Corporate Support Functions and Cost Allocation

Transcription

1 Corporate Support Functions and Cost Allocation OPG Regulated Facilities Payment Amounts Stakeholder Meeting #2 April 1, 2010 Tom Staines Director, Finance

2 Outline Corporate Support Functions Corporate Support Functions - OM&A Costs Corporate Support Functions - Benchmarking Corporate Support Functions - Capital Costs Corporate Support Functions - Asset Service Fees Corporate Cost Allocation Methodology Corporate Cost Allocation Review 3 Prong-Test 2

3 Corporate Support Functions Support Functions Business Services & Information Technology (BS & IT) Finance Human Resources Corporate Affairs Corporate Centre Services Provided Business/Enterprise Systems and Applications, Telecommunications, Licenses, Hardware, Real Estate Services, Procurement Services Business Unit Controllership, Accounting, Treasury, Internal Audit, Business Planning Business Unit Human Resources, Labour Relations, Compensation & Benefits, Employee Safety Regulatory Affairs, Public Affairs, Communications, Sustainable Development, Energy Markets Executive Office, Law, Corporate Secretary 3

4 Corporate Support Functions OM&A OM&A ($M) Actual Actual Actual Budget Plan Plan Corporate Functions Business Services & IT Finance Human Resources Corporate Affairs Corporate Centre Total Allocated to Regulated Facilities Regulated Hydroelectric Nuclear Total Allocated to Regulated Facilities Percentage Allocated to Regulated Facilities 68.0% 67.7% 66.9% 67.8% 68.2% 68.5% 4

5 Corporate Support Functions Benchmarking In 2009 OPG conducted benchmarking analyses for corporate groups: Information Technology Human Resources Finance Information Technology used Electric Utility Cost Group (EUCG) data to benchmark against peer North American utilities. Results indicate that OPG s IT costs in 2008 were within the second quartile for IT spending per employee and at the median for IT spending per GWh. Human Resources participates in Electric Utility Metrics Group (EU-HRMG) and benchmarked against 40 large member utilities. Results show that HR is better than median on spending per FTE to deliver a comparable set of HR services, and at median on investment per employee in HR programs. Undertaken in late 2009, Finance benchmarking results are not yet available. 1. For IT & HR peer utilities, the North American peer utilities are mostly integrated (generation, transmission, distribution, retail) utilities where costs are allocated among integrated businesses. 2. In the April 1,2010 presentation, HR benchmarking text read, better than below median, the text should have read better than median. 5

6 Corporate Support Functions Capital Expenditure Table includes total expenditures for all projects impacting the prescribed facility rate base or asset service fee. Projects Greater than $10 million Real Estate: 700 University Ave. Chiller Replacement Project ( ) Projects Between $5 million and $10 million Information Technology: Passport (work management system) Application Upgrade ( ) SAP (financial information system) Upgrade ( ) Energy Trading and Risk Management (ETRM) and Settlement Project ( ) CAPITAL ($M) Actual Actual Actual Budget Plan Plan Corporate Functions Information Technology Real Estate Total

7 Corporate Support Functions Asset Service Fee Asset Service Fee ($M) Actual Actual Actual Budget Plan Plan Regulated Hydroelectric Nuclear Total Assets include: 700 University Ave. 800 Kipling Ave. Wesleyville Building IT Assets Components: Operating Costs Depreciation Expense Property Taxes Return on Assets 7

8 Corporate Cost Allocation Methodology Corporate Functions Primary Allocators Information Technology Real Estate Supply Chain Finance Human Resources Corporate Affairs LAN ID's, PC's, Applications Square Footage, Time and Costs Estimates, OM&A/Capital Spend OM&A/Capital Spend Time Estimates, OM&A/Capital Spend, Transactions Full Time Equivalents (FTE's) Time and Costs Estimates, OM&A/Capital Spend Corporate Centre Time Estimates, OM&A/Capital Spend 8

9 Corporate Cost Allocation Review OPG has used essentially the same cost allocation methodology approved by the OEB in Costs are directly assigned or allocated Approximately 53% are directly assigned Black & Veatch (B&V) evaluated OPG s corporate cost allocation methodology and its implementation Major conclusions: The overall approach is appropriate for the business organization of OPG. Direct assignment of costs by specific identification and by estimation is based on sufficient information reasonably applied. Direct assignments are used wherever possible. The costs drivers selected by OPG for those instances where not all costs are directly assigned are appropriate. The methodology used by OPG to distribute the corporate costs separates the costs between regulated and unregulated business units in a manner that meets current best practices and is consistent with cost allocation precedents established by the OEB. 9

10 3-Prong Test In its decision, the OEB directed OPG to undertake a new cost allocation process review that included the 3-Prong Test. 1. Cost Incurrence - costs prudently incurred 2. Cost Allocation - corporate charges allocated appropriately 3. Cost/Benefit - benefits equal or exceed the costs Services Providers Information Technology Real Estate Finance Human Resources Public Affairs Service Recipients Regulated Hydroelectric Nuclear B&V has indicated that based on their review, OPG meets the requirements of the OEB s 3-prong test 10

11 Questions? 11