The Distributor Fall 2019 by Dovetail Communications

WELCOME TO THE EDA BLOG—7

DISTRIBUTOR THE

FALL 2019

SPECIAL EDITION

ON THE FRONT LINES OF P WER EDA AND ITS MEMBERS DELIVER A POWERFUL MESSAGE TO DECISION-MAKERS 10

MAKING THE CASE FOR AN EVEN MORE MODERN OEB

Agreement #: 43526108

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CONTENTS

SECTOR SCAN 6 News From the Electricity Sector

COVER 10 Delivering a Powerful Message to Decision-Makers 12 In Emergencies, Hydro Ottawa Prioritizes People Over Power, Planning Helps. 14 Stratford Ontario: Open for Business 16 Bringing a Community to Life, Even in the Face of a Storm

ADVOCACY IN ACTION 18 Government Relations Activities: OEB Reform, Political Staff Shuffle and More. 19 Expect Regional Government Review Details in the Fall 20 Making the Case for an Even More Modern OEB

COMMERCIAL SUCCESS 22 Ask the Expert: Contracting Strategies for Capital Projects 25 Ask the Expert: The Art of Bringing Two Companies Together

CONNECT EVENTS 26 EBIC 2019: October 22 26 AGM and ENERCOM 2020: February 26-28, 2020 27 Awards Gala: February 27, 2020 30 EDIST20: January 15-17, 2020

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MESSAGE FROM THE CHAIR Fall 2019

The Electricity Distributors Association (EDA) publishes The Distributor for its members and stakeholders. All rights to editorial content are reserved by the EDA. No article can be reproduced in whole or in part without the permission of the EDA.

PUBLISHED Fall 2019 FOR: Electricity Distributors Association (EDA) 3700 Steeles Avenue West, Suite 1100 Vaughan, ON L4L 8K8 www.eda-on.ca

EDA STAFF CEO’S OFFICE Teresa Sarkesian, President and CEO Kristina Macura, Executive and Administrative Assistant

POLICY, GOVERNMENT AND CORPORATE AFFAIRS Ted Wigdor, VP, Policy, Government and Corporate Affairs Kathi Farmer, Senior Regulatory Affairs Advisor Jesse Kulendran, Senior Policy Advisor Lynn Williams, Senior Policy Advisor Derek Nardone, Manager, Corporate and Government Affairs Brendan McClughan, Policy and Government Affairs Specialist

COMMUNICATIONS AND MEMBER ENGAGEMENT Ted Wigdor, Vice President, Policy, Government and Corporate Affairs Marica Macura, Director, Member Relations and Events Sari Maritzer, Communications Specialist Dianna Merlocco, Events Specialist Lesia Kostecki, Marketing and Member Relations Specialist

FINANCE AND ADMINISTRATION Tamara Orlova, Director, Finance and Administration Arlene Klemmer, Accounting Clerk Matthews Joseph, Senior IT Analyst Lina Parisi, Receptionist

PUBLISHER DOVETAIL Communications 30 East Beaver Creek, Suite 202 Richmond Hill, ON L4B 1J2 Tel. 905.886.6640 | www.dvtail.com Advertising inquiries, Beth Kukkonen, bkukkonen@dvtail.com Editorial inquiries, Emily Kirk, ekirk@eda-on.ca Please return undeliverable copies to: Electricity Distributors Association (EDA) 3700 Steeles Avenue West, Suite 1100, Vaughan, ON L4L 8K8 PUBLICATIONS MAIL AGREEMENT NO. 43526108

The Fall is always a busy time of year at the EDA, and this year is no exception. I had the pleasure of attending the EDA district annual general meetings in September and connecting with colleagues from utilities of all sizes representing the various regions of Ontario, as well as companies that provide critical goods and services that support the energy sector. Local hydro utilities are on the front lines of power, and our customers rely on us to deliver safer, more reliable and more affordable electricity day in and day out. We power local economic growth and job creation and re-invest dividends to support local community initiatives. We’re also there in times of crisis when customers need us most; we are on the front lines repairing the system and when it’s down and turning the lights back on for homes and businesses across the province. Power of Local Hydro is at the heart of this critical role we serve in communities large and small. Our refreshed campaign is in full swing, and this issue of The Distributor features some outstanding initiatives from local hydro utilities that exemplify what our campaign is all about. In this issue, you can read about: • Festival Hydro’s investments in the various communities it serves; • The launch of Canada’s first utility-scale microgrid by North Bay Hydro; and • Hydro Ottawa took care of its customers during a massive flood earlier this year. You can get involved with the campaign through Twitter and LinkedIn by using the hashtag #PowerofLocalHydro. You can also share your stories with EDA staff. We can amplify your voice by showcasing the great work you do in your communities through various digital and traditional communications platforms. Another key endeavour we recently undertook was providing the Ontario government with a paper focusing on ways to reform the regulatory framework governing the electricity distribution sector. We believe that these 70+ recommendations will cut red tape, reduce costs and save up to $70 million for electricity customers annually. I’m very proud of this report and stand by these recommendations. I look forward to working with government officials to help realize these savings soon. Don’t forget! Our Energy Business Innovation Conference (EBIC) is fast approaching. If you haven’t yet registered for the October 22nd conference, you can do so online at eda-on.ca. Registration has also opened for our Electricity, Distribution, Information Systems & Technology (EDIST) Conference and Exhibition in January 2020. Finally, we’re already hard at work planning our biennial Canadian Utilities Equipment & Engineering (CUEE) tradeshow, taking place next September. Online registration of indoor and outdoor exhibit booths is now open. As I said, this is definitely a busy time of year at the EDA, and we continue to push forward on our initiatives to serve our local communities. Sincerely,

Gerry Smallegange President and CEO, Burlington Hydro

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Every community needs an ally IN

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We’re proud to be the first utility in Ontario to receive the Caring Company designation from Imagine Canada in recognition of our excellence and leadership in corporate social responsibility.

