AESO 2014 Business Plan and Budget Proposal

Transcription

1 AESO 2014 Business Plan and Budget Proposal November 1, 2013

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3 Table of Contents Section 1 Section 2 Section 3 Board Decision Items Executive Summary Stakeholder Presentations to the AESO Board Stakeholder Consultation Undertaken Terms of Reference for Budget Review Process Budget Review Process Budget Review Process Schedule Section 4 AESO 2014 Business Plan and Budget Proposal General & Administrative and Interest Costs and Amortization Market Systems Replacement Project Capital Costs Other Industry Costs Wires Costs Transmission Line Loss Costs Ancillary Services Costs Section 5 Stakeholder Comments and AESO Responses AESO 2014 Business Plan and Budget Proposal

4 Section 1 Board Decision Items Executive Summary

5 Over the last several months, we have reviewed and discussed with stakeholders and the AESO Board, our proposed business initiatives for From this review, we have indicated our planned direction for our operations in the upcoming year that will enable the AESO to meet its mandate 1 and advance its strategic plan. This AESO 2014 Business Plan and Budget Proposal (Business Plan) provides an understanding of our proposed business initiatives that we are planning to focus on for the upcoming year. The business initiatives being proposed form the foundation from which we have developed our 2014 budget (general and administrative and capital). At this time, we are presenting this Business Plan to the AESO Board for approval which includes the following: General and Administrative and Interest Costs and Amortization Market Systems Replacement Project Capital Costs Other Industry Costs Wires Costs Transmission Line Losses Costs Ancillary Services Costs We have engaged stakeholders interested in reviewing our initiatives and budgets in more detail and providing us with their comments and feedback as we were working through this process. This consultation process, referred to as the Budget Review Process (BRP), allows us to prepare a business plan and budget that has been reviewed, discussed and at times challenged before we reach this point. As a part of this presentation to our Board, we provide the stakeholder written comments that we have received to date. The purpose of providing these comments is for the AESO Board to gain insight into some of the areas that created discussion throughout this process. We continue to believe that this open and transparent process enables us to prepare a thorough and comprehensive Business Plan, and we believe our stakeholders continue to appreciate this inclusive process. The end result is a well communicated and understood Business Plan that will provide us direction in the coming year. Our budget is based on the funding required for us to achieve our business initiatives and maintain our bases business as outlined in the Business Plan. In addition to this, we are also providing the wires, transmission line losses and ancillary service cost budgets for 2014 which are within the AESO Board s mandate for approval based on the provisions in the Transmission Regulation. These budgeted costs have been developed internally and have been included in the process to engage stakeholders for review and comment, consistent with our general and administrative and capital costs budgets. 1 The Alberta Electric System Operator (AESO) is responsible for the safe, reliable and economic planning and operation of the Alberta interconnected electric system (AIES) and the facilitation of a fair, efficient and openly competitive electricity market. AESO 2014 Business Plan and Budget Proposal Page 1 Section 1 - Board Decision Items Executive Summary

6 The following are the approvals that we will be requesting from the AESO Board. AESO Board is Requested to: 1. Endorse the 2014 business initiatives as outlined in the Business Plan. 2. Approve the following proposed 2014 budget amounts as outlined in the Business Plan and summarized as follows: Budget/Forecast Revenue Source ($ million) Category Transmission Energy Market Load Settlement Total General and Administrative Market Systems Replacement Project Interest (0.3) Amortization Capital 19.9 Other Industry Wires 1, ,407.3 Transmission Line Losses Ancillary Services AESO 2014 Business Plan and Budget Proposal Page 2 Section 1 - Board Decision Items Executive Summary

7 Section 2 Stakeholder Presentations to the AESO Board

8 Stakeholder presentations to the AESO Board to be inserted when received. AESO 2014 Business Plan and Budget Proposal Page 1 Section 2 - Stakeholder Presentations To the AESO Board

