BC H YDRO 2011 R EVENUE R EQUIREMENTS B-3 E XHIBIT B C hydro m G EN ER ATIO N S ONMLKJIHGFEDCBA FO R Joanna S ofield C hief R egulatory O fficer P hone: (604) 623-4046 Fax: (604) 623-4407 bchyd roregulatorygroup@ bchydro.com A pril 7, 2010 M s. E rica M . H am ilton. C om m ission S ecretary B ritish C olum bia U tilities C om m ission S ixth Floor - 900 H ow e S treet V ancouver, B C V 6Z 2N 3 D ear M s. H am ilton: R E : P roject N o. 3698592 B ritish C olum bia U tilities C om m ission (B C U C ) B ritish C olum bia H ydro and P ow er A uthority (B C H ydro) Fiscal 2011 R evenue R equirem ent W orkshop P resentation B C H ydro encloses as E xhibit B -3 its presentation from the W orkshop held on A pril 7, 2010. For further inform ation, please contact G uy Leroux at 604-623-3696. Y ours sincerely, VU/Jc/ Joanna S ofield C hief R egulatory O fficer (F11 R R A ) R egistered c. B C U C P roject N o. 3698592 Intervener D istribution List. 333 D U n'Sm lJir C olum bia and P ow er VarlC O lJVer B C V6B 5R 3
F2011 REVENUE REQUIREMENT APPLICATION WORKSHOP APRIL 7, 2010
PRESENTATION AGENDA 1. Introduction 2. Overview of the F11 RRA 3. F11 Revenue Requirement Summary • Cost of Energy • Operating Costs • Capital-related Costs • Subsidiary Net Income • Deferral Account Rate Rider • Revenue Shortfall 4. Capital Additions 5. Return on Equity 6. Regulatory Schedule F11 RRA Workshop April 7, 2010 2
OVERVIEW: ORGANIZATION OF APPLICATION Executive summary 1. Application overview 2. Performance measures and benchmarking 3. Load and revenue forecast 4. Cost of energy 5. Operating costs 6. Capital expenditures and additions 7. Deferral and other regulatory accounts 8. Other revenue requirement items 9. Status of RRA directives and commitments Appendices F11 RRA Workshop April 7, 2010 3
OVERVIEW: APPROVALS SOUGHT The Application covers a one-year test period (F2011) Across - the - board rate increase of 6.11 per cent • • Increase in the Deferral Account Rate Rider to 4.0 per cent • Acceptance of expenditures for energy conservation rates • Various Regulatory Account orders including some to mitigate the rate increase F11 RRA Workshop April 7, 2010 4
OVERVIEW: RATE INCREASE MITIGATION MEASURES • Reduction in operating cost budget (excluding non-current pension costs) • 4 per cent Deferral Account Rate Rider rather than 5 per cent • Smoothing the initial rate impact of the Waneta Transaction • Refunding in F2011 the entire balance of the Total Finance Charges and the Net Employment Cost Regulatory Accounts, and recovering the balances in the ROE Adjustment and Pension Regulatory Accounts over five years F11 RRA Workshop April 7, 2010 5
F2011 REVENUE REQUIREMENT SUMMARY F2010 F2011 Impact ($ million) RRA Plan Increase on Rates Cost of Energy 1,225.5 1,203.0 (22.5) -0.75% Operating Costs Current Operating Costs (excl PEB) 644.8 599.6 (45.2) -1.50% Non-current PEB - Pensions (51.4) 21.2 72.6 2.41% Non-current PEB - Other 42.0 30.0 (12.0) -0.40% Deferred Operating Costs 179.4 302.9 123.5 4.11% Taxes 178.1 180.7 2.6 0.09% Amortization 422.5 505.6 83.1 2.76% Finance Charges 498.5 482.5 (16.0) -0.53% Return on Equity 451.5 608.9 157.4 5.24% Non-Tariff Revenue (39.9) (44.6) (4.7) -0.16% Inter-Segment Revenue (64.8) (47.6) 17.2 0.57% Regulatory Account Transfers (199.2) (352.2) (153.0) -5.09% Subsidiary Net Income (200.9) (153.0) 47.9 1.59% Other Utilities Revenue (16.6) (18.2) (1.6) -0.05% Deferral Account Rider Revenue (15.3) (127.6) (112.3) -3.74% Less Revenue at F2010 Rates (3,054.1) (3,007.4) 46.7 1.55% Revenue Shortfall 0.0 183.7 183.7 6.11% Rate Increase 6.11% Exhibit B-1, Table 1-1, page 1-2 F11 RRA Workshop April 7, 2010 6
F2011 RR SUMMARY: COST OF ENERGY Cost of Energy Volume (GWh) Cost ($ million) F2009 F2010 F2010 F2011 F2009 F2010 F2010 F2011 Actual RRA Forecast Plan Actual RRA Forecast Plan Hydroelectric (water rentals) 44,348 47,041 41,126 47,852 309.7 339.1 303.7 372.9 IPPs and Long-Term Commitments 8,374 9,277 8,140 10,145 543.0 627.6 547.2 737.7 Market Electricity Purchases 5,020 1,091 2,516 732 272.6 59.6 87.1 27.0 Domestic Transmission - - - - 107.8 104.4 91.1 85.3 Natural Gas for Thermal Generation 312 260 609 356 47.3 39.2 44.9 41.1 Surplus Sales -196 -99 0 -835 (9.7) (6.8) 0.0 (39.3) Net Purchases (Sales) from Powerex -65 213 2,445 -1,619 (25.8) 19.9 99.9 (45.0) Non-Integrated Area 116 115 110 116 24.0 26.5 20.8 23.6 Other - - - - 13.9 16.0 15.9 (0.3) Total 57,909 57,898 54,946 56,748 1,282.8 1,225.5 1,210.7 1,203.0 Derived from Exhibit B-1, Appendix A, Schedule 4.0 F11 RRA Workshop April 7, 2010 7