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SINCE 2019

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Through our AlectraCARES Community Support Program, we fund not-for-profit organizations in our service area to help foster healthy, diverse and sustainable communities. Learn more at alectrautilities.com/AlectraCARES

@alectranews

AlectraNews

Alectra

SECTOR SCAN

Teresa Sarkesian Meeting with Minister Laurie Scott and Associate Minister Jill Dunlop

Back in August, the EDA’s President and CEO, Teresa Sarkesian had the opportunity to meet with Infrastructure Minister Laurie Scott, as well as with Associate Minister of Children and Women’s Issues Jill Dunlop. Minister Scott is seized with broadband and cellular expansion, and with addressing the barrier that pole attachment rates could pose to broadband expansion. Minister Dunlop’s interest related to the involvement of many EDA members in advancing greater gender equity and inclusion within our sector’s workforce. Both are illustrative of the broad and diverse points of connection we are establishing with the Government of Ontario. Follow us on Twitter and LinkedIn to stay up-to-date on our activities.

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Welcome to the EDA Blog

The EDA has long been the voice for the electricity distribution sector in Ontario, making sure the concerns, and priorities of our industry are heard by the province’s leaders and policy makers. In recent years, the EDA has made a focused effort to enhance our communications, including upgrades to our Distributor magazine, RapidSources, the EDA Weekly, Member Handbook and more. With the recent refresh of our website, we are very pleased to enhance those efforts further by launching a new blog. The EDA blog is now your go-to resource for industry news and insights, accessible 24/7 from any web-connected device. The EDA encourages all members and friends of the EDA to bookmark eda-on.ca/Blog and return often for ongoing updates not only from the EDA team but also from members, sector leaders and subject matter experts. When you check out the EDA blog, you can expect to find informative insights and analysis from the EDA and from expert contributors on topics of interest, including: • Policy and government affairs • Regulatory issues • Operations and engineering • Technology and cybersecurity • Innovation and efficiency • Finance and corporate issues • HR and professional development • Management and administration • Communications, PR and customer service • LDC success stories • Events, networking and speaking opportunities The blog also offers the opportunity to respond to and share the posts you see here via social media platforms. Visit eda-on.ca/BLOG to read our weekly blog posts.

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District AGMs Update

In September, the EDA’s President and CEO Teresa Sarkesian, kicked off this year’s four district AGMs travelling across the province to address the latest goings on at Queen’s Park, and review some of the major association initiatives, including the recent white paper on OEB reform, the refresh of the EDA’s Power of Local Hydro campaign, and more. Visit eda-on.ca to learn more about the district AGMs.

MRP Update – IESO’s Decision to Halt Work on the Incremental Capacity Auction (ICA)

This latest update reviews the IESO’s decision to halt work on the incremental capacity auction (ICA), its current position on the role of the transitional capacity auction (TCA) in procuring resources and the status of the IESO’s Market Renewal Program Business Case. The IESO’s decision to halt work on the ICA is based on: The IESO’s projection that Ontario will not require new baseload capacity, assuming that resources are reacquired, and that otherwise a maximum of 2,000 MW of new capacity could be required for the next 10 years. The IESO’s projection that capacity auctions (e.g. TCAs) can be relied on to acquire demand response resources, existing generation that is off-contract, and uprates. Several parties commented to the IESO that relying on the ICA exclusively risked increasing costs. EDA members can visit eda-on.ca to access the full reports.

SECTOR SCAN

Government Takes Issue with “High” Hydro Pole Attachment Rates New Cellular Action Plan Seeks to Address Barriers to Rural Broadband Expansion Premier Doug Ford announced that the government is spending $315 million to ensure up to 220,000 households and businesses have access to high-speed internet and cellular services in rural, remote and northern communities. As part of the new Cellular Action Plan, the government says it will act as a catalyst for getting reliable, affordable broadband and cellular service across the province.

Notable for LDCs is that the government has identified hydro pole attachment rates for telecommunications companies as a key barrier to address to implement this plan. The government has stated that Ontario has the highest hydro pole attachment rates in Canada, and the costs are a financial barrier to the expansion plan. The government did not distinguish between wireless and wire line rates.