9 Section 3 Stakeholder Consultation Undertaken

10 The Transmission Regulation 1 (T-Reg) includes provisions addressing the approval of the AESO s own costs, ancillary services costs and transmission line losses costs. The T-Reg provides that the AESO must consult with stakeholders with respect to the proposed costs to be approved by our Board. It also provides that these costs, once approved by the AESO Board, must be considered by the Alberta Utilities Commission (Commission) as prudent unless interested persons satisfy the Commission otherwise. The practice we have established to carry out this consultation is the Budget Review Process (BRP). The BRP is a transparent process which provides a level of prudence review with input from stakeholders. At the conclusion of the BRP, we will make a recommendation with respect to our own costs (general and administrative, interest, amortization, capital and other industry costs), transmission line losses costs and ancillary services costs to the AESO Board for approval. We have posted the BRP overview, terms of reference and a calendar providing the BRP milestone activities leading up to an AESO Board decision (the calendar was revised throughout the process to accommodate process changes and schedules). These documents have been included as Appendices A to C to this Section. At a high level, the BRP steps followed are: Notice to stakeholders AESO Develop 2014 Business Initiatives AESO Develops Own Costs Budgets and Ancillary Services and Transmission Line Losses Cost Forecasts Review 2014 Business Initiatives with stakeholders Technical Meeting(s) to Review the Own Cost Budget, Ancillary Services and Transmission Line Losses Costs Forecasts for 2014 AESO Board Decision As with prior years BRP, the process has been open to all stakeholders and the process had been transparent as all presentation materials, stakeholder comments (if any) and our responses have been posted on the AESO website. Through this process, we have ensured that all stakeholders have had an opportunity to provide input. The BRP will be re-evaluated with stakeholders at its conclusion and refinements made to the process going forward as required. 1 A/R 86/2007 AESO 2014 Business Plan and Budget Proposal Page 1 Section 3 - Stakeholder Consultation Undertaken

11 Appendix A Terms of Reference for Budget Review Process July 29, 2013 Transparency is the overarching principle in the BRP. The following will help ensure transparency to stakeholders during this process. The process should be open to all stakeholders that are interested. The size of the group should not be limited. Stakeholders are encouraged to register as participants at the outset of each year s process in order to ensure a consistent understanding and to minimize inefficiencies. Comments will be collected in written form only, and will be responded to by the AESO and shared with all stakeholders (i.e., posted to AESO website). As well, stakeholders will have the opportunity to comment on each others comments. Comment submissions are a requisite during the technical consultation period in order to be entitled to present to the AESO Board on the same comments. The written decision rendered by the AESO Board on these matters will contain reasons / rationale. Throughout the process, the AESO will endeavor to provide as much information as reasonably possible to ensure stakeholders have all information relevant to the subject matters under review. However, the AESO and stakeholders will need to agree on the level of detail to discuss (including confidential information), on an issue by issue basis, in an effort to be most effective and efficient. At the end of each AESO budget process review cycle, the AESO and stakeholders will evaluate the effectiveness of the process and make appropriate changes if required for the following year. In Addition: Everyone is able to present their views. Everyone must work within the timeline agreed upon at the start of the process. This process is not a negotiated settlement. The material to be delivered to the AESO Board in order to prepare a decision does not have to be agreed upon unanimously. Information will be provided to all stakeholders in a timely manner. Stakeholders will have a reasonable time period to review and respond to AESO material. Nothing will preclude the opportunity for stakeholders to ultimately appeal any decision using the dispute mechanism outlined in the ISO Rules. AESO 2014 Business Plan and Budget Proposal Page 2 Appendix A - Terms of Reference for Budget Review Process

12 Appendix B Budget Review Process Refer to the following BRP flow diagram. AESO 2014 Business Plan and Budget Proposal Page 3 Appendix B - Budget Review Process

13 AESO 2014 Budget Review Process Overview - Steps Process to approve forecasted Ancillary Services & Transmission Line Losses and update Stakeholders on 2014 Business Initiatives and Own Cost budget Invitation to Stakeholders AESO Develops Strategies & Business Initiatives AESO develops Own, Ancillary Services and Transmission Line Loss Costs Forecasts Technical Meeting to Review Forecasted Costs AESO Board Decision Dispute Process Notice sent to all stakeholders that the process to develop and review forecasted costs will commence Process includes developing a schedule with all milestone dates AESO to solicit stakeholder input on strategies and business initiatives Review progress on existing strategies and business initiatives with stakeholders Stakeholders receive AESO strategies and business initiatives for the upcoming year AESO prepares Own Cost forecast for the upcoming year based on the business initiatives and strategic plan set out in step 2.0 AESO prepares forecasts of Ancillary Services and Transmission Line Loss Costs AESO provides documents to stakeholders in advance of holding a technical review meeting AESO holds technical session(s) with stakeholders where the AESO presents forecasted costs, assumptions and responds to stakeholder comments AESO posts meeting overview document to AESO website and asks for written comments AESO makes revisions as deemed necessary AESO prepares an AESO Board Decision Document and provides to stakeholders for review prior to submission to the AESO Board AESO submits Board Decision Document to the AESO Board for review and decision AESO Board reviews Board Decision Document Stakeholders make oral or written presentations to the AESO Board on issues of disagreement or concern (multi-lateral) based on comments submitted in step 4.0 AESO Board considers stakeholder presentations and reply comments in its approval process AESO Board issues a decision for AESO s Own, Ancillary Services and Transmission Line Loss Cost forecasts with rationale Dispute resolution mechanism for instances where a stakeholder disagrees with the AESO Board Decision. The Dispute Resolution process is outlined in the ISO Rules Alberta Electric System Operator July 29, 2013 Page 4

