British Columbia Utilities Commission Page Information ... Columbia Hydro & Power Authority Response issued 20 February 2004 Page 1 British Columbia Hydro & Power Authority Revenue

British Columbia Utilities CommissionInformation Request No. 1.75.4 Dated: 23 January 2004British Columbia Hydro & Power AuthorityResponse issued 20 February 2004

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British Columbia Hydro & Power Authority Revenue RequirementsApplication 2004/05 and 2005/06

75.0 Reference: Application, Volume I, Chapter 3, pp. 3-3 to 3-5; Chapter 6, p. 6-42Budget Process and Variance Analysis

Section 2 of Chapter 3 describes how the F2005 and F2006 OMA and capitalspending forecasts used in the Application were developed.

1.75.4 Please identify the performance targets that were established for F2005

and F2006 for the lines of business and the corporation as a whole.Please provide a copy of the guidelines that were generated by corporateoffice and provided to the lines of business on September 30, 2003regarding the development of performance targets.

RESPONSE:PART 1 - Please identify the performance targets that were established for F2005 andF2006 for the lines of business and the corporation as a whole.

The following performance targets for the lines of business and BC Hydro as a wholeare as per BC Hydro’s latest Service Plan that was published February 17, 2004.

BC HYDRO OVERALLPerformance Measure F2005 Plan F2006 PlanNet Income ($ millions) 442 486Customer Satisfaction (%) 84 84Reliability ASAI (%) [Average System Availability

Index] CAIDI (Hours) [Customer Average

Interruption Duration Index]

99.970

2.15

99.970

2.15

Sustaining Capital Ratio (%) 1 – 2 1 – 2Environmental Regulatory Compliance (incidents) 28 27Conservation Gigawatt Hours (GWh) 1310 1769New Electricity From Clean Energy (%) 50 50All Injury Frequency 2.7 2.5Approved Strategic Workforce Positions Filled(number) 71 70


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BC HYDRO GENERATIONPerformance Measure F2005 Plan F2006 PlanNet Income ($ millions) 196 198Cost per Megawatt Hour Including ElectricityPurchases ($) 21.86 20.94

Commercial Performance (%) 99.5 99.5Average Number of Forced Outages (Large /Strategic / Available Energy / Thermal)

2.2 / 3.6 / 4.8 / 3.0

2.1 / 3.5 / 4.8 / 3.0

Resource Smart Energy Gains Put Into Service(GWh) 104 31

BC HYDRO DISTRIBUTIONPerformance Measure F2005 Plan F2006 PlanNet Income ($ millions) 39 110Capital, Operating, Maintenance, andAdministration Expenses per Customer ($) 267.6 265.8

Asset Health Risk Index (%) 20 20Customer-Based Generation (GWh) 275 290Green Gigawatt Hours (GWh) 580 650

POWEREXPerformance Measure F2005 Plan F2006 PlanNet Income ($ millions) 89 91Transactions per Employee 660 675

BC HYDRO ENGINEERINGPerformance Measure F2005 Plan F2006 PlanUtilization Rate (%) 83 83Hourly Charge-Out Rate ($) 97 97Client Feedback / Satisfaction (out of a possible 7) 6+ 6+Approved Engineer-in-Training & GraduateTechnologist-in-Training Positions Filled (%) 100 100


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BC HYDRO FIELD SERVICESPerformance Measure F2005 Plan F2006 PlanLabour utilization (%) 75.5 76.5Hourly Charge-Out Rate ($) 95 96Total Planned Work Completed (%) 98 98All Injury Frequency 4.7 4.7Trainee Positions Filled (number) 132 141

Question Part: Please provide a copy of the guidelines that were generated bycorporate office and provided to the lines of business on September 30, 2003regarding the development of performance targets.

Please see the attached documents “Business Planning Guidelines F2005 and F2006”and “F2005 Service Plan / Business Plan Templates” that were provided by thecorporate office for F2005 and F2006 business planning.

