Substation Refurbishment Capital Projects Project Data New Business August 22-25, 2016 Park City, UT 2016 Transmission & Distribution Benchmarking Community Insights Conference

Develop System Strategy Develop and Approve Asset Plans Project/Portfolio Management Expand System A Process Model for Managing the T&D Business Operate System Sustain System Indicates separate D, S, T components Add New Customers Respond to Emergencies 2

DISTRIBUTION SUBSTATION REFURBISHMENT August 22-25, 2016 Park City, UT 2016 Transmission & Distribution Benchmarking Community Insights Conference

Study summary We added a detailed review of Distribution Substation Refurbishment work this year to learn more about:  The relative volumes and types/scopes of projects that are being completed  Factors that companies evaluate to determine the need for major component replacement or rebuild/reconditioning  Factors that influence the costs of projects and individual component replacements A few companies outside of the regular T&D benchmarking community provided data for the study:  Hydro One (study sponsor)  We Energies  PowerStream (a local distribution utility in the Greater Toronto Area)  Veridian (a local distribution utility in the Greater Toronto Area)

Study summary (Continued) The study results show that:  Refurbishment project volumes and types vary widely across the responding companies  Expected Service Lives for major substation components also vary widely  Factors that companies evaluate to determine the need for component replacement or rebuild/reconditioning work differ somewhat across the major component types but are generally similar across companies  Costs of Full Station Rebuild projects correlate closely with both the number and MVA capacity of the transformer banks that were refurbished  Costs of Station Centric projects do not correlate to any significant degree with the number or MVA capacity of transformer banks that were refurbished  Unit costs of power transformer and low side switching and protection equipment replacements correlate closely with the rated capacity of the new units that were installed  Unit costs of high side switching and protection equipment replacements do not correlate to any significant degree with the rated capacity of the new units that were installed. This is likely due to significant variations in voltage levels and types of equipment used by the study respondents.

Substation refurbishment PROJECT APPROACHES Data on distribution substation refurbishment projects was collected and analyzed based on three categories of projects 3 Project ApproachDefinition Component Focused Individual substation components are evaluated separately and any needed component replacement, rebuild or reconditioning work is completed through separate, component-focused refurbishment projects over a period of several years. Station Centric A refurbishment project at a specific substation is considered when certain critical components are determined to be in need of replacement or major rebuild/reconditioning work. At that time, all of the other substation components are evaluated and a single, comprehensive substation refurbishment project is initiated to replace or rebuild/recondition all components of the substation that require attention. Full Station Rebuild A refurbishment project at a specific substation is considered when certain critical components are determined to be in need of replacement. At that time, the entire substation is completely rebuilt on-site with all existing components being removed/demolished and replaced with new components.

Refurbishment project volumes 7 Substation Refurbishment pages 25 & 28 – A1, B to 2019 Actual and Planned Projects Per 1,000 Stations -- All Project Types 2010 to 2019 Actual and Planned Projects Per 1,000 Stations -- Station Centric and Full Station Rebuilds Refurbishment project volumes vary widely across the community. Most of the responding companies use multiple refurbishment approaches, including Station Centric and Full Station rebuild projects. Component-based projects are most frequently used. MeanMean131 Quartile 1164 Quartile 2:71 Quartile 3: 5 MeanMean1432 Quartile Quartile 2:756 Quartile 3: 321

Station centric refurbishment projects – COST PER TRANSFORMER BANK REFURBISHED 8 Refurbishment costs on Station Centric projects range widely and display only a very weak correlation with the number of transformer banks that were refurbished. Correlation Analysis Cost Per Transformer Bank Refurbished Source: Question C2a, C3 Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed

STATION CENTRIC refurbishment PROJECTS – COST PER MVA REFURBISHED 9 Refurbishment costs on Station Centric projects display no significant correlation with the total capacity (MVA) of the transformer banks that were refurbished Correlation Analysis Cost Per Transformer Bank MVA Refurbished Source: Question C2a, C3 Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed

FULL STATION REBUILD PROJECTS – COST PER TRANSFORMER BANK REFURBISHED 10 Refurbishment costs on Full Station Rebuild projects correlate strongly with the number of transformer banks that were refurbished. However, unit costs still range from $1.6 million to $6.6 million per transformer bank across this group of projects Correlation Analysis Cost Per Transformer Bank Refurbished Source: Question C2a, C3 Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed

FULL STATION REBUILD PROJECTS – COST PER MVA REFURBISHED 11 Refurbishment costs on Full Station Rebuild projects also correlate strongly to the total capacity (MVA) of the transformer banks that were refurbished. However, unit costs still range from $86K to $363K per MVA across this group of projects Correlation Analysis Cost Per Transformer Bank MVA Refurbished Source: Question C2a, C3 Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed

Component evaluations – power transformers 12 Expected Service Life Factors Considered in Replace/Rebuild Decisions The Expected Service Life of Power Transformers is in the range of 40 to 50 years at most companies. Testing Results, Maintenance History and Loading were the most frequently mentioned evaluation factors for replace vs. rebuild decisions Substation Refurbishment page 16 – A4 Substation Refurbishment pages 31 & B4, B5

Component evaluations – High side switching and protection equipment 13 Expected Service Life The Expected Service Life of High Side Switching and Protection Equipment is also in the range of 40 to 50 years at most companies. Maintenance History, Visual Appearance and Loading are the most frequently mentioned evaluation factors for replace vs. rebuild decisions Substation Refurbishment page 16 – A4 Substation Refurbishment pages 32 & B4, B5 Factors Considered in Replace/Rebuild Decisions

Component evaluations – LOW side switching and protection equipment 14 Expected Service Life The Expected Service Life of Low Side Switching and Protection Equipment is in the range of 40 to 50 years at most companies. Maintenance History, Visual Appearance, Loading and Testing Results are the most frequently mentioned evaluation factors for replace vs. rebuild decisions Substation Refurbishment page 16 – A4 Substation Refurbishment pages 33 & B4, B5

Component evaluations – relays and control wiring 15 Expected Service Life The Expected Service Life of Relays and Control Wiring is 20 years at the majority of the companies. Maintenance History, Testing Results and Visual Appearance are the most frequently mentioned evaluation factors for replace vs. rebuild decisions Factors Considered in Replace/Rebuild Decisions Substation Refurbishment page 16 – A4 Substation Refurbishment pages 35 & B4, B5

Component installation costs – power transformers 16 As expected, reported unit installation costs for Power Transformers closely correlate with the rated capacity (MVA) of the new equipment that was installed. Correlation AnalysisCost Per Unit Installed Source: Question C2a, C3 Installed 1 new 7.5 MVA Trf Installed 1 new 5 MVA Trf Installed 1 new 10.5 MVA Trf Installed 1 new 7.5 MVA Trf Installed 1 new 10.5 MVA Trf Installed 1 new 5 MVA Trf Installed 1 new 25 MVA Trf Installed 1 new 15 MVA Trf Installed 1 new 84 MVA Trf Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed

Component installation costs – high side SWITCHING AND PROTECTION EQUIPMENT 17 Reported unit installation costs for high side switching and protection equipment display no significant correlation to the rated equipment capacity (continuous amps). This is likely explained by the differences in equipment voltages and types. Correlation AnalysisCost Per Unit Installed Source: Question C2a, C3 Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed Installed 6-150A HV Fuses Installed 6-25A HV Fuses and 1-600A Disconnect Switch Installed 1-600A Disconnect Switch Installed 2-600A Load Interrupt Switches Installed 1-300A Load Interrupter Installed A SF6 Breaker and 2 Breaker Isolation Switches Installed A Breakers w/Integrated Isolation Switches Installed A Circuit Switchers Installed 1-800A Vaccum Recloser Installed A Circuit Switchers w/Integrated Disconnect Switches