14 Appendix C Budget Review Process Schedule Refer to the following calendar providing the BRP milestone activities. AESO 2014 Business Plan and Budget Proposal Page 5 Appendix C - Budget Review Process Schedule

15 Budget Review Process External Calendar - Revised August 29, 2013 Meeting Material Distributed Stakeholder Mtgs Stakeholder Comments Requested Stakeholder Comments Received AESO Posts Meeting Summary JULY AUGUST SEPTEMBER Mon Tues Wed Thurs Fri Mon Tues Wed Thurs Fri Mon Tues Wed Thurs Fri Holiday Holiday Holiday Distribution of materials for Business Strategies / Initiatives mtg. (Step 2) Receive Stakeholder comments on Invitation and Process materials (Step 1) Business Strategies / Initiatives meeting (Step 2) Web posting for comments on Business Strategies / Initiatives (Step 2) Web posting of comments on Invitation and Process materials (Step 1) Receive Stakeholder comments on Business Strategies / Initiatives (Step 2) Distribution of Invitation to Stakeholders and Process materials (Step 1) Web posting for comments on Invitation and Process materials. (Step 1) OCTOBER NOVEMBER DECEMBER Mon Tues Wed Thurs Fri Mon Tues Wed Thurs Fri Mon Tues Wed Thurs Fri Distribution of materials for Tech Mtg Forecasts, Own Costs and MSR (Step 4) Web posting of comments on Business Strategies / Initiatives (Step 2) Tech. Mtg. Forecasts, Own Costs and MSR Calgary (Step 4) Web posting for comments on Forecasts, Own Costs and MSR (Step 4) Receive Stakeholder written submissions to AESO Board (Step 5) Web posting of Stakeholder written submissions to AESO Board (Step 5) Holiday Tech. Mtg. Forecasts, Own Costs and MSR Edmonton (Step 4) Holiday Meetings with AESO Board (TBC) Oral Presentation to AESO Board or Board 21 Committee (Step 5) Receive Stakeholder comments on Forecasts, Own Costs and MSR (Step 4) Holiday Holiday Web posting of comments on Forecasts, Own Costs and MSR (Step 4) Web posting of 2014 Draft - Business Plan and Budget (Step 4) * MSR - Market Systems Replacement 2014 BRP External Calendar revision 1.xlsx

16 Section 4 AESO 2014 Business Plan and Budget Proposal

17 Table of Contents AESO Vision... 2 AESO Mission... 2 Letter from the President and CEO... 2 AESO Operations Business Plan... 5 Electric System Operations Achievements Plans... 7 Electric System Development Achievements Plans... 9 Customer Access Services Achievements Plans Corporate Services Achievements Plans Information Technology Services Achievements Plans Financial Highlights Section I Section II Appendix A: Year-to-Date September 2013 Financial Results Detail Appendix B: Transmission Operating Cost Definitions Appendix C: 2014 General and Administrative Cost Detail Appendix D: Capital Projects Appendix E: Market Systems Replacement Appendix F: Allocation of Costs... 56

18 AESO Vision The AESO will be seen as a significant contributor to the development of Alberta and the quality of life for Albertans, through our leadership role in the facilitation of competitive electricity markets and the reliable operation and development of the Alberta Interconnected Electric System (AIES). AESO Mission The AESO facilitates a fair, efficient and openly competitive market for electricity and provides for the safe, reliable and economic operation of the AIES. Letter from the President and CEO We have made good progress in advancing our initiatives in 2013 and we are on track to deliver another year of solid performance. This will position us well to execute on the ambitious plans we have for The AESO s 2014 Business Plan and Budget Proposal (Business Plan) provides our most notable achievements for 2013 and our initiatives for the upcoming year to advance our Strategic Plan. New for 2014, our Business Plan has been presented based on our business activities and associated costs. A significant amount of effort has been expended into the development of this presentation basis and we believe this will provide better transparency and understanding of our operations. Here are some of our highlights. Maintaining safe, reliable, economically efficient electric system operations continues to be an important priority at the AESO and is a critical part of our mandate. We expect the electric system to continue to be stretched in 2014 and beyond until some of the major transmission reinforcement projects in Alberta are operational. The expertise of our world-class System Controllers will continue to be crucial throughout this period. Our controllers were put to the test this summer during the supply shortfall events that we experienced and we were able to mitigate the impact to Albertans, which was quite remarkable under the circumstances. Further to this we have initiatives underway to enhance overall grid reliability such as the integration of the high voltage direct current (HVDC) transmission projects currently being constructed. We are well on our way to reestablishing a robust transmission system in Alberta as we continue to execute on our electric system development plans. Construction has begun on several major projects across Alberta as we continue to advance several of the projects which were included in our 2012 Longterm Transmission Plan. Improving Customer Access Services continues to be an important area of focus for us particularly to reduce customer connection cycle times and to provide higher quality customer service overall. We have advanced connection process enhancements and the Market Participant Choice initiatives which will continue to progress in To be successful with these initiatives, we will need to continue to collaborate with industry so the full benefit of these initiatives can be realized. The wholesale electricity market is functioning well and contributing many benefits for the province: the price of electricity in Alberta is competitive; we have healthy supply margins; diverse generation technologies and access to a wide variety of fuel sources; and we have a higher percentage of wind generation on our system than any other Canadian province. The initiatives that we plan to execute in this area are designed to further evolve the market including advancing the wind framework, various intertie AESO 2014 Business Plan and Budget Proposal Page 2

