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alectra utilities Appendix L Alectra Value Framework Implementation Document Alectra Utilities Distribution System Plan (2020-2024) March 27, 2018 March 27, 2018 Alectra Value Framework Implementation Document Copperleaf TechnologiesTechnologies 2920 Virtual Way, #14#1400 Vancouver,Vancouver, BC V5MV5M 00C4C4 Canada "114/4 Tel: +1 604 639 9700 Fax: +1 604 639 9699 copperleaf © 2018 Copperleaf Technologies Inc.,Inc., Confidential InformationInformation Page 1 of 28 Table of Contents 1. Value-Based-Based Decision-Making-Making Approach ....................................................................................................... 4 2. Summary ....................................................................................................................................................... 6 3. Alectra Value Framework .............................................................................................................................. 6 3.1 Alectra Strategic Goals & Objectives ............................................................................................................ 6 3.2 C55 Value Function ................................ ...................................................................................................... 7 4. ValueValue Measures: Financial Benefits ............................................................................................................... 8 4.1 Capital Financial Benefits ............................................................................................................................. 8 4.2 OM&A Financial Benefits ...........................................................................................................................10 4.3 OM&A Costs ...............................................................................................................................................11 5. Value Measures:Measures: KPI Impacts ...................................................................................................................... 12 5.1 Reliability ....................................................................................................................................................12 5.2 Reliability for Spares ..................................................................................................................................17 5.3 Customer Satisfaction ................................................................................................................................18 5.5.44 Customer Service .......................................................................................................................................19 5.5 Application Ready Organization ................................................................................................................. 20 5.6 Environmental Improvements ................................................................................................................... 21 5.7 Employee Wellness Benefit ........................................................................................................................ 22 5.8 Technological Innovation ........................................................................................................................... 22 6. Value Measures: Risk Mitigation ................................................................................................................. 24 6.1 Financial Risk .............................................................................................................................................. 24 6.2 IT Capacity Risk ........................................................................................................................................... 24 6.3 Environmental Risk ................................ .................................................................................................... 25 6.4 ReputationalReputational Risk ................................ ....................................................................................................... 25 6.5 Safety Risk .................................................................................................................................................. 25 6.6 Distribution System Capacity Risk .............................................................................................................. 25 6.7 Compliance Risk ......................................................................................................................................... 25 7. Value Measures: Project Cost ...................................................................................................................... 25 8. Mandatory Compliance Investments ........................................................................................................... 26 9. Other Mandatory Investments .................................................................................................................... 26 10. Value and the Optimization Process ............................................................................................................ 26 11. Risk Consequence Levels, Probabilities & Risk Matrix ................................................................................. 27 © 2018 Copperleaf Technologies Inc.,Inc., Confidential InformationInformation Page 2 of 28 Document Control Sheet Version Date Description Originator 1.0 Apr 2, 2014 Initial Draft Stan Coleman 2.0 Apr 17, 2014 Updated risk definitions Vlad Serdiuk 3.0 Apr 20, 2014 Updated Reliability benefit calculation Vlad Serdiuk 4.0 May 2, 2014 Reformatted the document for easier read Vlad Serdiuk Added methodology description. Updated Financial Value Measures to include changes to Capital and 5.0 Mar 20, 2015 OM&A financial benefits. Reorganized mapping to Vlad Serdiuk strategic objectives. Enhanced benefit and risk descriptions. 6.0 Mar 23, 2015 General edits, addition of A3 Victoria Wills 7.0 Apr 1, 2015 Edits to Reputational risk definitions Victoria Wills Updated section A3. Added reference to 8.0 Apr 13, 2015 Vlad Serdiuk PowerStream Value Measures spreadsheet 9.0 Feb 15, 2018 Updated consequences, likelihoods Brian Dewan Replaced the list of value measures with new format. 10.0 Feb 19, 2018 Vlad Serdiuk General cleanup of value measure descriptions.descriptions. Updated Reliability and Reliability for spares value 11.0 Feb 20, 2018 measures based on the Alectra'sAlectra’s most recent Grant Burwash mmodels.odels. Removed extra factor of 60 from reliability for spared value measure. Clarified Duration lookup. 12.0 Mar 08, 2018 Brian Dewan Added Diversity Factor table. Added table for system configurable fields. Updated Alectra Strategic goalsgoals,, Probabilities, Risk 13.013.0 Mar 22, 2018 Consequences and Risk MatrixMatrix.. Removed table Brian Dewan mapping to strategic pillars. 14.0 Mar 27, 2018 Updated Labour Rates Brian Dewan 15.0 Mar 26, 2019 Updated Name of Value Measure for consistency Tracy Martin © 2018 Copperleaf Technologies Inc.,Inc., Confidential InformationInformation Page 3 of 28 1. Value-Based-Based Decision-Making-Making Approach This document outlines Alectra Value Function description as well Copperleaf'sCopperleaf’s Value-Based-Based Decision Making (VDM) approach for valuing investments for comparison against each other in a manual or automated investmentinvestment decision-making-making process. This document addresses the following: • How to determine the value of an investment • The method used to create a Value Framework a• Alectra Value Function description How to Determine the Value of an Investment Every organization needs a mechanism by which they determine the value of an investment if they intend to optimize the use of their scarce resources. There are a number of elements that can contribute to assessing the value of an investment to an organization. • ImprovementsImprovements in Key Performance Indicators (KPIs) • Risks mitigated by an investment, often grouped into categories • Consequences of a given risk, were they not mitigated • Financial benefits such as cost savings • Other elements that may bring value to the organizationorganization An investment'sinvestment’s value is used to determine both its independent merit and its standing among other investments competing for resources in a constrained optimization process. The process that Copperleaf uses to determine an investment'sinvestment’s value is calledcalled VDM, or Value-Based-Based Decision Making. It is an implementation of Multi-Criteria-Criteria Decision Analysis (MCDA). Copperleaf'sCopperleaf’s VDM approach captures the strategic management decisions made by the organization as to the relative importance of KPIs, risk categories,categories, and financial benefits. These categories can be individually weighted to suit the priorities of the organization or to determine the sensitivities inherent in each recommendation. The function that is used to weight and combine the individual categoricategorieses that deliver value to the organization is termed the Value Function. The Value Function along with the detailed supporting calculations, assumptions and quantification, as well as the broader methodology and supporting processes is termed the Value Framework.Framework. C55, Copperleaf'sCopperleaf’s Asset Investment Planning and Management software, supports the VDM process. Based on asset and investment data, C55 automatically calculates the investment value for each