Component installation costs – LOW side switching and protection equipment 18 Reported unit installation costs for low side switching and protection equipment display a relatively strong correlation with rate equipment capacity (continuous amps). However, there still are some wide cost ranges that likely relate to differences in equipment voltages and types. Correlation AnalysisCost Per Unit Installed Source: Question C2a, C3 Project costs for Canadian companies were converted to US$ based on currency exchange rates during the year when the majority of work was performed Installed 3-800A Reclosers Installed 6-140A Reclosers Installed 2-800A Reclosers Installed 3-800A Reclosers Installed A Breakers w/ Integrated Disconnect Switches Installed 3-800A Reclosers Installed A Outdoor Vacuum CBs Installed A Outdoor Vacuum CBs Installed A and A Metal Clad Switchgear Breakers Installed A Metal Clad Switchgear Breakers Installed A SF6 Circuit Breakers

Capital Projects & Portfolio Management August 22-25, 2016 Park City, UT 2016 Transmission & Distribution Benchmarking Community Insights Conference

Capital spending drivers and trends 20

Drivers/sources of transmission lines capital investment requirements Capital Projects Page 5 – CP5 Load Studies, Reliability Analyses and ISO/RTO Needs are the primary drivers of Transmission Line Capital Investments 21

Drivers/sources of substation capital investment requirements Capital Projects Page 4 – CP5 Load Studies, Reliability Analyses and Maintenance/Equipment Aging Concerns are the primary drivers of Substation Capital Investments 22

Drivers/sources of distribution lines capital investment requirements Capital Projects Page 3 – CP5 Customer Requests, Reliability Analyses and Maintenance/Equipment Aging Concerns are the primary drivers of Distribution Line Capital Investments 23

2015 Capital Investments (FERC) 24 Combined Financials Page 8 – DF5, DF30, DF70 TF5, TF65 Large-scale transmission investments are common to the companies with the highest investment levels

2015 Capital Investments (ACTIVITY BASED) 25 Sustaining capital investments exceeded those for growth in 2015, reversing a longer-term spending pattern.

Projected Capital Spending Next 3 Years -- Transmission Four companies are projecting 50% or greater increases in Transmission Capital spending over the next three years Spending per Asset Spending Compared to 2015 Capital Projects Page CP165, TF65 Capital Projects Page CP165, TF45 100% 26

Projected Capital Spending Next 3 Years -- Substation Several companies are projecting relatively large increases in Substation Capital spending, including two who are projecting 50% or larger increases. Spending per AssetSpending Compared to 2015 Capital Projects Page CP165, DF70, TF65 Capital Projects Page CP165, DF55, TF50 27

Projected Capital Spending Next Three Years -- Distribution Only one company is projecting a 50% or greater increase in Distribution Capital spending Spending Compared to 2015 Spending per Asset Capital Projects Page CP165, DF70Capital Projects page CP165, DF50 28

performance measures Capital Project and Portfolio Management 29

Percent Of Capital Budget Actually Spent – Past Three Years Capital Projects Page 30-- CP70 The reasons for underspending capital budgets should be examined. This suggests either unrealistic capital planning or weaknesses in portfolio management processes, or both 30

Percent of Completed Projects That Were “Walked In” During The Year Capital Projects Page CP57 The majority of respondents have a reasonable level of “walked-in” projects. For the few companies with a high percentage of such projects, the causes should be examined. There may be gaps or weaknesses in the current capital program planning processes 31

Percent of Projects Completed On or Under Budget Capital Projects Page 29 – CP65 Performance on this measure can be skewed by the type of budget estimate that is being provided:  “Upper Limit” estimate vs.  “Bulls Eye” estimate Performance on this measure can be skewed by the type of budget estimate that is being provided:  “Upper Limit” estimate vs.  “Bulls Eye” estimate Project budget performance ranged from 27% to 92% this year. Overall performance is slightly worse than last year MeanMean67% Quartile 178% Quartile 2:75% Quartile 3:57% 32

Average actual project spend as a percent of budget Capital Projects Page 29 – CP65 Those towards the top of this chart appear to be setting “Bulls Eye” budgets while those toward the bottom appear to be more oriented to “Upper Limit” estimates MeanMean93% Quartile 198% Quartile 2:94% Quartile 3:90% 33

Percent of Projects Completed On Time Capital Projects Page 28 – CP65 On Schedule performance ranged from 62% to 98% this year. Results are very similar to last year. MeanMean85% Quartile 195% Quartile 2:88% Quartile 3:75% 34