19 initiatives and the implementation of the new transmission constraint management rule. In addition, a validation project was initiated in 2013 to determine if our current market systems should be replaced with new technology. This included initial research on market systems and consultation with market participants to develop requirements. In December the AESO Board will decide if the project should proceed to the next phase, Request for Proposals. If the decision is to proceed, this will become a significant initiative for our organization in To enable the AESO to successfully achieve our mandate and the initiatives I have highlighted, we need great people, processes and tools. We continue to invest in our most important assets our people as well as supporting processes and technologies to ensure we can deliver effectively and efficiently to meet the high standards we set for ourselves. As a mature organization, our operations are stable and we see opportunities to streamline processes to reduce our spending without sacrificing the value we add or the quality of our work. Each year we take a careful look at our costs and manage them diligently. This year we took this a step further to examine our overall activities, sharpen our focus and become more efficient. As a result of this work, our proposed general and administrative budget for 2014 is $96.0 million, which is a $2.3 million or a two per cent reduction from our 2013 budget of $98.3 million. In addition, our capital budget for 2014 is $19.9 million compared to the 2013 budget of $27.0 million, a reduction of $7.1 million or 26 per cent. As we move forward we will continue to seek further efficiencies or reduced costs. In closing, we have a solid electricity framework in place, we are focused on the right initiatives and we are well equipped to deliver on our commitments. We will continue to work hard and apply our knowledge to advance our strategic and business plans. David Erickson, President and Chief Executive Officer AESO 2014 Business Plan and Budget Proposal Page 3

20 AESO Operations The AESO s 10-year anniversary occurs in 2013 and over the last ten years the operations of the organization have changed significantly in response to increased participation in the restructured electricity industry, wholesale electricity market evolution and additional growth in Alberta which impacts the provincial electricity infrastructure. It has been a challenging 10 years and during this period, the role and focus of the AESO has needed to be agile to respond to these changes. The AESO s operations have historically been described using five key processes: Electric System Development; Electric System Operations; Customer Access Services; Market Development; and Corporate Services. In preparation for the Business Plan, the day-to-day activities, resulting deliverables and associated general and administrative costs (mainly staff and contract services) for each process were examined and summarized. Each key process is described through an overview and the respective activity groups. Resource costs in 2014 represent approximately $74 million or 77 per cent of the AESO s total general and administrative budget of $96.0 million. The associated resources, notable achievements for 2013 and plans for 2014 are presented by activity group to provide greater transparency and understanding of AESO operations and all of the work that goes into delivering on the AESO mandate every day. The AESO s information technology program was set apart from the key processes for 2014 to provide additional time for management to complete a thorough review and analysis of the information Resource Costs ($74 million) 1. Electric System Operations ($22 million) 3. Customer Access Services ($10 million) 2. Electric System Development ($17 million) 4. Market Development ($5M) 5. Corporate Services ($10 million) Information Technology Services ~ Resources ($11 million) With the passage of time and as the industry evolves, the AESO will continue to refine its focus and reallocate its resources to best serve Albertans. This will become apparent when comparing the activity grouping information on an annual basis. While annual changes may have subtle impacts, the impact from material changes will be more evident. For instance, over the last several years, the focus has been on the evaluation of the transmission system and the approval and construction of reinforcement which resulted from that evaluation. Looking forward to the future, that level of activity is will slow as system development plans are executed. For the presentation of AESO operations, the shift will be evident in Electric System Development resources when it occurs. AESO 2014 Business Plan and Budget Proposal Page 4

21 2014 Business Plan In 2009, the AESO refreshed its Strategic Plan which provided both the AESO and industry with the view of the AESO s role in leading the industry into the future and furthering the economic development of Alberta for a period out to This Strategic Plan provided a path forward so that the AESO would be well positioned to proactively identify those opportunities for success, as well as emerging issues, on a timely basis and address them in the best way possible. The Strategic Plan is meant to set the direction of the organization for multiple years. It is the annual business plan that will influence the day-to-day and annual initiatives. During 2013, the AESO has once again taken the step back to confirm and reassess the longer term direction for the organization. This work is ongoing with plans for a new Strategic Plan to be communicated in It is not anticipated that this updated Strategic Plan will change the course of any of the 2014 business initiatives presented in this Business Plan given the multi-year nature of the initiatives currently underway and the long term nature of the Strategic Plan. The AESO s annual business plan and budget are presented to industry through the Budget Review Process for valued feedback. The business plan initiatives presented reflect that consultation. AESO 2014 Business Plan and Budget Proposal Page 5

