
• $

Total Direct Benefits 27,697,450 $ 38,501,278 $ 42,000,091 $ Direct Benefit Comparison (Twenty Years Cumulative)

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Deferred Direct Benefits

This water utility also recognized the potential to avoid the forecasted costs associated with moving from bi-monthly to monthly reads

AMR AMI Enhanced AMI Deferred Direct Benefit 13,316,958 $ 13,316,958 $ 13,316,958 $ Deferred Direct Benefit Reduction 304,111 $ 608,222 $ 608,222 $ Net Deferred Direct Benefits 13,012,847 $ 12,708,736 $ 12,708,736 $ Deferred Direct Benefit Comparison (Twenty Years Cumulative)

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Indirect Benefits

We also considered the potential to augment the business by evaluating “soft” benefits

• Increased system modeling capabilities
• Network support for planned smart city effort
• Enhanced technology development in support of city strategic plan and economic development
• Enhanced employee safety/reduced claims
• Others?

AMR AMI Enhanced AMI Customer Satisfaction 3,535,573 $ 7,071,145 $ 7,071,145 $ Carbon Impacts 20,209 $ 50,522 $ 50,522 $ Leak Detection 5,673,620 $ 14,184,049 $ 14,184,049 $ Conservation 465,081 $ 1,162,703 $ 1,162,703 $ Total Indirect Benefits 9,694,483 $ 22,468,420 $ 22,468,420 $ Indirect Benefit Comparison (Twenty Years Cumulative)

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Two of the more important functions of a utility are billing and operations

• It is inefficient and risky to have multiple sources of data floating from more than two applications
• These should either be consolidated into one, more robust application or chose multiple applications that all pull from one main

database of information Information Management – Minimize Complexity

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After defining the information architecture and adopting standards for interoperability, it will be important to evaluate the future framework for a utility’s systems

Information Management – Future Applications

• GIS – Trimble
• MDM – MPower
• SCADA
• Electric – Survalent
• Water – Land
• Gas – None
• CIS – local system

The ultimate systems approach will depend on the vendor(s) chosen. Nevertheless, a likely scenario will involve continued use of Survalent for electric SCADA and Trimble for GIS. MPower (MDM) may be usable, but will need to be determined.

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Information Management - Mobile Data

With the increased use of mobile workforce applications comes the need to ensure a number of elements in wireless data networks

Security Data encryption to protect data from being read by an unintended recipient Authentication Only valid users are allowed on the network to prevent eavesdropping and unauthorized use of the data network Mobility Seamless and automatic roaming between a number of wireless networks IP Connectivity The ability to establish and maintain IP connectivity in a mobile environment MVPN (Mobile Virtual Private Network) A secure tunnel between the client and customer enterprise network that persists as the user roams Application Steering and Blocking Steer or block applications from specific networks Data Compression Enables higher bandwidth data or capacity for more users on the network Application Session Persistence Maintains TCP/IP sessions if user loses coverage, or during PC device power savings mode

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Today’s discussion

• Introduction
• Topics for Discussion
• Infrastructure Condition
• Utility Personnel
• Financial Tracking
• Benchmarking Process

Agenda

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We have developed a seven-step process that allows for the effective benchmarking of different utility functions across a diverse set of comparisons

Project Methodology Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

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The first step involves interviews with XYZ and XYZ staff to collect data on key processes, work functions, and output levels

Internal Data Collection

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Key Issue: Identify performance levels and key tasks performed at XYZ Approach: Conducted interviews with all subject matter experts, including specialists in short term planning, long term planning, network maintenance, digital network, land mobile radios, network monitoring, network provisioning, engineering, and finance. Collected data from each and identified key organizational responsibilities. Rationale: In order to complete the benchmarking process, it was necessary to start with the XYZ’s data

• points. Furthermore, in order to assure the delivery of the best comparison possible, we needed to fully

understand the nature of the job requirements associated with the way in which XYZ worked. Furthermore, this step was critical in providing initial hypotheses regarding the establishment of appropriate cost drivers. Result: A thorough understanding of XYZ’s organizational structure was gained, which led us to focus on the network monitoring function.

