SUMMARY OF CAPITAL EXPENDITURES

Transcription

1 Filed: May, EB--00 Page of SUMMARY OF CAPITAL EXPENDITURES.0 SUMMARY OF CAPITAL BUDGET The proposed capital expenditures result from a rigorous business planning and work prioritization process that reflects risk-based decision-making to ensure that the appropriate, cost-effective solutions are put into place to meet Hydro One Transmission objectives. These processes are described in detail at Exhibit A, Tab, Schedules to Schedule. The capital expenditures proposed in this filing represent investments that will ultimately become in-service capital assets supporting the Hydro One Transmission business. Specifically, these expenditures include: a) design and development of specific assets providing future economic benefits; b) purchase, construction and commissioning of specific assets providing future economic benefits; c) additions to specific assets; and d) betterments that result in improvement of capacity, efficiency, useful life span, or economy of specific assets. As described in the following schedules of this Exhibit, the proposed capital programs address Hydro One Transmission s integrated set of asset replacement and expansion needs to meet its objectives of: public and employee safety; maintenance of transmission reliability at targeted performance levels; meeting system growth requirements; compliance with regulatory requirements (such as specified within the Transmission System Code); environmental requirements; and Government direction. The

2 Updated: August, EB--00 Page of development of these capital programs is based on comprehensive asset condition information, system loading versus capacity information and various studies. Hydro One Transmission's capital budget is grouped into four different investment categories: Sustaining, Development, Operations, and Shared Services Capital. Table provides a summary of Hydro One Transmission s capital expenditures for the historical, bridge and test years. Table Summary of Transmission Capital Budget ($ Million) Including Capitalized Overheads and Interest Capitalized* Description Historic Bridge Test 0 Sustaining Development Operations Shared Services Capital TOTAL ,.,. *AFUDC for the period 0 to The Transmission Capital requirements continue to grow over the to period to address asset replacement and refurbishment needs of Hydro One s aging system, and to expand the system for the purposes of load growth, accommodating a modified generation mix, and expanding access to interconnected electricity markets. The increase in Sustaining expenditures is primarily due to the continued growth in the number of assets that are beyond their expected service life and have been identified as either in poor condition and at end of life, obsolete with no spare parts available, or requiring replacement in order to satisfy changes in the regulations that govern the transmission business.

3 Filed: May, EB--00 Page of Investment Summary Documents in support of capital projects with cash flows in excess of $.0 million in either or are filed at Exhibit D, Tab, Schedule..0 SUSTAINING The Sustaining capital program includes the costs for investments required to replace or refurbish components to ensure that existing transmission system facilities function as originally designed. Hydro One Transmission manages its sustaining program within two program categories, namely stations and lines. Details of the expenditures under this program are provided at,, Schedule..0 DEVELOPMENT The Development capital program consists of the investments required to upgrade or enhance transmission system capabilities to address load growth, generation connection requirements and transmission congestion, and to ensure that the system is designed and operated in a safe, secure and reliable manner. Details of the expenditures under this program are provided at,, Schedule..0 OPERATIONS The Operations capital program represents investments in infrastructure required to sustain the Central Transmission Operations function, which is operated from Hydro One's Ontario Grid Control Centre. Details of the expenditures under this program are filed at,, Schedule.

4 Filed: May, EB--00 Page of.0 SHARED SERVICES AND OTHER CAPITAL Shared Services capital consists of the sustainment and enhancement of existing equipment and infrastructure, including computer-related hardware and software, facilities and transport and work equipment, as well as projects initiated to improve business support functions. Shared Services investments are described in detail at, Tab, Schedules through..0 COMPARISON OF CAPITAL COSTS TO BOARD APPROVED Table provides a comparison between the actual capital expenditures and the expenditures approved by the Board in its Decision on Hydro One Transmission s previous application in Proceeding EB Table Board Approved versus Actual Capital Expenditures Capital Category Board Actuals Variance Approved ($ million) ($ million) ($ million) Sustaining.. (.0) Development 0.. (.) Operations.. (.) Shared Services.. (.) Total,.. (.) Hydro One Transmission s capital expenditures in were approximately $ million lower than the level approved by the Board due to the following offsetting work program factors: The Sustaining under-expenditure was driven by delays in the System Re-investment program, due to the complexity of a number of projects resulting in more time