22 Electric System Operations We will direct the safe and reliable operation of the Alberta transmission and market system in a fair, efficient, and openly competitive manner. The optimal management of electric system operations continues to be a primary focus and a crucial piece of the AESO s mandate. Effectively maximizing the use of transmission capacity and monitoring transmission system performance is critical as Alberta s demand for electricity grows on an already constrained system. The AESO operates the Alberta Interconnected Electric System (AIES) and competitive market, in accordance with the North American Electric Reliability Corporation (NERC) and Western Electricity Coordinating Council (WECC) reliability criteria and standards. We will proactively manage risks and operate the AESO and the AIES compliantly. The AESO fosters a culture of compliance through demonstrated adherence to Alberta Reliability Standards (ARS), legislation, regulations and Independent System Operator (ISO) rules, and by monitoring compliance to ARS by market participants. The AESO delivers Electric System Operations through four primary activity groups: Real-time Operations; Operations Business Services; Operations Engineering; and Operations Systems. It is not surprising that the significant work accomplished in these critical activity groups represents the largest portion of the AESO s resources at 30 per cent or $22 million of 2014 resource costs. Electric System Operations Costs $22 million to deliver 30% of total AESO resource dollars Real-time Operations requires the largest amount of time and dollars spent on Electric System Operations. A critical component of this is the 24/7 real-time operation of the AIES and AESO markets. Resources are also associated with planning for operating limits and preparations for system restoration. Operations Business Services includes the resources dedicated to maintaining System Controller procedures and training as well as managing and facilitating energy market settlement and credit. It also includes the activities related to developing and implementing the ARS and monitoring both the AESO and external market participants to ensure their operations are in compliance with these standards. Operations Engineering reflects the studies, analysis, monitoring tool development and coordination required for operations planning as well as providing real-time engineering support. Technical rule development is also captured in this activities group. Operations Systems focuses on the Energy Management System (EMS) application to provide real-time support, modifications resulting from changes to the AIES as well as the project management required for operations system changes. Electric System Operations Costs by Activity Group 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Real-time Operations ($8.7M) Operations Engineering ($4.9M) Operations Business Services ($6.0M) Operations Systems ($2.5M) AESO 2014 Business Plan and Budget Proposal Page 6

23 Achievements and Plans In addition to the ongoing electric system operations activities, the following table outlines the notable achievements completed or expected to be completed in 2013 and planned initiatives for 2014 categorized by activity group. Real-time Operations Operations Business Services Operations Engineering Operations Systems 2013 Achievements Managed the AIES within the appropriate limits identified for short and long term operations. Completed preparations to assume Alberta Reliability Coordinator (RC) function. Continued ongoing development and implementation of ARS. Completed the grid restoration review and initiated implementation plans. Developed a revised Energy Management System (EMS) strategy. Implemented changes to the EMS model to accommodate the Montana-Alberta Tie Line. Completion of 120 or more energizations Plans Integrate 29 additional RC-related requirements as the AESO assumes the RC responsibilities from WECC. Assume RC function for Alberta. Continue to prioritize and implement ARS. Continue to advance Security/Critical Infrastructure Protection program to enhance system reliability and operate the AIES in accordance with industry-wide reliability criteria and standards. Design and implement operations engineering studies to prepare for high voltage direct current (HVDC) operations. Implement process and system enhancements designed to improve grid reliability and those designed to support the integration of electric system development initiatives (reliability programs). Implement the revised EMS strategy that was developed in AESO 2014 Business Plan and Budget Proposal Page 7