BC Hydro

Business Planning Guidelines2004/2005 and 2005/2006

For the Planning PeriodCommencing April 1, 2004

Table of Contents

1. Introduction.............................................................................................................. 22. Business Planning Process..................................................................................... 21. Overview of the Strategic and Business Planning Process ...............................2. Situation Analysis............................................................................................. 33. Strategy Formulation........................................................................................ 64. Measures and Targets.............................. ..................... ................................... 7

5. OMA and Capital Target Setting and Resource Allocation................................ 86. Approval Process .... ................................................. ......

... .............................

7. Common Planning Assumptions .............. .,............... ......

...

............................. 128. Organizational Transfer Agreements ......... ..................... ... ............. ................ 129. Key Dates.................................... ................................................................... 1210. Key Contacts.............................................................................. .................... 13

3. Preparation of Business/Service Plans """""""""""""'"''''''''''''''''''''''''''''''''..... 131. Mandate ..... ................................ ..................... ...... ................................... ...... 132. Planning Context and Key Strategic Issues .................................................... 133. Objectives , Strategies , Performance Measures , Targets """""""'''''''''''''''''' 14

3.4. Summary Financial Outlook.. ........ ................................ .................................. 145. Staffing ... ... ........... ....... ....... .......... .................................................................. 15

Appendix A - Service Plan templateAppendix B - Organizational Transfer Agreement form

C:\Documents and Settings\sbradley\Local Settings\Temporary InternetFiles\OLK7\F2005 Business Plan Guidelines.doc

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1. INTRODUCTION

Business planning is the process of translating strategic objectives into concrete , short-term tactical priorities and individual responsibilities within the context of (or as an inputto) annual budget allocations as determined by the financial and strategic plans.

The objective of these guidelines are:

To help ensure that business plans are developed that support the strategicobjectives of BC Hydro.To provide guidance for developing performance measures and targets.To provide an overview of the resource allocation process and identify theinformation required to be submitted for funding requests.To communicate the business planning process key dates and contacts.To communicate the information requirements of business/service plans.

. .

In general this document identifies guidelines that LOB/SOs should implement to theextent possible. However, the Executive and the Board do require some level ofconsistency and in some cases specific formats are required for the purpose ofconsolidating the information into the overall BC Hydro plan. Requirements to provideinformation in specific formats are identified in this document.

2. BUSINESS PLANNING PROCESS

The business planning process is a component of the management cycle. Themanagement cycle is an iterative process that includes the following components:

Strategic Planning - includes setting and revising goals and objectives anddetermining strategies to meet objectives. Strategy is the selection of themost appropriate option to achieve an objective. It also involves establishingperformance measures and targets.Business Planning - involves determining how to execute strategy includingdetermining necessary resources and time frames.Executing Plans - performing activities identified in business plans.Performance Assessment - includes reporting actual performance forprograms and individual projects to targets.


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The management cycle is illustrated below.

Management Cycle

Establish objectives, strategies,measures and targets

. ,-

Overview of the Strategic and Business Planning Process

The following diagram depicts the BC Hydro strategic and business planning process.

Situation Analysis

Situation analyses are prepared for BC Hydro and for each of the Lines of Business(LOB) and Service Organization. They begin in June and are completed inAugust/September. The purpose of the situation analysis is to examine the current and


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future business environment and identify key strategic issues. The key components ofthe situation analysis are as follows:

. A review of current performance and key initiative status

. An examination of the external business environment

. An examination of the internal environmentIdentification of key strategic issues arising from the environmentalexam i nation.

The examination of the external environment includes a review of energy marketdevelopments , BC economic outlook , technological changes , environmental- and FirstNations issues , regulatory developments , demographics and the labour market.

The examination of the internal environment includes resources , management systemsconsent to operate and organizational restructuring.

Key strategic issues for BC Hydro identified in the situation analysis are identified below.

1. Market Trends

Power Market Trading

In light of increased credit risk, BC Hydro and Powerex need to continue to ensurethey have a strong understanding of how Powerex makes risk - return decisionsrelated to energy trading.

RTO West

It will be important that BC Hydro establish a clear relationship and process withBCTC in order to have its interests effectively represented in the development ofRTO West.

