Future Efficiencies in The Electricity Distribution Sector

presented by

Don MacKinnon, PresidentFebruary 17, 2004

Power Workers’ Union

Represents 17,000 members

Generation

Transmission

Distribution

Market Operator

Presentation Overview

Industry Certainty

Stability

Service quality and reliability

Industry Certainty

Lack of consolidation activity with current opportunity for tax-exempt transfer of assets reflects lack of certainty

Government interference in a commercial entity’s ability to realize a market-based Rate of Return (ROR) minimizes incentive for voluntary consolidation that occurs because a distributor can be confident of reaping the benefit of any resulting increase in efficiency

Industry Certainty

Distributors as Commercial Entities

Uncertainty devalues investment value of distributors

Conditions that contribute to uncertainty:

Requirement for Minister’s approval for distribution rate review by OEB

Proposal on using distributors’ third installment towards a market based rate of return to fund Demand Side Management

Industry Certainty

Industry uncertainty impacts distributor’s decisions on investment in its system, operations and workforce

Efficiency improvements through technical innovation require upfront capital investment

Efficiency improvements of workforce requires ongoing training – a significant investment

Investment in System and Workforce

Industry Certainty

Industry certainty is required to provide a healthy work environment for workforce that results in efficiency enhancement

Uncertainty creates stressful work environment and low workforce morale that is not conducive to efficiency improvements

Industry Certainty

Confirm commercial status and give commitment to treat distributors as commercial entities

or

Introduce legislation establishing distributors as non-commercial, non-profit entities

Clear declaration of distributors’ status

Stability

Healthy electricity industry requires skilled workforce

Industry restructuring must ensure stability for workforce

Requires smooth transition

Uncertainty among workers impacts efficiency

Stability

The Electricity Conservation and Supply Task Force (ECSTF) identifies the importance of addressing the need for skilled workers as the electricity industry goes through a major demographic shift.

Stability

Service territory issues

Efficiency initiatives through voluntary, commercial arrangements

Voluntary consolidation

Service Quality and Reliability

Need to invest, not only in system, but equally in skilled workforce

Cutting training to cut costs results in inefficiency and deterioration of service quality and reliability

Uphold Board’s objective “To protect the interests of consumers with respect to prices and the reliability and quality of electricity service”

Service Quality and Reliability

Centrally coordinated training program

Central manpower system for recruitment

Summary

The Government needs to clarify distributor status as commercial entity or non-profit

Stability for the highly skilled distribution workforce is essential to realize efficiency and maintain service quality and requires smooth transition

Continued investment in training and hiring of workforce essential to maintain service quality and reliability

The PWU will continue to ensure effective membership representation through all means

available