24 Electric System Development We will lead the development of a reliable transmission system, including interties to other jurisdictions, which fully enables the operation of the competitive market. The transmission system and the electricity market are mutually interdependent and together form Alberta s electricity framework. The market s continued success is underpinned by a robust transmission system. Its ability to continue to function well and encourage economic prosperity in Alberta relies on having an unconstrained, reliable transmission system that can keep pace with the evolving market. The AESO continues to advance the transmission projects outlined in its Long-term Transmission Plan and filed its 2012 Long-term Plan Progress Report with the Alberta Utilities Commission (AUC) in July of Several of these projects are now well into the implementation stages, helping to establish a system to deliver electricity where needed while maintaining confidence that new generators will have access to the AIES. As specified in the Transmission Regulation, and as outlined in the Electric Statutes Amendment Act, the AESO received AUC approval for its Competitive Process in February of The Competitive Process, which will be used to select a successful bidder to develop, design, build, finance, own, operate and maintain the Fort McMurray West 500 kv Transmission Project, is currently in the Request for Qualifications (RFQ) stage. From the RFQ, up to five respondents will be shortlisted to move forward into the Request for Proposals (RFP) stage. A successful bidder will be announced in early Electric System Development is accomplished at the AESO through three primary activity groups: Plan to Need Identification Document (NID) Approval; System NID Approval to Energization; and Maintenance. The work supporting these activity groups combined amounts to 22 per cent or $17 million of 2014 resource costs. Electric System Development Costs $17 million to deliver 22% of total AESO resource dollars Plan to NID Approval encompasses the planning and preparation work leading up to NID approval for system projects. This includes maintenance and program management for the long-term regional and bulk transmission plans; all of the activities prior to receiving NID approval including the regulatory process; and planning for system enhancements and affected power system and transmission-related market models. System NID Approval to Energization describes the work completed after a NID is approved and includes all of the activities leading up to energization such as providing transmission program support; project benchmarking, communication strategies; and developing and implementing the Competitive Process for certain transmission projects. Maintenance involves data and model maintenance for power system and transmission-related market models. Electric System Development Costs by Activity Group 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Plan to NID Approval ($6.3M) System NID Approval to Energization ($9.6M) Maintenance ($0.7M) AESO 2014 Business Plan and Budget Proposal Page 8

25 Achievements and Plans In addition to the ongoing electric system development activities, the following table outlines the notable achievements completed or expected to be completed in 2013 and planned initiatives for 2014 categorized by activity group. Plan to NID Approval System NID Approval to Energization Maintenance 2013 Achievements Filed 2012 Long-term Transmission Plan Progress Report with the AUC. Updated and filed the 2013 Longterm Transmission Plan with the AUC including advancing a robust and comprehensive regional planning process as part of the AESO s major long-term planning process. Filed and/or received AUCapproval of system project Need Identification Documents (NIDs) and amendments for Algar Area, FATD East, Kettle River, Medicine Hat SATR, North Central and Windy Flats SATR Plans Implement the updated 2013 Longterm Transmission Plan advancing regional and system transmission projects. Advanced plans for system and customer connection projects for improved delivery. Implemented new transmission cost monitoring practices and protocols. Progressed plans for the three stages of the Competitive Process for the Fort McMurray West 500 kv Transmission Project (REOI, RFQ and RFP stages). Continued to advance work on the Transmission Facilities Cost Monitoring Committee including enhancing cost estimate quality and reporting, implementing cost oversight initiatives and drafting amendments to ISO Rule Section 9.1 Compliance Monitoring (describes the obligations of the transmission facility owner in carrying out transmission projects). Energized major system projects across the province including projects in the southern Alberta, Hanna, Calgary, Edmonton, and Fort McMurray areas Continue implementation of the Competitive Process. Initiate the first stages of the Competitive Process for the Fort McMurray East 500 kv Transmission Project. Implement recommendations from the Department of Energy s Transmission Cost Management Policy development. Continue to plan and build out the transmission plan with various major system projects under development. No notable initiatives for AESO 2014 Business Plan and Budget Proposal Page 9

26 Customer Access Services We will consistently meet or exceed customer expectations in the delivery of AESO services. Connecting customers with expedience and providing excellent customer service throughout the process is essential to effective Customer Access Services. Additional system access requests are anticipated in The AESO continues to advance initiatives to streamline the connection process and improve cycle times including the Abbreviated Needs Identification Approval (ANIA) process and the Market Participant Choice process (MPC) as well as other refinements. The AESO is committed to ongoing improvements in Customer Access Services including increasing the number of Need Identification Documents (NIDs) filed with the AUC, and is confident the rigor and focus being applied in this area will lead to increasing customer satisfaction. This will be achieved through a continued focus on well-defined project scopes, high-level scheduling and clean transfer of engineering work and generally improved execution by all players at each stage of the process. The AESO provides Customer Access Services through four primary activity groups: Plan the Customer Connection; Connection Approval; Construction to Energization; and Customer Management. The work accomplished in these activity groups costs $10 million and represents 13 per cent of 2014 resource costs. Customer Access Services Costs $10 million to deliver 13% of total AESO resource dollars Plan the Customer Connection focuses on the thorough analysis and project management performed by the AESO. It involves conducting customer connection studies; power system model management; and coordination of customer requests and time spent moving through the connection proposal approval process. Connection Approval involves completing the regulatory requirements such as NID development, technical review and hearing management as well as creating functional specifications. Construction to Energization is mostly comprised of coordinating with the transmission facility owner (TFO) on various aspects of the customer connection through to energization as well as the transmission program support provided by the AESO internally and within the industry. Customer Management includes the financial transactions (transmission settlement and credit management) and consultation and development of the AESO tariff. Customer Access Services Costs by Activity Group 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Plan the Customer Connection ($3.3M) Construction to Energization ($1.9M) Connection Approval ($3.4M) Customer Management ($0.9M) AESO 2014 Business Plan and Budget Proposal Page 10