2. Financial Performance

Burrard Thermal Generating Station

The MLA Technical Review of BUITard may require changes in how investments andoperating decisions relating to Burrard are commercially optimized.

Environmental Regulatory Developments

The Species at Risk Act and other regulatory changes affecting water systemoperations and protection from contaminants have the potential to affect howhydroelectric systems are operated and where they are built.

Asset Health and Reliabiliy

A tension exists in managing between rising risk levels and the significantly highercosts for equipment replacement over maintenance. A customer-based reliabiltystrategy is being developed to determine an optimal level of investment inmaintenance and sustaining capital.

Natural Gas


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BC Hydro s expected incremental needs over the next 10 years are expected to bemet using some gas resources but mostly non-gas resources , such as Power SmartResource Smart , Green and Customer-Based Generation , allowing BC Hydro tomitigate natural gas price and supply risks through diversification.

3. People

The key workforce issues are the impact of on-going change on employeesemployee safety, training (eg, business acumen), workload imbalances , attraction forkey positions , retention , succession planning, and leadership development.

4. Manaaement Systems

The revenue requirements hearing: There are potential financial risks to managedepending on the outcome.

Commercial Focus: In addition to outsourcing services to lower-cost providers , BCHydro is exploring several key areas of significant financial impact to see if systemsand processes can be further refined to optimize and manage them at a moresophisticated level. These include an energy purchase model , capital structuresupply/demand forecasting, and risk management frameworks.

Power Planning and Portolio Management: The key issues to be addressed areload forecasting methodologies, public expectations , some technical issues (eg,interconnections) and capacity resource issues such as those relating to incrementalnon-firm supply.

IT Investments: In light of the restructuring taking place at BC Hydro , it wil beimportant to ensure that the IT strategy supports the new business model andcustomers. Accountabilty and Performance: Governance and accountabilty frameworks forprojects and issues that cut across the corporation need to be clear. In addition , withseveral significant regulatory projects underway tapping the same people resourcesthere is a need to manage them thoughtfully.

Smart" Regulation: The move of federal and provincial governments towardssmart" regulation (that is focused more on monitoring outcomes rather than

processes and outcomes) presents BC Hydro with both an opportunity to optimizehow it meets compliance standards and a need to ensure it establishes appropriatemechanisms for monitoring practices and results.

Technology: BC Hydro is currently examining the value proposition associated witha significant increase in research and development (R&D) spending targeted atadding value to the core strategic goals and objectives. Efforts are also underway tostrengthen partnerships and relationships to better leverage R&D spending.

5. Consent to Operate

Customer Satisfaction and Public Opinion Issues: If rates increase , it is verylikely that customer satisfaction ratings wil drop. However, it remains unclear whatthe full impact of this would be and to what level satisfaction must fall to trigger a


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negative impact. Further, with a number of high profile initiatives taking place , theremay be a compounded effect among them increasing public approval or disapproval.

First Nations: First Nations ' issues continue to be a priority in order to managecurrent operational risks and future resource development.

BCUC: As this is the first time in ten years that BC Hydro will engage in majorregulatory hearings with the BCUC , BC Hydro will need to re-establish a muchstronger relationship with the regulator.

Energy Infrastructure Siting Issues: Multiple environmental and social issues andthe resulting increased regulatory requirements continue to challenge the siting ofnew and existing plants and wires in BC.

6. Meeting Electricity Demand

Greenhouse Gas Regulation: BC Hydro may be required to reduce emissionsand/or purchase GHG credits in order to comply with domestic regulation. Afavourable policy outcome would mean minimal financial costs imposed on BCHydro s thermal resources and the maximum credit possible granted to its emissionavoiding activities.

Supply to Vancouver Island: Vancouver Island is a challenge with regards todependable capacity and the current status of VIGP and GSX.

7. Organizational Restructuring

Contract with BCTC: BC Hydro and BCTC will negotiate the coordination of BCHydro s planning processes for resource acquisition and BCTC's transmissionsystem , and the coordination of their respective regulated services to address IPPaccess to the transmission system and the need for BCTC's tariffs to continue toprovide services to BC Hydro.