Internal Data Collection

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Detailed headcount data was collected to start the process

Internal Data Collection

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Organization HC Cost Driver(s) Second Level Support

8

• Number of projects
• Size of network

ITMC

11

• Number of projects
• Number of network elements and network size

Field Team

4

• Number of projects
• Size of network

Land Mobile Radio Maintenance

6

• Number of sites
• Size of network

Project Management

10

• Number of projects
• Number of network elements

Provisioning

3

• Number of circuits
• Number of network elements

System Design

21

• Number of projects
• Size of network

Engineering, Planning

59

• Number of projects
• Number of network elements and network size

Contract Labor

92.5

• Number of projects
• Size of network

Engineering

4

• Number of projects
• Number of network elements

3

• Number of projects
• Number of network elements

Outside Plant

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Once the initial data is gathered, it is then important to determine the correct benchmark approach

Benchmark Method

Key Issue: Identify the appropriate way to compare work loads of very different utility telecommunications

• perations

Rationale: The initial goal involved benchmarking total costs; however, it was quickly determined that there were too many variables that came into play – some of which were controllable and others not. Due to the potential differences in labor rates, cost allocation methodologies, and burden factors outside the control of XYZ, we chose to determine efficiency levels based on full time equivalents (FTEs) of work load rather than on pure dollars. Result: A view toward comparing the work loads of network monitoring functions for benchmarking was developed.

Benchmark Method

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Approach: Interviews with XYZ Telecom and some of the early stage benchmark companies were held to determine the commonality of group functions and overall work structure and process flow

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Based on the initial interviews, we were able to identify a set of specific definitions for the network monitoring function that were common to all electric utilities involved in the benchmarking effort

Cost Drivers / Activity Definitions

Key Issue: Identify a common denominator dealing with benchmarked companies. Rationale: Once it was determined that an activity-based benchmark approach was needed, it was important to identify the appropriate way to segment work function. Given that there appeared to be six key areas of activity for each company (planning, maintenance, network monitoring, provisioning, engineering, and land mobile radio), those tasks were defined. Result: Specific definitions for each task were developed.

Activity Definitions

Approach: Extended primary research was conducted based on common areas of focus – labeled as key activity areas – that served as unifying work functions.

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

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Monitoring activities are focused on ensuring seamless operation of the distribution network

Network Monitoring Definition

Network Monitoring Characteristics

• Ensuring physical and logical security of network
• Conducting remote fixes of network when available
• Major alarm investigation
• Client services associated with network monitoring
• Monitoring technology platforms within network

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

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In order to establish benchmarks and compare values, data needs to be collected from each of the target utilities

External Data Collection

Key Issue: Collect information from benchmark companies for comparison to XYZ. Rationale: In order to ensure collecting the proper depth of information, it was important to have discussions directly with each of the target utilities. Furthermore, in order to ensure access to as much information as possible with as many of the key people needed, meetings at the utility locations were arranged. Result: Data was collected from each of the three utilities in each of the areas sought. Follow up discussions focused primarily on the network monitoring activities.

External Data Collection

Approach: Interviews with subject matter experts at three utilities were conducted at the utilities’ offices. Additional discussions regarding changes and updates to operations or network monitoring activities since the

• riginal benchmarking effort will continue with each iteration of this report.

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

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Besides XYZ, three other utilities have been selected for comparison

• They were selected for their scope of operations and number of electric customers served

External Data Collection

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

ABC DEF XYZ GHI 68,972 58,958 150,000 61,861 Customers 1,535,843 1,294,441 640,000 283,350 Service Territory (sq. km) 166,700,000 54,000,000 153,200,000 32,144,000 System Capacity

Note: While an attempt was made to select utilities that offered comparative value, none of the utilities profiled provided an exact match to XYZ

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External data was gathered to support the benchmarks

• This type of organizational data helps to develop algorithms for comparing different types of operations
• By looking at overall workload, network size and complexity, we can establish calculations to balance the

research data prior to analyzing the results

External Data Collection

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Hydro Quebec

Number of Large Projects 15 3 28 13 Number of Medium Projects 30 10 38 6 Number of Small Projects 250 150 5 1 Network Elements 3,255 2965 13,462 1250 Category

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Weighting factors will be applied prior to comparing values in order to normalize the data

Weighting Factors

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Key Issue: Establish weighting factors in order to make comparisons across companies’ activity levels. Rationale: Since the number of network elements and the number of projects were deemed to provide even contributions to overall workloads, the weighting factors preserved that 50/50 relationship while using an index to tie it to a single value. The resultant weighted values will be more meaningful when compared against one another because they are all indexed off a single value. Result: Values appropriate to compare the work loads of other utilities to XYZ’s operations.