27 Achievements and Plans In addition to the ongoing customer access services activities, the following table outlines the notable achievements completed or expected to be completed in 2013 and planned initiatives for 2014 categorized by activity group. Plan the Customer Connection Connection Approval Construction to Energization Customer Management 2013 Achievements Enhanced metrics reporting to continue monitoring performance of parties affecting customer access processes. Obtained approval of implementation schedule to advance the Market Participant Choice pilot project. Continue to advance process enhancements Plans Continue to advance process enhancements. Further reduce customer connection cycle times. Continue to advance pilot projects such as Market Participant Choice to further align processes between transmission industry stakeholders and achieve additional efficiencies. Continue to advance process enhancements including the Abbreviated Needs Identification Approval (ANIA) process. No notable initiatives for AESO 2014 Business Plan and Budget Proposal Page 11

28 Market Development We will operate a fair, efficient and openly competitive (FEOC), real-time energy-only wholesale electricity market, where market evolution is driven by participants and the AESO. The current competitive wholesale market and Alberta s electric system create an overall electricity framework that continues to reliably serve consumers in one of the fastest growing jurisdiction in North America and generate numerous benefits for the province. The market is not stagnant and evolves along with changes in industry, technology and other relevant influences or circumstances. The AESO monitors developments and evaluates the impact of these changes to identify appropriate courses of action. When addressing market changes, the principal objective is to maintain a FEOC market and ensure market stability is maintained. Market stability is instrumental to ensuring investor confidence in opportunities in Alberta s electricity sector. Compliance monitoring to ensure market participants adhere to rules and procedures in their operations is an important aspect of maintaining a FEOC market. Rule development, operating procedure enhancements and implementation of IT solutions are all impacted when the design of the wholesale market is advanced. Incorporating storage technologies into the Alberta market is an example of a market enhancement where rules, tariff, technical standards and operating procedures are being reviewed by the AESO to ensure they are applicable and appropriate considering the market design and principles, including a FEOC market and reliable grid operations. Stakeholder engagement is vital to the success of market changes. At all times, an emphasis on stakeholder engagement is maintained; industry experience is essential to identifying and testing issues, opportunities, and solutions regarding market refinements. The AESO supports market development through three primary activity groups: Design and Create; Implement; and Monitor. The work accomplished in these activity groups combined amounts to $5 million and represents seven per cent of 2014 resource dollars. Market Development Costs $5 million to deliver 7% of total AESO resource dollars Design and Create involves identifying market evolution initiatives and determining the AESO s position and implementation plan through stakeholder consultation. The implementation plan may include the design of business processes, policies, procedures, or products; and changes to IT systems. The development of compliance expectations and monitoring procedures for new or changing rules is also a focus. Implement includes stakeholder consultation and execution of the implementation plan determined in the Design and Create activities and any required regulatory filings. Monitor encompasses the compliance monitoring of market participants through audits and assessments in addition to monitoring market performance and operations (market metrics) for issues and required changes. Market Development Costs by Activity Group 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Design and Create ($1.7M) Implement ($1.7M) Monitor ($1.6M) AESO 2014 Business Plan and Budget Proposal Page 12

29 Achievements and Plans In addition to the ongoing market development activities, the following table outlines the notable achievements completed or expected to be completed in 2013 and planned initiatives for 2014 categorized by activity group. Design and Create Implement Monitor 2013 Achievements Continued to facilitate demandside participation in the market and advanced work that will enable load to sell spinning reserves (continue to advance rules, Authoritative Documents and Information Documents). Anticipate issuing a discussion paper to industry on incorporating storage technologies into the Alberta market. Completed Market Systems Replacement Validation to address aging market systems impacting the reliable operation and timely evolution of the market. Targeting AESO Board approval in December Initiated TCM rule development Plans Consult on, design and implement demand-side participation in the market. Consult on, design and implement plans to facilitate the integration of energy storage technologies. Complete and file TCM rule with the AUC. Wind integration: Implementation schedule for Phase 2 approved (up to 2,500 MW) including potential refinements to ancillary service products and a wind dispatch pilot project. Interties: Integrated the Montana-Alberta Tie Line (MATL), Alberta s first merchant intertie. Completed tool changes for implementation of the Western Electricity Coordinating Council (WECC) Dynamic Scheduling System to allow dispatchable interties. Implement plans to facilitate development, integration and restoration of the interties. Design and implement Phase 2 of wind integration. Implement the next phase of market systems replacement work (i.e. Request For Proposals) if given AESO Board approval. Continue market evolution through the development and implementation of the Operating Reserve market review recommendations. Continued to evolve market metric data. Implemented new/revised compliance monitoring for priority rule areas, including Offer Control rule, Wind Power Management Directives, Available Capacity changes, Ancillary Services declarations, detection of premature dispatch ramping, and generator testing rules to reflect market rule changes. Implement new compliance monitoring tools for new market rules as they are approved (e.g., dispatchable interties, intergration of storage technologies, dispatchable wind, and other initiatives). AESO 2014 Business Plan and Budget Proposal Page 13