5 Filed: May, EB--00 Page of required for planning and engineering as well as resolution of stakeholder issues (primarily Beck # SS); a Toronto underground cable replacement project due to unexpected difficulties with obtaining land easements; and the Protection & Control program, due to complexities encountered in several projects in the detailed engineering phase. This was partially offset by the acceleration of power transformer replacements due to unit failures and to mitigate the risk of further failures due to the poor condition of specific units. The Development program variance is primarily due to delays in customer projects, Tremaine and Barwick TS, delays in the Toronto Area projects, Leaside and Hearn due to outage scheduling and land acquisition issues, as well as several of the SVC projects coming into service under budget. The Operations program is under spent primarily due to delays in the Back-up Control Centre facility costs and the Wide Area Network (WAN) program costs. Shared Services actual capital expenditures were lower than approved primarily due to lower Facilities and Real Estate and fleet spending initially planned for that was ultimately deferred. This is partially offset by the shift of Cornerstone savings which were netted out against the Cornerstone spend in Board approved; the actuals reflect the Cornerstone savings within Sustaining, Development and Operations as well as Shared Services program/project spending. Table provides a comparison between the projected capital expenditures and the expenditures approved by the Board in their Decisions in Proceedings EB and EB--0.

6 Updated: August, EB--00 Page of Table Board Approved versus Projected Capital Expenditures Capital Category Board Bridge Year Approved ($ million) ($ million) Variance ($ million) Sustaining... Development.. (.) Operations.. (0.) Shared Services... Total. 0.0 (.) Hydro One Transmission s projected capital expenditures in are $ million below the expenditure levels approved by the Board in EB--000 and EB--0 due to the following work program factors. The Sustaining over-expenditure is primarily due to the continued acceleration of the power transformer replacements to mitigate the risk of failures due to the poor condition of specific units. This is partially offset by Cornerstone savings and further delays in the System Re-investment program. The Development program is under spent primarily due to the new Bruce to Milton project coming into service under budget, the impact of the load and generation related project delays cascading into, as well as the suspension of some of the Green Energy projects identified in proceeding EB The Operations program is under spent primarily due to the delays in the Back-up Control Centre and the WAN project. The WAN implementation is underway but will have lower spending in than originally forecast. The increased Shared Services capital costs are due to the shift of Cornerstone savings which were netted out against the Cornerstone spend in Board Approved; the bridge year forecast reflects the Cornerstone savings within Sustaining, Development and Operations as well as Shared Services program/project spending.

7 Updated: August, EB--00 Page of.0 STATUS OF NIAGARA REINFORCEMENT PROJECT (NRP) As of the summer of 0, completion of the project has been indefinitely delayed due to unforeseen circumstances which are out of the control of Hydro One Transmission. Expenditures to date are $ million. In its Decision with Reasons in EB-0-00, the Board decided to allow Hydro One Transmission to expense rather than capitalize the AFUDC¹ associated with the project based on the actual expenditures made to date, effective January, 0 with no explicit time limit as it remains uncertain when the Caledonia dispute will be resolved. As a result, through the current Ontario Uniform Transmission Rates, Hydro One is recovering the AFUDC¹ associated with NRP. Hydro One Transmission is continuing to apply this OEB directive and as such the interest capitalized associated with NRP has been included in the and Revenue Requirement (as referenced in Exhibit E, Tab, ). In its EB-0-00 Decision, the Board also stated that if Hydro One requires additional relief prior to the project being completed and in-service, it is free to bring an application seeking such further relief. Hydro One Transmission remains hopeful that at some point it will be able to complete the NRP and is not seeking further relief at this time. ¹ As of January,, no allowance for funds used during construction (AFUDC) rate is specified for use by Hydro One, consistent with the OEB s decisions in EB See, Tab, for details.