OEB Staff Bulletin clarifies when “Notification Charge” is not to be applied

In August, the OEB posted a Bulletin expressing OEB staff’s view that electricity distributors cannot apply Notification Charges for collection activities. The Bulletin reminds electricity distributors that the OEB previously decided to eliminate Collection of Account Charges and implemented this decision through a generic rate order that took effect on July 1, 2019. The Bulletin expresses staff’s view that charging for activities related to the Collection of Accounts - including activities to notify customers that their account is overdue or when issuing a Disconnection Notice - is inconsistent with the OEB’s decision to eliminate Collection of Account Charges, and LDCs are not to apply Notification Charges when the underlying activity is related to account collection. EDA staff spot checked four different OEB approved 2019 Tariff Sheets that authorized Notification Charges. In each case, the Tariff Sheet neither characterized nor specifically excluded circumstances under which the Notification Charge was to be applied. The blog also offers the opportunity to respond to and share the posts you see here via social media platforms. We look forward to your participation and your input.

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COVER

DELIVERING A POWERFUL MESSAGE TO DECISION MAKERS

THE DISTRIBUTOR

FALL 2019

COVER

eaningfully reducing costs for electricity consumers. Untangling daunting accumulations of red tape. The power to do those two things alone is a very compelling capacity for the Government of Ontario to leverage. Combined with a strong customer focus, an embrace of innovation and big contributions to local economies, amounts to the full Power of Local Hydro (PoLH) and it’s a value proposition the EDA is going to once again shine a bright spotlight on beginning this fall.

Refreshed Take on a Proven Theme

This theme probably sounds familiar, since we rolled out a previous incarnation of the Power of Local Hydro campaign in early 2018. Given where we were in the provincial election cycle, that earlier version broadly targeted the full political spectrum at Queen’s Park. It was also a partially proactive play, as we headed into a provincial election in which electricity rates were poised to be a major issue. Today, we have a majority PC government in an early stage of its mandate. This refreshed version of the PoLH will, therefore, be more targeted to the elected and other officials who will be in decision making roles until at least the next provincial election. It will also be more focused on general reputational enhancement than on specific policy asks. This new campaign will also be more sustained, carrying through to 2022. The campaign messaging and look-and-feel have been adjusted to focus on those elements of our members’ capabilities that align particularly well with the Ford government’s priorities, and that will resonate with key influencers and decision makers. That means cost reduction and red tape elimination will be featured front and centre in the refreshed campaign.

Traction with Decision Makers

Our recent phase two OEB modernization submission is an excellent illustration of just how effective a partner to government the EDA and its members can be (see Advocacy in Action, page 20). The submission identifies more than 70 examples of unnecessary red tape and regulatory burdens. Untangling them has the potential to create up to $70 million in annual savings for electricity consumers – while at the same time creating greater operational efficiencies and business opportunities for our members. We know we’re getting traction with those recommendations, based on indications of interest from key Cabinet members responsible for energy issues and red tape reduction. And the new PoLH campaign will help us keep our standing offer of mutually beneficial partnership prominent on the government’s radar screen, while underscoring our position as an indispensable source of information and advice.

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Refreshed Campaign Messaging On the Front Lines of Power LDCs are the part of the electricity system closest to the end-users: households, businesses, farms and institutions

Putting Customers First We have a relationship of trust with customers, we put them first and have our fingers on the pulse of their expectations

Eager to Cut Red Tape We are coming to the table with solutions to help regulators provide better value for the people of Ontario

Innovating for People Innovation is key to meeting changing customer needs and enabling them to better manage their own power

Powering the Economy We employ 11,000 Ontarians, invest $2B+ in capital each year and provide hundreds of millions in dividends to local communities of shares

Local Hydro is Powerful Local utilities are best positioned to reduce costs while keeping the distribution system safe and reliable

Rollout and Involvement

This new campaign was rolled out concurrently with the EDA’s annual district meetings across Ontario in September. The refreshed website is up now at eda-on.ca/Power-ofLocal-Hydro and we’ve developed a factsheet, Q&A and key message materials. EDA representatives will weave campaign messages into all of our dialogue with decision makers and use it as a conversation starter with those who may be less familiar with our sector. We will also consider other time-limited tactics as appropriate, such as potential social media advertising geo-targeted to Queen’s Park and site visits for decision makers. As with the previous PoLH campaign, we will encourage and facilitate member involvement. We have designed various materials to help LDCs easily integrate campaign messages into their own ongoing communications. A campaign “Power Pack” was recently overviewed in a workshop for the EDA Communicators Council and is available for the use of all members. Resources include a social media calendar, graphics for social media posting, website and social media banners and campaign logos. There is indeed tremendous power behind local hydro – and great potential to leverage it in support of government objectives, an improved operating environment for local utilities, and the broad interests of the people of Ontario. We look forward to collectively making that case over the next three years through the renewed Power of Local Hydro campaign.

COVER

IN EMERGENCIES, HYDRO OTTAWA

PRIORITIZES PEOPLE OVER POWER. PLANNING HELPS.