Capital Program Performance in 2015 Company: Percent complete - planned pole replacements Percent spending - planned pole replacements 2269? ?103 Percent complete - planned UG cable replacement Percent spending - planned UG cable replacement ?0 Percent complete – planned substation breaker replacements Percent spending -- planned substation breaker replacements Percent complete – planned substation transformer replacements Percent spending -- planned substation transformer replacements Percent complete – planned substation battery replacements Percent spending – planned substation battery breaker replacements Capital program performance results deviated significantly from plan at several of the responding companies Capital Projects Page 47 & 48 – CP115 35

Organization and staffing Capital Projects and Portfolio Management 36

Reporting department for the project management organization (PMO) Company: T&D (leadership level)♦♦♦♦♦♦♦50% Engineering♦♦♦21% ConstructionConstruction♦7%7% FinanceFinance0%0% StrategyStrategy0%0% Asset Management0%0% Other (including any matrix reporting) ♦♦♦♦♦♦43%43% Co. IDResponse 3131Substation: No PMO. 2828Deputy CEO and Capital Infratructure Project Delivery 3838Substation & Transmission (S&T) leadership. 16The PMO reports to the Technical Services organization At half of the responding companies, the PMO reports directly to senior T&D leadership Capital Projects Pages 36 & 37 – CP80 37

Sizes/Types of Projects and programs That Have assigned Project or program Managers Capital Projects Pages CP87 38 Most companies are consistent between T, D, and S projects in terms of when to assign project managers (based mostly on $ value of the projects).

Project Manager Workload Measures – Combined T&D Companies appear to determine project manager needs more on the basis of $ under management than by the number of projects needing management. Capital Projects -- CP90, SO12Capital Projects Page 67- CP90, SO15 39 MeanMean14 Quartile 123 Quartile 2:9 Quartile 3:4 Project $ per Full Time Proj. Mgr # Projects per Full Time Proj. Mgr Mean$29,808,049 Quartile 1:$38,356,140 Quartile 2:$22,089,159 Quartile 3:$6,345,044

Thank you for your Input and Participation! Ken Buckstaff Debi Cook Gene Dimitrov Rob Earle Your Presenters First Quartile Consulting is a utility-focused consultancy providing a full range of consulting services including continuous process improvement, change management, benchmarking and more. You can count on a proven process that assesses and optimizes your resources, processes, leadership management and technology to align your business needs with your customer’s needs. Visit us at About 1QC Dave CanonDave CarterDave Weiler

New business August 22-25, 2016 Park City, UT 2016 Transmission & Distribution Benchmarking Community Insights Conference

Organization Structure for New Business – customer contact and design work New Business Pages 55-72, Question DP The majority of companies have centralized their customer contact and design work for both new subdivisions and new commercial developments

Organization Structure for New Business – construction work New Business Pages 63-70, Question DP Centralization of construction work is less common. The largest degree of centralization is in the area of new subdivisions (35% of companies)

Activities Performed By Developers/Customers ON NEW RESIDENTIAL SERVICE INSTALLATIONS New Business Pages 72-73, Question DP425 Co. ID: Engineering Design♦♦8%8% UG trenchingUG trenching♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦73%73% UG conduit♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦73% UG substructures♦♦♦♦♦♦♦♦♦♦38% Structures for future expansion ♦♦♦♦♦♦♦27% Concrete padsConcrete pads♦♦♦♦♦♦♦♦♦♦♦♦♦50% UG wire installation♦♦♦12%12% UG connection0%0% OH service0%0% OH line extensions♦5%5% ROW clearance♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦58% Meter socket♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦88%88% 44 For most companies in our community, developers or customers perform a large portion of the field work for new UG service installations but little or no field work for OH installations, other than ROW clearance