Heritage Contract: A priority for Generation and Distribution in the coming year wilbe to negotiate how the Heritage Contract wil be administered between them.

Line of Business Model: The need to present as one consolidated , vertically-integrated utilty to the BCUC , coincident with the move to lines of business modelhas created a need to clarify the functions and responsibilities for each organizationto ensure they can act in a coordinated fashion to optimize BC Hydro as a whole.

The complete BC Hydro situation analysis is available at the following intranet address:http://w3. bchvdro. bc.ca/strateoicissuesand plannino/situationanalvsis. html.addition , LOBs/SOs have prepared situation analysis documents specific to theirbusiness situation. (Note to draft - update once Situation Analysis finalized)

Strategy Formulation

Strategic planning guides the decision-making process for all spending. The strategicplanning process begins with the situation analysis. Strategy formulation is the process


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of determining how (selecting options) to achieve BC Hydro s mission and objectives.BC Hydro s vision , mission and objectives as stated in the Service Plan are identifiedbelow.

VisionBC Hydro s vision is to be the leading sustainable energy company in North America.

MissionBC Hydro s mission is to provide integrated energy solutions to its customers in anenvironmentally and socially responsible manner.

ObiectivesBC Hydro s vision centers on the concept of sustainability. Sustainability is aboutfocusing on financial , environmental , and social value to address the challengesidentified in the planning context. BC Hydro will continue to focus on its strengths infinancial performance , service quality, environmental management, and employees:

Strong Financial Performance- by optimizing financial performance to ensurestable earningsQuality Service- by focusing on customer satisfaction and service reliability.Consent to Operate- by building and maintaining good environmental andsocial performance.Skiled workforce, safe workplace- by ensuring that the right people are inthe right roles and the right time

2.4. Measures and Targets

Performance measures are a means of evaluating performance to assess whether or notBC Hydro is achieving its objectives. Measures are developed for each of the strategicobjectives and short-term and longer-term targets are established for each measure.Overall BC Hydro measures and targets are provided in October. LOB/SO measuresand targets , aligned to the BC Hydro measures and targets , are completed in October.

Measurement Development GuidelinesMeasures should be developed with the following guidelines in mind:1. Measures should be clearly linked to BCH/LOB/SO Goals and Objectives.2. LOB/SO measures should cascade down to lower levels in the organizational

hierarchy,3. Where possible , select widely used measures (useful for benchmarking)4. Where possible , measures should be simple. Here simple means readily calculated

readily understood , and data readily available.5. Measure portolios should cover all three bottom lines (economic, social , and

environmental).6. Measure portolio should include both lead (predictive) and lag (outcome) measures

in proportions the LOB/SO considers appropriate

AccountabiltvIn order for performance measures to have their appropriate impact , accountabilty forthe results of the measures needs to be established. Such accountability shouldreinforce the LOB/SO structure and objectives. It is recommended that whereappropriate , Variable Pay contracts be used to enforce accountability. To be consistent


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with the Variable Pay philosophy, measures in the contracts should be high priority, non-routine items.

OMA and Capital Target Setting and Resource Allocation

OMAThe following diagram ilustrates the fiscal 2005 and fiscal 2006 OMA target setting andresource allocation process.

Fiscal 2005 & F2006 OMA Target Setting

Cross LOBtrans fers toreflect org.

trans fers 2% red cti on

non-mamtenancecosts (F200S

only)

Plan F2004

::

ContinuingInitiatives

OMA budgets will be addressed in three separate components:Initiatives

. ABS ChargesOther

Initiatives

LOB/SOs wil identify completed initiatives and forecast fiscal 2005 and fiscal 2006 costsof approved fiscal 2004 initiatives that are continuing into fiscal 2005 and fiscal 2006 (ifapplicable). The forecast costs of ongoing initiatives wil be consolidated to determinethe total fiscal 2005 and fiscal 2006 OMA costs of committed initiatives. Seniormanagement wil determine the amount of the remaining initiative pool that will beavailable for funding new fiscal 2005 and fiscal 2006 initiatives. If funds are available , theresource allocation process wil be as follows:

LOB/SOs submit funding request lists (initiatives or base items). A one page justification wil be provided for each funding request item. The

funding justification will include: name of funding items , description of theitem , reason for the request (including strategic objective addressed),


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implications of not funding the request , forecast F2005 and fiscal 2006 (ifapplicable) OMA and capital costs (if applicable), future years initiative costsand any ongoing costs associated with the item.Senior Management will review requests and allocate funds items identifiedas high priority items required to meet BC Hydro objectives.Senior management will review the listing of committed initiatives todetermine whether any of these initiatives should be deferred in order to fundnew higher priority initiatives.

ABS Service CharoesCharges for ABS services will require adjustment for fiscal 2005 and fiscal 2006 planningdue to the following:

Committed savings for services included in the Minimum Aggregate Spend (MAS);Adjustments to the MAS due to errors or omissions in the original determination ofthe MAS;Cross-LOB consumption shifts due to organizational transfers;Change orders signed or in-progressChanges in BC Hydro loadings

The impact of these changes on LOB/SO ABS budgets will be estimated and provided tothe LOBs. Additional OMA funding will not be provided for increases in ABS costs due tochange orders or volume increases. OMA target adjustments will only be provided forchanges in ABS loadings and for cross LOB transfers resulting from organizationaltransfers. LOB/SOs will retain the ABS committed savings associated with the productsthat they consume.

Other CostsBC Hydro s shareholder has directed BC Hydro to reduce Plan 2005 OMA costs by $4milion (2% of non-maintenance costs) compared to Plan 2004. The $4 millon reductionis applicable to all base OMA costs excluding maintenance costs but including ABS non-maintenance costs. OMA targets wil be reduced to reflect the 2% reduction in non-maintenance costs.

Orqanizational TransfersLOB/SO OMA targets wil be adjusted to reflect organizational transfers identified sincethe completion of the fiscal 2004 OMA plan.

Capital

The following discussion of the F2005 capital expenditure planning process is asummarization of the information contained in the F2005 and F2006 Capital PlanningGuidelines. As in F2004, capital expenditures wil be classified into twopools-sustaining capital projects and growth/expansion capital projects.

Sustainino CapitalLOBs/SOs wil identify needs for sustaining capital expenditures for the next 5 years tomeet the BC Hydro objective of retaining current levels of system reliability.


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Growth/Expansion Capital

Growth capital expenditures are driven by load growth , customer needs or other profitdriven business investment. Load growth and customer driven expansion projects mustbe linked to BC Hydro load forecasts , customer growth estimates or be supported bycustomer requests.

Capital Targets

The capital expenditure target setting approach is similar to fiscal 2004 and is illustratedin the following diagram.

F2005 & F2006 Capital Expenditure Target Setting

LOB/SOPreliminaICapex fudin

requests

Funds allocated asrequested

LOB/SO submitprogram or projectdeferral proposals

Sr. Mgmtdetenmnesfudireductiobased onro osals

RevisedLOB/SOtargets

LOB/SOs submit their 5 year capital expenditure forecasts on October 3 , 2003. Theforecasts are presented based on the following segmentation:

Capital expenditure business functionsDriver categories (Sustaining and Growth)

LOB/SO forecasts are consolidated and input into the BC Hydro financial forecast.

The aggregate LOB/SO forecasts are evaluated for affordability within the BC Hydrofinancial forecast. If suffcient funds are available, LOB/SOs are allocated the requestedfunding for their capital expenditure target.

If funding is limited , LOB/SOs are notified that funding requests exceed fundingavailability and LOB/SOs are requested to reassess their funding needs, given thatfunding is limited , and resubmit capital expenditure funding requests. Revised fundingrequests are submitted by October 10, 2003 and are consolidated to determine whetheror not funding requests continue to exceed available funds. If funding requests continueto exceed available funding, LOB/SOs submit program or project deferral proposals byOctober 14 2003 , on a comparable basis , for consideration. The program or project listsare presented in terms of common expenditure drivers and projects are listed inascending order (lowest ranking items first). LOB/SOs provide brief narratives identifyingthe implications of deferring program or project expenditures.