By Morgan Barnes, Media and Public Affairs Advisor

n April 2019, an unprecedented once-in-a-100-year record flood happened for the second time in three years on the Ottawa River systems. It was also the second time in the utility’s century long history that operations at its hydroelectric generating plants at Chaudière Falls would be completely shut down. For Hydro Ottawa, only seven months after tornadoes devastated the region, it was all-hands-on-deck once again for its employees. This meant long hours, less-than-ideal weather conditions and time spent away from families to deal with another weather emergency, something that has become increasingly common in the last decade. As Bryce Conrad, President and CEO of Hydro Ottawa tells it, his employees are hard-wired to weather any storm. “Our employees rise to the occasion at the most critical times. Regardless of job title or role, we always have employees jumping into action or volunteering when there is trouble,” Conrad says. “It’s almost impossible to send employees home in the middle of a crisis to get rest. They don’t want to go.”

Asked why that is, he responds: “I believe it’s because our employees have a purpose they deeply believe in, and that’s to help our customers. They’re extremely dedicated and they care.” Recognizing that the safety and well-being of his employees is his most important priority, Conrad talks about the work the company is doing to mitigate risks for the future. “It’s not sexy, but we are looking at our after-action reports, assessing our systems and any vulnerabilities to see how we can plan and be better prepared for future events.” It’s working. Even though flood levels exceeded those experienced in 2017 by approximately 20 per cent, the damage wasn’t as severe or as costly thanks to numerous measures that were put in place after the 2017 flood. Having worked both flood events as an evening shift manager, Jean-Marc David, the Supervisor of Generation agrees. “The 2019 flood presented more challenges and lasted longer than the flood of 2017, but we were better prepared,” David says. “Crews still worked around the clock throughout the flood, but we worked smarter thanks to the lessons learned in 2017.” THE DISTRIBUTOR

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COVER

“ Our employees are our greatest asset. The work that they do matters to the people here at home, and to

David recalls the intense work crews did to bag sand and build berms to secure the historic generating facilities and the company’s brand new plant on both sides of the Ottawa River, but says the company always prioritized staff safety. “It was made very clear that no risks should be taken by crews and that if the water reached a designated threshold, we would follow a clear evacuation plan.” Hydro Ottawa understands that planning not only protects its assets but also its employees, because emergency response to a crisis can take a toll on those working the frontline. “Thanks to experiences with major weather events and participation in disaster relief in other parts of the country and the United States, we have adapted and implemented measures that have kept our employees, the public and our city’s infrastructure safe,” Conrad says. “Our employees are our greatest asset. The work that they do matters to the people here at home, and to those in communities far from home that they assist in times of crisis.” Hydro Ottawa is currently completing a climate vulnerability assessment and adaptation plan, to be included in its five-year distribution system plan. This process will identify infrastructure most at risk from a changing climate, and identify mitigation measures that can be implemented in the coming years to support continued reliable operation for the next 30 years and beyond. When it comes to his employees, Conrad says: “Preparing for the worst is easier when you work with the best.”

those in communities far from home that they assist in times of crisis.” — Bryce Conrad, President and CEO Hydro Ottawa

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About Hydro Ottawa Hydro Ottawa delivers electricity to more than 335,000 homes and businesses in Ottawa and Casselman. For 100 years, Hydro Ottawa has reliably supplied its customers with power, building and investing in the local electric grid. Proudly municipally owned, Hydro Ottawa contributes to the well-being of the community we serve. Its innovative services help customers manage their account and energy use.

COVER

STRATFORD ONTARIO: OPEN FOR BUSINESS

THE DISTRIBUTOR

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COVER

he City of Stratford has been receiving attention on the world stage, not only for the arts, but also for its innovation and pursuit of technology driven investments. Often noticed at the epicentre of these announcements are three organizations that work collaboratively to promote economic stability, attract industry, and set an example of what it means to truly be a smart community. Stratford’s Economic Development Corporation, Invest Stratford, is a stand-alone entity with a mandate to keep, grow, and attract business to the City of Stratford. Under the guidance of its CEO Joani Gerber, the organization focuses its energy on the city’s economic future. Festival Hydro Inc. (FHI) is an LDC that prides itself on being a leader in innovation and both owns and manages distribution assets in the City of Stratford, Town of St. Marys, Seaforth, Hensall, Dashwood, Zurich and Brussels. Internet service provider (ISP), Rhyzome Networks, is an FHI affiliate company. In 2009 Rhyzome constructed a city-wide Wi-Fi network to backhaul smart meter data for FHI while providing ISP service to the residents and businesses of Stratford and St. Marys. Recently Rhyzome has partnered with local ISP’s Wightman Telecommunications and Quadro Communications to help bring fibre to the home to more communities. InvestStratford, Festival Hydro Inc. (FHI), and Rhyzome Networks challenge the traditional ideas of their roles being mutually exclusive, and instead, share a common objective to attract new business to the areas they serve in order to drive down costs within the community, which in turn assists in attracting more business. This is accomplished by harnessing the power of cross-functioning teams to pursue opportunities that will benefit and advance the local economy. A number of companies have decided to call Stratford home in the last decade, including RBC which invested an estimated $300 million to establish a 396,000 sq. ft. data centre in the city, and Scotiabank which expanded its worldwide IT support department. As well, a Stratford-based campus for the University of Waterloo opened to administer its advanced business and digital media degree program, Master of Digital Experience and Innovation. 2018 saw announcements from a number of companies expanding or setting up operations in the community. Trillium Hatchery invested $25 million to build a high tech, high efficiency, 70,000 sq. ft. facility in the Wright Business Park, Samsonite opened a state of the art 140,000 sq. ft. facility to house its Canadian head office and GreenSeal Cannabis www.eda.on.ca