30 Corporate Services We will design a high performance culture and provide an environment that makes the AESO an exceptional place to work, learn, succeed and make a difference. The AESO is comprised of an experienced team of many specialized technical experts and the competition to retain and attract these talented individuals is high. Recognizing that talent is a key enabler of the AESO s success, a number of talent management practices continue to be implemented as part of its longer-term roadmap. Some of these include an engineer-in-training rotation program, implementation of a new collaborative and self-serve talent management system, and a concerted focus on organizational and individual learning and development. We will build appropriate levels of public, industry and government support to ensure effective execution of our mandate. The AESO maintains effective relationships with government and industry as key stakeholders and enablers to successfully fulfilling the AESO s mandate for the province. The AESO continues to engage in ongoing public consultation in areas affected by transmission developments to fulfill the mandate of operating in the public interest and to help Albertans understand the role it plays in keeping the lights on. The AESO s Corporate Services are provided through four primary activity groups: Corporate Management; People Management; Administration and Executive general strategy. The work accomplished in these activity groups costs $10 million and requires 14 per cent of the 2014 resource dollars. Corporate Services Costs $10 million to deliver 14% of total AESO resource dollars Corporate Management includes the operations of corporate service functions including legal, accounting, security, facilities management, internal audit, project management and corporate communication. People Management describes the human resources activities such as compensation, workforce planning, recruiting and learning and development. Administrative accounts for the administrative support staff. Executive (general strategy) portion of Corporate Services relates to general strategy development and leadership of the AESO; executive resources have also been associated with other key processes. Corporate Services Costs by Activity Group 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Corporate Management ($6.1M) Administrative ($1.6M) People Management ($1.7M) Executive - general strategy ($0.9M) AESO 2014 Business Plan and Budget Proposal Page 14

31 Achievements and Plans In addition to the ongoing corporate services activities, the following table outlines the notable achievements completed or expected to be completed in 2013 and planned initiatives for 2014 categorized by activity group. Corporate Management People Management Administrative Executive 2013 Achievements Completed an assessment of the AESO communications program. Implemented year one of a three-to-five year customer service initiative. Developed and began implementation of a new enterprise-wide talent management system. - Advanced development of the AESO s Strategic Plan Plans Continue refinement and implementation of communications plans. Continue to advance implementation of talent management system. No notable initiatives for Complete and publish the AESO s Strategic Plan. Continue to advance the customer service initiative. AESO 2014 Business Plan and Budget Proposal Page 15

32 Information Technology Services Underlying the five key processes of the AESO are the Information Technology Services that provide the systems and tools to allow for seamless operations. The activities and costs in this area can be associated with the five key AESO processes but additional time is required to complete a thorough review and analysis of the information prior to its inclusion in the key processes as part of the 2015 business plan. We will learn and leverage leading technologies. Information technology is critical to the AESO s ability to support ongoing operations. Investing in this area allows the AESO to better support its operations and prepare for future initiatives that will require additional infrastructure support. Information Technology Services includes the operational support of critical real-time systems as well as general business systems. This comprises of 150 active applications used by over 200 market participants and 500 AESO personnel across two data centres with over 900 servers and 300 databases. The resources for Information Technology Services are focused on five primary activity groups: Infrastructure and Operations; IT Planning; Application Support and Validation. The work supporting these activity groups combined amounts to 15 per cent or $11 million of 2014 resource costs. Information Technology Costs $21 million to deliver ($11 million for resources & $10 million for systemrelated costs) Infrastructure and Operations involves the ongoing maintenance and administration of the information technology systems and applications for critical real-time and general business systems and front line customer service staff supporting corporate applications. IT Planning ensures alignment between the AESO s business strategy and IT capabilities. It also includes the creation of standards and practices supporting business systems and general and administrative costs related to capital development. Application Support includes fulfillment of standard application-related service requests and troubleshooting to identify the root cause and fix issues related to applications. Validation includes reviewing feasible options to achieve a business outcome and providing a recommendation in a business case the decision if a project should proceed or not. Information Technology Costs by Activity Group Resources 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Infrastructure and Operations ($4.8M) Application Support ($2.8M) IT Planning ($3.1M) Validation ($0.4M) AESO 2014 Business Plan and Budget Proposal Page 16