Weighting Factors

Approach: Initial interview results identified project related work and the number of network elements were both significant factors in determining work load for the network monitoring function. Weighting multiples were then established to arrive at an expression of relative workload whereby each factor accounted for 50% of the total.

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Weighted Projects Network Elements Initial Units Final Units BCH 350 1250 455 1.00 MTB 244 2965 493 1.08 HQC 857 13046 1954 4.29 HON 745 1250 850 1.87 484 5754 Initial Weighting 1 0.08 Final Weighting 0.00220 0.00018 Organization Network Monitoring

For network monitoring activities, it was concluded that 50% of the work load stems from projects and the remaining 50% by the number of network elements – applying appropriate weighting factors accomplishes this

Weighting Factors

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

A) Weighted projects are calculated based

• n time allocations

B) Information on the network elements is collected D) Initial units are calculated based on weights C) Weightings are calculated so that average values are driven to the desired ratio based on interviews with target utilities E) Final units are based on recalibrations

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Weighted Projects Network Elements Initial Units Final Units BC Hydro 350 1250 486 1 Manitoba Hydro 244 2957 566 1.16 Hydro-Quebec 857 13046 2279 4.69 Hydro One 580 1375 730 1.5 Average 508 4657 Initial Weighting 1 0.11 Final Weighting 0.00206 0.00022 Network Monitoring

HC Units Unit Cost HC at HOT HC in Excess of HOT Efficiency Level BC Hydro 11.75 1.00 0.09 15.84 8.99 Manitoba Hydro 6.71 1.16 0.17 8.09 1.24 Hydro-Quebec 16.81 4.69 0.28 7.26 0.41 Hydro One 6.85 1.50 0.22 6.85 0.00 Network Monitoring

Scaling factors are also used to compare differing levels of activities

• The original interviews we conducted identified the network monitoring job functions at each of the utilities
• The procedures from Step 5, where we calculated weighted project values, established the amount of work

completed by each group

• With these two pieces of information the unit costs – headcount per work unit – can be calculated
• However, before comparing the values they must be adjusted to account for differing efficiency levels, which

is accomplished through the use of scale curve calculations

Scaling Factors

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

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The use of scale curves allows us to make comparisons even when operating volumes differ widely

Scaling Factors

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Network Monitoring Efficiency Levels

8.00 10.00 12.00 14.00 16.00 18.00 20.00 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Work Units FTEs/Work Unit HON HQB BCH MTB

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Finally, revisions are made where collected information seems suspect

Validation

Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation Internal Data Collection Benchmark Method Cost Drivers External Data Collection Weighting Factors Scaling Factors Validation

Network Monitoring Benchmarking Model Prepared for: Prepared by: Company A Company B Company C Company D Company E Large Projects 50 7 33 17 5 Medium Projects 122 16 11 140 17 Small Projects 231 265 4 18 78 Network Elements 5,892 3,876 1,852 4,500 1,750 Ntwk Mntr Headcount 14.95 8.00 14.75 15.61 13.43 Weighted Projects 1,969 504 873 1,003 271 Network Elements 5,892 3,876 1,852 4,500 1,750 Initial Units 3,492 1,506 1,352 2,166 723 Final Units 4.83 2.08 1.87 2.99 1.00 Initial Weighting - Projects Initial Weighting - Elements Final Weighting - Projects Final Weighting - Elements Unit Cost 3.10 3.84 7.89 5.21 13.43 Comparable FTEs 9.35 9.30 18.57 13.88 26.81 FTEs above Industy Avg.

• 4.00
• 4.05

5.22 0.54 13.46 % from Industry Average

• 29.93%
• 30.31%

39.14% 4.02% 100.83% 1.00000 0.25853 0.00138 0.00036