FALL 2019

ramped up operations at its new $5.5 million, 28,000 sq. ft production facility. This is only a small sampling of the growth realized within the city last year, and if the number of opportunities currently being explored are any indication, steady economic growth and success will be experienced well into the future. The key element that makes this symbiotic collaboration possible is the ownership structure of these municipal companies. Although the City of Stratford is the sole shareholder of all three organizations, each is a separate corporation governed by separate boards. This allows each to be agile in its individual operations while still supporting a shared vision for economic health and growth within the community as well as a collective mindset that is open to innovative technology and business streams that generally do not fall into the scope of the LDC’s/ISP’s and Economic Development departments of the past. This type of collaboration can make a world of difference as you approach the table with an organization looking to do business in the municipality by providing those who are knowledgeable about the business’ primary considerations such as land, power, communications, transportation infrastructure and minimization of ‘red tape’. This approach also ensures that the best of what the community has to offer is highlighted and presents a unified front that lets prospective businesses know that they are valued and have the buy-in of all the key players in the community, thus proportionately increasing the value proposition and the rate of attraction and retention of industry to the benefit of the local economy and community as a whole.

About Festival Hydro, investStratford, Rhyzome Networks Festival Hydro is the distributor of electrical power for approximately 20,000 customers in 7 communities and officially opened on November 1, 2000, as a result of deregulation. investStratford, incorporated in 2014, together with the provincially-funded Stratford Perth Centre for Business, offers full advisory services for business start-up, growth, relocation and new investment. Rhyzome Networks is a data infrastructure company that seeks to investigate, develop and implement innovative, profitable, and community-focused opportunities.

COVER

BRINGING A COMMUNITY TO LIFE, EVEN IN THE FACE OF A STORM

By: Neil Russell Customer Solutions Advisor, North Bay Hydro Services and Chris Evanich Manager of Microgrids, S&C Electric Company

hen an ice storm hit Ontario in 2013, transmission lines were knocked down, leaving hundreds of thousands of residents without power for days. Without electricity, local communities were at risk of being exposed to perilous temperatures. With climate change increasing the future prevalence of severe winter weather, North Bay Hydro Services sought to secure the warmth and safety of the North Bay, Ontario

community by improving power resiliency. The municipal-utility affiliate decided to develop a microgrid that could island a group of buildings to shelter residents if a weather event took out power in North Bay. Called the Community Energy Parkâ&#x20AC;&#x201C;the first utility-scale advanced microgrid in Canadaâ&#x20AC;&#x201C;the group of community-centric facilities includes the YMCA Aquatic Centre, Memorial Gardens Sports Arena, and Thomas Park Sports Field.

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“ We are proud to be setting the example for other utilities around the world that are considering a resiliency hub microgrid to better their communities.” — Matt Payne, President and Chief

Operating Officer for North Bay Hydro Services

The microgrid had to be able to deliver power primarily generated by distributed energy resources (DERs), adapt to existing building infrastructures and electrical equipment, and operate independently of the main electrical grid during a sustained outage. Because the YMCA Aquatic Centre and Memorial Gardens can shelter thousands of community residents, the microgrid also had to supply enough electricity and heat for times of refuge. To accomplish these goals, North Bay Hydro Services and S&C Electric Company collaborated to develop a turnkey microgrid for the community. A combination of generation sources supplies power to the Community Energy Park. Primary generation comes from two 265-kW natural gas generators in a combined heat and power (CHP) system that provides thermal and electrical energy to effectively meet the facilities’ needs. As the CHP system operates, it produces electricity, and water pipes capture and transfer the heat by-product to the facilities. This combined with the other generation sources will warm community residents during a severe weather situation. The CHP system will also provide other benefits to the community during normal operation, including warming the Aquatic Centre’s pool and aiding in the ice-resurfacing process at Memorial Gardens’ professional ice-hockey rink. A 10-kW flower-shaped solar panel array supplements on-site generation and powers new electric vehicle recharging stations at the park. A 250-kW battery energy storage system stores the extra energy produced by the solar-panel system for later use. The battery storage system’s dynamic power capability overcomes limitations of the CHP system and allows the microgrid to black-start into Island mode. S&C’s GridMaster® Microgrid Control System serves as the brain of the microgrid’s operations. The controller manages the power sources to ensure generation and load are balanced appropriately, and it continuously monitors the status of the microgrid’s DERs to assess the microgrid’s capability to operate in Island mode. It also monitors the health of the main grid’s supply and automatically triggers islanding if it senses a sustained outage.