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Senior Management reviews the deferral proposals and identifies funding levelreductions by October 16 , 2003. The deferral decisions will be based on a variety offactors which will include the level of support for corporate objectives and the level of riskthat BC Hydro is prepared to accept. LOB/SO capital expenditure targets are establishedthat reflect reductions identified by Senior Management.

Approval Process

Plan ApprovalLOB/SO OMA and capital plans will be approved using the process identified in section

5 of these guidelines.

Ex-Plan ApprovalAfter the start of the fiscal year (April 1 , 2004), or off-cycle from the annual planningprocess , new projects , programs or other initiatives may be required to realizeopportunities or solve problems. LOB/SOs will fund these new items by reprioritizingactivities , programs or projects within their approved plans. If LOB/SOs are unable toreprioritize to meet critical funding needs , they may submit a request , including a one totwo page justification , for additional funding to senior management consideration. Theprocess for obtaining approval of ex-plan OMA or capital funding is illustrated in thefollowing diagram.

If Approved

1. EAR - Expenditue Authorition Request2. Projects or intiatives ;:thesholds stated in the Financial Responsibility CPS require business casand EAR approval ITom CFO, CEO and Board depending on the amount of the project.


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Common Planning Assumptions

GeneralThere will be minimal Community Charter impacts for this planning horizonStepped Rates as proposed to the BCUC are approved as submittedThe Heritage Contract submitted to the BCUC is approved as filed.Common Planning Rates are stated on the Controllers ' Division websitehttp://edmssappp 1/fi nance/cdcd/bi ns/content page. asp?cid=215-256

Organizational Transfer Agreements

During the planning cycle and throughout the year, transfers of responsibility, staffing,and resources from one LOB/SO to another may occur. For each transfer in/out of yourLOB/SO , complete an Organizational Transfer Agreement (OT A) form and submit it tothe Controller s Division (attention: Darin Hale). An OTA form is attached in appendix B.

Key Dates

Executive Strategic RetreatBoard of Directors RetreatService/Business Plan Template distributedLOB/SO Forecast 5 Yr Capex submissionBC Hydro MeasureslTargets communicatedOMA Funding Requests to CorporateLOB/SO VP Resource Allocation Meetings with CEO&CFOLOB/SO Capex reduction proposals submitted (if necessary)LOB Preliminary Rate Application schedules to CorporateDraft LOB/SO measures and targets to corporatePlanning System openingCEO/CFO final resource allocation decisionsPreliminary 5 Yr Financial Forecast to BoardFinal LOB Rate Application schedules due to CorporateRevenue Requirements Application due to BCUCLOB/SO/Subsidiary Business/Service Plans duePlanning System closingBC Hydro Service Plan to BoardBoard Approval of BC Hydro Service PlanLOB/SO Plan 2005 Capital Expenditures forecast by month

September 2- , 2003September 20/21 , 2003

September 22 , 2003October 3 , 2003October 3 , 2003October 7 , 2003

October 8 - 2003October 10 , 2003October 15 , 2003October 15 , 2003October 15 , 2003October 16 , 2003October 28 , 2003October 28 , 2003December 1 , 2003December 1 , 2003December 1 , 2003January 20 , 2004January 28 , 2004March 31 , 2004


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10. Key Contacts

Capital Plan Requirements and Planning Process

Dana Hardy

Darin Hale

John Arthur

Karen Cheng

74084

73958

73547

73738

Budget System

Anil Dias 73839

Shirley Ko 74568

3. PREPARATION OF BUSINESS/SERVICE PLANS

The BC Hydro fiscal 2005 Business/Service Plan wil include segmented information. ABusiness/Service plan template has been developed that incorporates the requiredLOB/SO information for the BC Hydro Service plan and the information requirements fora business plan. In addition templates have been developed for the preparation ofinformation required for the Revenue Requirements Application. The formats as set outin the appendices to the Business/Service Plan template are required for consolidationand to ensure consistent presentation of the information. Selected information from theLOB/SO Business/Service plans wil be included in the BC Hydro Service Plan. LOBsSOs , subsidiaries and corporate groups are required to prepare Business/Service plans.In addition , Business/Service plans must be prepared , and held within the LOB/SO , forall Key Business Units reporting to a Senior Vice President. This section of theguidelines outlines the information that LOB/SOs should include in theirBusiness/Service plans.