New Business Improvement Initiatives New Business Pages 53 & 54, Question DP410 CategoryCo.Responses Process Improvements Developed a New Business Flow Diagram that is updated as needed, holding Workload Planning/Scheduling meetings with Region personnel Standardization among sister utilities where feasible Constantly reviewing our work management processes. In process of replacing our Work Management System Tally Board scheduling of small work scopes using pre-allocated construction crews, Thorough review of new account set-up process to ensure proper billing; streamlined requirements for City Inspector level services The New Business Process has undergone a Lean Six Sigma analysis Revamped the entire process and wrote Standard Operating Procedures Streamlined the design review process Currently rolling out the results of a New Business Process Enhancement project Technology Improvements New customer information system, new NEM online web application We have been working on a technological intake connected to our web site, also hoping to implement a PM/Customer friendly dashboard Mobile workforce (laptops and wireless cards to issue contracts and collect payments in the field), Mobile Dispatch (electronic routing of daily work assignments); website for customers to request services Working on improving our mobile technology and our Work Management System (WMS) performance Introduced a Web Application tool for No-Design Required service jobs and a Distribution Project Coordination Tool to enable project tracking and program metrics New scheduling tool that takes into consideration crew capacity and estimated job hours 45 Most improvement initiatives in the New Business area focus on Process or Technology

New Business Improvement Initiatives (Cont.) CategoryCo.Responses Organization/Role changes Expand field roles to allow trouble crews to install meters Qualifying designers to open some energized equipment for observation and data collection Established a Customer Program Office to support strategic operation initiatives Reorganized the structure and tasks of our teams, created a Centre for management of technical services to clients (CGSTAC) and a Distribution management center (CGAD) Other Initiatives Electrician certification program, customer transaction survey, no meter no service process, safety/fire alert process, customer brochures, online customer payment, credit card payment option, service agreement for timely processing Working on improving interdepartmental communications, focus on designs being right the first pass through Quality Review Refresher training for designers Focus on Project Specific cost estimates and Economic Feasibility Analysis Reviewed all WR over 100 MHs completed by Company Crews with >50% variance to determine root causes of Over/Under runs Implemented a new line extension policy 46 Organization and/or role changes are also being pursued by several companies New Business Pages 53 & 54, Question DP410

New service installation benchmarking

New service benchmarking Scenarios - schematics 75’OH Service line Scenario #1; New OH service drop 100’ UG Service line 75’ UG Service line100’ UG primary Scenario 2; New pole, transformer & UG service line Scenario 3; New UG primary run; padmount transformer & UG service line 50’ 3 phase UG Service line 3 phase 200’ UG primary Scenario 4; new riser pole, 3 phase UG primary run;3-phase padmount transformer & 3 phase UG service line 100A 240/120V 200A 240/120V 200A 240/120V 200 kW 120/208V Existing New Meter 48

New service installation costs Scenario 1 - New OH Service Drop Scenario 2 – New Pole, OH transformer and UG Service Line New Business Pages 96 & 98, Question DP Mean$483 Quartile 1$350 Quartile 2:$475 Quartile 3:$569 Costs of the various new service scenarios vary across the community. Some of the variation is due to differences in customer/developer work contributions and some is due to differences in company operating efficiencies Mean$6,634 Quartile 1$4,942 Quartile 2:$6,655 Quartile 3:$8,409

New service installation costs (continued) 50 New Business Pages 100 and 102, Question DP445 Scenario 3 - New UG primary run, padmount transformer & UG service line Costs vary across the community. Some of the variation is due to customer/developer work contributions and some is due to operating efficiencies Mean$29,538 Quartile 1$18,556 Quartile 2:$25,820 Quartile 3:$37,405 Scenario 4 - New riser pole, UG primary run; padmount transformer & UG service line (all 3-phase) Mean$11,304 Quartile 1$7,084 Quartile 2:$9,868 Quartile 3:$13,026

Thank you for your Input and Participation! 51 Ken Buckstaff Debi Cook Gene Dimitrov Rob Earle Your Presenters First Quartile Consulting is a utility-focused consultancy providing a full range of consulting services including continuous process improvement, change management, benchmarking and more. You can count on a proven process that assesses and optimizes your resources, processes, leadership management and technology to align your business needs with your customer’s needs. Visit us at About 1QC Dave CanonDave CarterDave Weiler