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In the event of a momentary outage, the controller can execute a seamless transfer and immediately transition to Island mode, enabling the microgrid to ride through system events that would normally cause an outage. Because momentary outages can trip solar-panel inverters offline, it’s important for the microgrid to be able to override them. This not only improves reliability when a sustained outage occurs because of extreme winter weather, but it also effectively reduces frequent momentary outages that can negatively affect the DERs delivering power to the surrounding facilities. The microgrid can supply up to 87 percent of the electricity requirements and 55 percent of the heating needs for the energy park’s buildings through on-site generation. While the main grid supplements the park’s additional power and heating demands, the battery energy storage system smooths fluctuations in DER availability to deliver the majority of power needed to run each facility when the main grid power is unavailable, guaranteeing the community will have a safe refuge in the face of a sustained outage. “This microgrid paves the way for a resilient, sustainably powered future for the heart of North Bay and shows how forward-thinking approaches to power delivery can be used to protect our community members,” says Matt Payne, President and Chief Operating Officer for North Bay Hydro Services. “We are proud to be setting the example for other utilities around the world that are considering a resiliency hub microgrid to better their communities.” About North Bay Hydro North Bay Hydro Services Inc. strives to be the preferred supplier of energy and energy related products and services across the Nipissing district. Committed to promoting both responsible energy consumption and environmental management. S&C Electric Company applies innovation to address challenges facing the world’s power grid and is shaping the future of reliable energy delivery. S&C’s mission is to continually develop new solutions for electricity delivery, fostering the improved efficiency and reliability needed for an intelligent grid.

ADVOCACY IN ACTION

GOVERNMENT RELATIONS ACTIVITIES: OEB REFORM, POLITICAL STAFF SHUFFLE AND MORE. Earlier this summer, the EDA met with senior political staff in building new and maintaining old relationships due to the Cabinet shuffle in June. The EDA finished its white paper on the OEB reform which highlights the association’s vision for the next phase of OEB modernization. Visit eda-on.ca to read the full report. In late July, Premier Doug Ford announced that the government is spending $315 million to ensure up to 220,000 households and businesses have access to high-speed internet and cellular services in rural, remote and northern communities. As part of the new Cellular Action Plan, the government says it will act as a catalyst for getting reliable, affordable broadband and cellular service across the province. The EDA has been working with the Ministry of Energy, Northern Development and Mines regarding the upcoming potential changes to bill presentment. Earlier this year

government officials indicated there would be upcoming changes to the electricity bill, specifically around language regarding the “Fair Hydro Plan.” In a government post-shuffle, the roles within the Premier’s Office, Ministers’ Offices, and PC Caucus continues to shift. Since the departure of the former Chief of Staff, Dean French, the political leadership within Queen’s Park is recalibrating both in tone and personnel. Jamie Wallace has been named the Premier’s new Chief of Staff. Visit eda-on.ca to read our submissions identifying ongoing relationship building and collaboration. The EDA has become the go-to resource for governments, regulators and stakeholders seeking input and advice from Ontario’s distributor community. Through proactive outreach and formal responses to calls for submissions, the EDA supports and advocates for sound energy decision-making that balances LDC business interests with key economic, environmental and consumer concerns. THE DISTRIBUTOR

FALL 2019

ADVOCACY IN ACTION

MINISTER CLARK SAYS, “ EXPECT REGIONAL GOVERNMENT REVIEW DETAILS IN THE FALL” The EDA attended the annual AMO Conference in Ottawa in August and took advantage of the opportunity to engage with both municipal and provincial decision-makers on behalf of our LDC members. Mayors, councillors, wardens, reeves and staff from Ontario’s 444 municipalities took part in the Association of Municipalities of Ontario’s traditional “bear pit” Ministers’ forum, where they targeted questions to almost all of Premier Doug Ford’s cabinet. A Brampton politician asked, “will the PC government be transparent when it comes to the regional government review?” Municipal Affairs Minister Steve Clark said, “I’m hoping to share more information in the fall.” The Minister told AMO delegates the two-person panel leading the review received more than 8,500 public submissions and he wants to take his time with the recommendations from special advisers Ken Seiling and Michael Fenn, which will go to cabinet, and therefore, be shielded from the public. The Minister wasn’t specific on a timeline, only saying he’s hoping to release the results this fall.

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FALL 2019

ADVOCACY IN ACTION

MAKING THE CASE FOR AN EVEN MORE MODERN OEB In a major submission to the provincial government in August, the EDA laid out its vision for the next phase of Ontario Energy Board (OEB) reform and modernization. The document is a deep dive, providing more than two dozen high level recommendations, along with over 70 specific recommendations, that could collectively save up to $70 million annually for electricity customers. Much of the focus is on regulatory and cost efficiency, and on improved flexibility for LDCs – objectives that align well with the provincial government’s desire to reduce red tape. While acknowledging government action to-date to improve the OEB, the submission details the tremendous opportunity to further untangle, reduce and measure the regulatory burden currently associated with OEB compliance. Some of the low-hanging fruit involves strategies as basic as digitization and cost/ benefit analysis. The submission also addresses a range of other modernization opportunities, including increasing the accountability and effectiveness of the intervenor process, reforming and improving customer engagement, and better enabling local distribution companies to make customerbenefitting business decisions. In making this submission, EDA hopes to build on the considerable success of its engagement with the Dicerni review panel, which resulted in the implementation of a variety of governance-related and other OEB modernization measures. At the time of writing, it was hoped that some of these most recent recommendations will feed into the government’s regular fall omnibus red tape reduction legislation.