Mandate

The mandate section includes a brief explanation of the LOB/SO/Subsidiary includingmission statement, vision and business model.

Planning Context and Key Strategic Issues

This section includes a summary of external economic and business environment, theimplications for LOB/SO performance and key strategic issues. It also includes risks andinternal pressures. A summary of the LOB/SO Situation Analysis should be suffcient.Only those items specifically relevant to the LOB/SO should be included.


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Objectives , Strategies , Performance Measures , Targets

This section includes a description of LOB/SO/Subsidiary key strategic objectives and adescription of the key strategies that will be employed to meet the objectives. It alsoincludes descriptions of the measures and associated targets that will be used todetermine if the objectives are being met. Targets are to be set for 3 years.In addition each measure is defined and the basis on which targets were set (e.benchmarks , historical performance , etc. ) is provided.

Summary Financial Outlook

LOB/SO/Subsidiary income statements and balance sheets are required for fiscal 2004to 2007. The format of the income statement and balance sheet is shown in theBusiness/Service Plan Template. Provide key assumptions used in preparation of theplan schedules and key risks associated with the plan. Also provide strategies andproposed contingency plans for mitigating the key risks.

OMA

OMA expenses wil be presented in two components - Maintenance , Operations &Administration (O&A) on LOB/SO income statements. In addition , base and initiativeswill be presented for Plan F2005 and F2006 Maintenance and O&A expenses.

OMA information by resource is required for preparation of the Revenue RequirementsApplication. Revenue Requirements Application information templates will be distributedto each LOB/SO.

Capital Plan

As stated in the 2004/2005 Capital Planning Guidelines , the following information isrequired for capital plans:

Summary and analysis of factors driving the need for capital expendituresCapital plan performance measures (include in the summary of performancemeasures section)Capital Expenditure Forecast presented based on the following categorizations. 5 Year Forecast Capital expenditures by business function. 5 Year Forecast by business driver. LOB/SOs are not required to use the

common list of BC Hydro drivers.Large Capital Project Listing - the thresholds for reporting planned capital projectexpenditures in Business/Service plans has been lowered for fiscal 2005 due toreporting requirements for the Revenue Requirements application. For specificcapital projects , provide the following information for all projects with aggregateF2004 to F2006 forecast expenditures of greater than $2 milion. The projects wil bepresented under business function headings.

Project nameTotal Project Cost


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Life-to-date and 3 year forecast project costs (F2004 to F2006)Estimated in-service dateSustaining or growth category and business driver

In addition , brief project descriptions including project rationale are required for allprojects with aggregate F2004 to F2006 expenditures of greater than $5 million.

For Recurring capital expenditures , segment the capital plan in terms of programsbusiness drivers or other appropriate method. Identify forecast expenditures for fiscal2004 to fiscal 2006 and provide a description and rationale for the expenditures.

For further details refer to the 2004/2005 and 2005/2006 Capital Planning Guidelinesand the F2005 Service Plan Guidelines.

Staffing

Forecasts of active employee and contractor FTEs for fiscal 2004 to fiscal 2007 arerequired. In addition , rationale for significant increases or decreases in staffing levelsshould be provided.


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F2005 Service Plan Business Plan Templates

Mandate (Y2 page)Please provide a brief explanation of your LoB including mission statement / vision andbusiness model.

PlanninQ Context and Key StrateQic Issues (1 to 1 Y2 pages)Please provide a brief analysis of your LoB's external economic and business environment , theimplications for LoB performance and key strategic issues. Also include risks and internalpressures. A summary of your Situation Analysis should be suffcient. Only those itemsspecifically relevant to your LoB should be included. An overall summary of the BCH SituationAnalysis wil be provided in the consolidated section.