F2011 RR SUMMARY: OPERATING COSTS Current Operating Costs F2009 F2010 F2010 F2011 ($ million) Actual RRA Forecast Plan Operating Costs by Business Group Corporate (Excl Non-Current PEB) 166.0 165.1 176.4 170.4 EARG 136.0 147.4 129.4 131.2 CC&C 90.8 88.8 87.3 85.1 Transmission 97.6 95.9 96.1 96.1 Field Operations 139.5 160.3 142.7 140.5 F09/F10 RRA Adjustments 0.0 (19.4) 0.0 0.0 Subtotal 629.9 638.1 631.8 623.3 Non-Current PEB - Pension (44.6) (51.4) 34.2 21.2 Non-Current PEB - Other 27.1 42.0 26.8 30.0 Regulatory Account Transfers 36.2 6.7 (58.3) (23.7) Total Current Operating Costs 648.6 635.4 634.5 650.8 Exhibit B-1, Table 5-3, page 5-6 F11 RRA Workshop April 7, 2010 8
F2011 RR SUMMARY: CAPITAL-RELATED COSTS • Capital-related costs include amortization, finance charges, and ROE • Overall F2011 rate increase impact is 7.47 per cent • Lower interest rates provide an offset to what would otherwise be higher capital-related costs • Capital additions will be discussed later F11 RRA Workshop April 7, 2010 9
F2011 RR SUMMARY: SUBSIDIARY NET INCOME Subsidiary Net Income F2009 F2010 F2010 F2011 Actual RRA Forecast Plan ($ million) Powerex Net Income 243.9 199.0 (54.3) 152.0 Powertech Net Income 1.2 1.9 0.7 1.0 Total 245.1 200.9 (53.6) 153.0 Exhibit B-1, Appendix A, Schedule 1.0 F11 RRA Workshop April 7, 2010 10
F2011 RR SUMMARY: REVENUE FROM THE DEFERRAL ACCOUNT RATE RIDER • December 2009 balance was $586.0 million, up from September 2009 balance of $539.7 million • Main contributors to the increase in Deferral Account balances in F2010 have been: – Low trade income – Load variance • 4 per cent rate rider provides $127.6 million in revenue in F2011 F2009 F2010 F2010 F2011 Actual RRA Forecast Plan ($ million) Revenue from Deferral Account Rate Rider 14.0 15.3 29.5 127.6 Exhibit B-1, Appendix A, Schedule 1.0 F11 RRA Workshop April 7, 2010 11
F2011 RR SUMMARY: REVENUE SHORTFALL Domestic Energy Sales F2009 F2010 F2010 F2011 (GWh) Actual RRA Forecast Plan Residential 17,861 16,967 17,378 17,296 Light Industrial and Commercial 18,265 18,586 17,859 18,021 Large Industrial 14,303 15,240 12,858 14,226 Other 1,887 1,829 1,905 2,006 Total 52,316 52,622 50,000 51,550 Domestic Revenues F2009 F2010 F2010 F2011 Actual RRA Forecast Plan ($ million) Residential 1,191.5 1,234.9 1,267.0 1,255.3 Light Industrial and Commercial 1,048.7 1,159.3 1,125.5 1,125.6 Large Industrial 479.0 576.5 468.6 537.4 Other 99.8 100.1 103.4 107.2 Total 2,819.0 3,070.7 2,964.4 3,025.6 Derived from Exhibit B-1, Appendix A, Schedule 14.0 F11 RRA Workshop April 7, 2010 12
F2011 RR SUMMARY: REVENUE SHORTFALL Domestic Energy Sales 60,000 50,000 Other 40,000 GWh Large Industrial 30,000 20,000 Light Industrial and Commercial 10,000 Residential 0 F2009 F2010 F2010 F2011 Actual RRA Forecast Plan Derived from Exhibit B-1, Appendix A, Schedule 14.0 F11 RRA Workshop April 7, 2010 13
CAPITAL ADDITIONS F2009 F2010 F2011 ($ million) RRA Actual Difference RRA Forecast Difference Plan 1 2 3 = 2 - 1 4 5 6 = 5 - 4 7 Capital Additions Hydroelectric Generation 308.2 274.8 (33.5) 245.4 1,042.5 797.1 497.6 1 Diesel Generation 13.3 0.5 (12.8) 14.3 10.9 (3.4) 10.5 2 Thermal Generation 12.6 16.6 4.0 10.3 16.8 6.5 10.1 3 Transmission Lines 511.6 406.4 (105.2) 397.4 351.9 (45.5) 369.2 4 SDA Substations 83.3 136.6 53.3 103.4 89.0 (14.4) 100.9 5 Distribution 372.9 317.7 (55.3) 398.9 487.6 88.8 436.6 6 Information Technology 44.4 42.4 (2.0) 42.1 72.0 29.9 92.4 7 Vehicles 24.0 25.2 1.2 21.8 43.6 21.9 26.4 8 Properties and Other Capital 79.1 45.2 (33.9) 97.1 74.4 (22.7) 100.8 9 Smart Metering and Infrastructure 0.0 0.0 0.0 0.0 4.0 4.0 54.3 10 HPOP Properties for Resale 0.0 0.0 0.0 0.0 49.0 49.0 (21.0) 11 Demand Side Management 112.1 94.9 (17.2) 138.2 144.8 6.6 184.4 12 Total 1,561.5 1,360.1 (201.4) 1,468.8 2,386.5 917.7 1,862.1 13 Exhibit B-1, Table 6-4, page 6-7 F11 RRA Workshop April 7, 2010 14
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