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CONTRACTING STRATEGIES FOR CAPITAL PROJECTS Overview of success factors

A robust contracting strategy that allocates project risks among contract parties in a reasonable fashion is a key driver of good project performance. A good example in the civil and transportation sector is Infrastructure Ontario’s Alternative Financing and Procurement (AFP) program, which has delivered over 70% of its projects on time and budget using the public-private partnership (P3) model. Under the P3 “design-build-finance-operate” delivery model, major risks (such as schedule, productivity or quality risks) are identified upfront and transferred to capable private sector developers and contractors productivity – thereby promoting innovation and reducing costs through value engineering. Specialist advisors are heavily involved from the early stages of project planning to ensure that a robust contracting framework is put in place. Historically, project performance in the hydro power industry has been lacking. A 2014 study, which analyzed data over a 70-year period, concluded the cost of 245 large hydro dam projects in 65 countries escalated by an average of 90 percent . The nuclear industry is also plagued with poor performance on new builds and refurbishments. In the U.S., Georgia Power started building its Vogtle nuclear reactors in 2009, with expected completion projected for 2016. After several delays, completion is now forecasted in 2022. Costs escalated from US$14 B to almost US$26 B during that period. Frequent drivers for lower than planned performance can include: 1. Contracts that transfer little or no construction schedule risk, driving lower upfront prices that inform

optimistic budgets and returns that are not attainable. 2. Risks transferred to the wrong party (e.g. an equipment supplier taking on construction risks). 3. A low bid procurement model where contractors put forward aggressive schedules that imply lower overall project cost but lead to change orders or claims. 4. A lack of independent advisor scrutiny on the business case through the planning phases and lack of independent oversight through execution.

Six steps for developing a contracting strategy

1. Bundling of projects or contract packages according to their distinct scopes of work. 2. Identifying project risks and deciding what will be borne by the owner vs. the contractor. 3. Selecting a delivery method (Design Build Finance, Design Build, or Bid Build) for each bundle 4. Identifying contract packages and selecting a form of contract (Unit Price, Lump sum, Cost +, or Hybrid). 5. Establishing bid evaluation criteria that enables a fair and realistic final award price. 6. Retaining independent advisory teams to perform sound checks on the above process.

Contract types and lessons learned

Reimbursable contracts (such as EPCM or Cost Plus contracts) typically produce lower upfront bid prices, and therefore seem to yield higher project returns on investment. Risks associated with these contracts (such as man-hour overages) are high and often not accurately reflected in the project’s financial model. In situations where contractors are tempted to take advantage of the terms by “burning” hours to increase revenues and margins, owners have resorted to: THE DISTRIBUTOR

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Plant Vogtle on track after schedule revised” —W. Brown, The Augusta Chronicle

a. Target cost and pain/gain mechanisms. b. Penalties or liquidated damages associated to delayed schedule milestones. These are adequate risk transfer mechanisms, however they need to be sizable and meaningful. Strong incentives for schedule performance or high quality are strongly recommended. When scope is highly uncertain and schedule is driven by operational constraints, reimbursable or cost plus contracts can be used (coupled with adequate risk transfer mechanisms). For example, in a target cost contract, exceeding the target cost should affect payment of a portion of direct costs and not just overheads or profit. Independent reviews and cost audits are very helpful to identify and mitigate such risks of overruns, preventing incorrect billing. Lump Sum or turnkey (EPC) contracts should be used mostly on highly specialized projects, typically with only one general contractor involved and a heavy equipment supply component. Smaller organizations should consider this form of contract if they do not want to deploy a larger team of in-house project staff. However, if the scope is not well defined, costs will grow as scope changes accumulate. Contractors are not normally required to report on actual (incurred) costs resulting in less visibility for the owner around root causes of cost or schedule variances. Further, commercial interests may misalign due to contractors trying to cut costs by reducing quality, and owners enforcing the contract unreasonably given the lack of visibility. This form of contract often promotes less owner-contractor collaboration.

“ Should we build more large dams?

Unit price contracts are in the middle of the spectrum when it comes to risk transfer levels. Costs can escalate, but task (item) prices are fixed per unit, which limits the owner’s exposure to cost overruns and schedule delays. Unit price contracts are also not applicable to every situation as they require upfront time and investment to produce detailed designs, and bills of quantities. In addition, these contracts also don’t offer good visibility into actual costs per item, since contractors can distribute the costs among different items in the bid form to maximize their cash flow. Most successful energy projects utilize a hybrid delivery model, with a combination of contract forms that are different for various areas of scope. For example the price to cover indirect costs and overheads could be fixed, the price for materials and equipment could be a price per unit, and the price for labour could be cost at an agreed rate per hour (reimbursable) with a target cost for labour and a pain/gain mechanism. Above all, project executives and boards of directors should recognize the need to pay the right price for on time/on budget delivery and avoid a lowest bid procurement model. Owners should always ensure contractors remain profitable and can deliver quality, through fair and prudent contract procurement and administration. About KPMG Canada KPMG LLP, an Audit, Tax and Advisory firm (http://kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm affiliated with KPMG International Cooperative (“KPMG International”).