Obiectives. StrateQies. Performance Measures. TarQets (1 to 2 pages)Please describe your LoB's key strategic objectives and how you wil meet these objectives (thekey strategies). LoB objectives should align to BC Hydro s key goals and objectives which are:

1. Strong Financial Performance - by optimizing financial performance to ensure stableearnings

2. Quality Service - by focusing on customer satisfaction and service reliability3. Consent to Operate - by building and maintaining good environmental and social

performance 4. Skiled Workforce , Safe Workplace - by ensuring that the right people are in the right

roles at the right timeAlso describe the measures and associated targets you wil use to determine if the objectivesare being met. Targets are to be set for 3 years. Please use the following format for presentingthe above information.

GOAL and OBJECTIVE

STRATEGIES

In addition to summarization in the above table , please provide definitions for each measure andindicate the basis on which targets were set (e.g. benchmarks , historical performance , etc.Benchmarks should be referenced wherever possible.

Summary Financial Outlook (approximately 2 pages)Please complete the income statement and balance sheet in Appendix A. A more detailedbreakdown of the line items will be required for preparation of the 5 year forecast for thegovernment. A separate template will be distributed for this purpose.

Capital Plan (approximately 1.5 pages)Please provide your LoB's/SO' s planned capital expenditures categorized on the followingbases:

Capital Expenditures by Business Function and high level driver (Appendix B)Capital Expenditures by Business Driver to ilustrate linkage to BC Hydro s goals andobjectives. If the LoB has drivers different to those in the template , feel free to use those(the LoB) drivers instead (Appendix C).

Include a discussion of factors impacting the capital expenditure trend.

In addition , provide a list of forecast expenditures (see format in appendix D) for capital projectswith total project expenditures based on the rate application thresholds:

$2M aggregate spending for F2004 - F2006$5M requires a summary that should include a detailed description of the project and its

justification.

Capital projects with expenditures greater than $50 Milion will be included in reports to thegovernment as required under the Budget Transparency and Accountabilty Act.

Also , please provide your LoB's/SO' s net book value of assets and estimated replacement costof assets at March 31 2005.

StaffinQ (1 paragraph)Please identify forecast staffng levels in the following table. The definition of FTEs for thepurpose of this schedule is estimated headcount at March 31 of the fiscal year converted toFTEs (Le. 1 full-time regular = 1 FTE , 1 Part-time reQular = % FTE)

FTEsFest F04 Plan F05 Plan F06 Plan F07

Active EmployeesContractors/ConsultantsTotalProvide rationale for significant increases or decreases in staffng levels.

APPENDIX A - INCOME STA TEMENT and BALANCE SHEET

Segmented Statement of IncomeFor the Year Ended March (in Millons)

Forecast F04 Plan F05 Plan F06 Plan F07Revenues

Internal

External

OMA Recoveries

ExpensesEnergy costs - external

Energy costs - internal

Wheeling costs

Operations and administration

Maintenance

Contribution Margin

Asset Related ExpensesDepreciation and amortization

Taxes

GRTA

Common Use Stations

Business Unit Margin

Business sustaining costs

Finance charges

Net Income Before Adjustments

Point-to-point wheeling adjustment

Net Income

Notes:1 Only applies to Engineering, Field Services , and Corporate

Segmented Balance SheetFor the Year Ended March (in Millions)

Forecast F04 Plan F05 Plan F06 Plan F07ASSETS

Capital Assets

Current Assets

Deferred Charges & Other Assets

LIABILITIES

Long-term Debt

Current Liabiliies

Deferred Water Rentals

Other Liabilities

EQUITY

Deferred Revenue

Rate Stabilzation Account

CRT and CIA

Retained Earnings

-_....--- .... --",._.",,, ' ' --' "'''''-''"- ". .. " ''- '-.'' .'-''-''-''----'

Notes:1 Includes FRSR and

FIX contracts2 Regulatory definition

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