The actual costs of hydro power

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The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

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FALL 2019

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THE ART OF BRINGING TWO COMPANIES TOGETHER

s members of the Ontario energy sector continue to find ways to reduce costs and better serve their respective communities, mergers are becoming increasingly popular among LDCs. Here, two Grant Thornton advisors – Troy MacDonald, National Leader and Ingrid Holbik, Senior Manager – discuss ways to streamline the process and enhance your chances of merger success.

Q: If there is one critical component of a successful integration, what would it be?

Ingrid: In any integration plan, there are a lot of moving pieces. When it comes to LDCs – which not only deal with multiple stakeholders, but must also navigate unionized workforces and regulatory restrictions – things can get confusing quickly. For this reason, it’s absolutely necessary to designate someone early on to lead the integration. To ensure one clear vision is communicated throughout, it’s important to have integration leadership in place. This enhances stability because people are able to remain focused, disciplined and – since they know what to expect – happier in their working environment. An integration leader can support that leadership vision by aligning the vision to the integration work streams.

Q: How do you address and/or manage cultural change?

Ingrid: Many organizations operate under the false assumption that culture just kind of happens – but this couldn’t be farther from the truth. After all, when you meld two organizations together, you’re often dealing with deeply rooted differences regarding how people digest information, how they communicate and how they demonstrate respect and appreciation. You’re also probably facing different ways of working, communicating and goal-setting. As such, it’s not possible to let culture find its way on its www.eda.on.ca

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own – which is why an integration that incorporates a cultural plan is critical. Such a plan must be deliberate, and clearly define how the merging organizations plan to manage cultural change. This can involve outlining how you plan to help people grow within the new company – such as by providing additional job training – or how you plan to support them, should they choose to leave or retire. You may also want to consider preparing your workforce with valuable change management skills using tools such as workshops and visualizations.

Q: How do you reduce complexity around the integration process?

Troy: Aside from a designated, full-time leader, the transition process also requires a robust governance structure. So, in addition to hiring someone to manage the integration, provide regular updates to decision makers and hold people accountable, it’s also often helpful to hire someone from outside the company to act as a sounding board, provide an avenue for feedback and help the organization address and identify risks. This person should be from within the industry but not the organization – such as a retired CEO, a COO or an outside advisor – and able to provide unbiased advisory services to the merging companies. If you have additional questions or need advice on mergers and acquisitions within your utility, contact: Ingrid Holbik Director, Transactions, Integration & Separation Ingrid.Holbik@ca.gt.com Troy MacDonald Partner, Advisory – National Leader, Create Value Troy.MacDonald@ca.gt.com

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EBIC 2019 REGISTER NOW! October 22, 2019 Hilton Meadowvale Hotel, Mississauga Get the details and register today at eda-on.ca/EVENTS/EBIC. For more information, contact Marica Macura, Director of Member Relations and Events.

AGM and ENERCOM: Save The Date February 26-28, 2020 CON::NECT Event Series announces new dates for the EDAâ&#x20AC;&#x2122;s Annual General Meeting (AGM) and ENERCOM 2020. Mark your calendars - February 26-28, 2020 at the newly renovated Fairmont Royal York Hotel, Toronto. Visit eda-on. ca/EVENTS for up-to-date information, registration, pricing and more. Visit eda-on.ca/EVENTS for more information on the EDA CON::NECT Event Series.

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Awards Gala: Save The Date February 27, 2020 Mark your calendars for Thursday February 27, 2020 the industry’s most exciting awards gala providing a platform to celebrate the accomplishments of the LDC sector through a prestigious award ceremony. The dinner brings together top players in the sector from government, regulators, boards of directors and LDCs. This “red carpet” event takes place at the newly renovated Fairmont Royal York Hotel, Toronto. The evening kicks off with a special keynote address, followed by the sectors special awards ceremony, but it doesn’t end there. The night will continue with an evening of entertainment featuring live music, good company and a memorable night out. Visit eda-on.ca/EVENTS for more information on the EDA CON::NECT Event Series.

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FALL 2019

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FALL 2019

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Technology In Action Technology in Action Now in its 19th year, the EDIST Conference presents new and exciting opportunities to learn about the energy industry, network with key, industry decision makers and meet with the companies that drive innovation within the sector. Register by November 28, 2019 and take advantage of early bird rates!

Registration is now open. 30

January 15-17, 2020

Hilton Toronto/Markham Suites 3 days 4 Plenaries 21 Concurrent Sessions 2 Keynotes 80+ exhibitors

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A Key Step in Achieving Peak Board Performance Register for this Fall’s Chartered Director Program (C.Dir.) – Energy Sector In partnership with

Customized to the unique requirements of the energy sector, this university accredited designation provides skills, perspectives and tactics enabling graduates to drive value as effective and successful board members. This program delivers a unique experience recognizing both sides of directorship – the “technical and structural” (rules-based) side, and the “cultural” (principle-based and behavioural) side. Successful completion of this five module program and exam provides candidates with the Chartered Director (C.Dir.) designation and access to valuable resources including webinars, research papers, conferences and the alumni network.

Learn more and register at: www.mearie.ca/training Coming soon! Online registration for MEARIE’s 2020 Training Programs opens this Fall! www.mearie.ca/training www.eda.on.ca

FALL 2019