The pillars of this Blueprint for Renewal are the business unit structure launched in June, ongoinginternal cost reductions, and pricing changes effective January 1, 1996 to addresscross-subsidization rate imbalances and initiate a reconstruction charge to replace aging facilities.
Based on the recommendations made by employee teams in the first quarter, SaskPowerreorganized operations into four business units and two support groups: Customer Services,Power Production, Transmission and Distribution, Systems Operation and Decision Support,Finance, and Corporate and Business Services. Starting with further Executive downsizing,management positions have since been restructured to reflect the business unit requirements. Asimilar restructuring of in-scope employees will be completed early in 1996.
This new structure is increasing accountability and performance as the Corporation responds tothe specific needs of customer groups. At year-end, many examples of this were found throughoutthe business units.
Customer Services concluded new long-term agreements with major customers, including a10-year, $80 million contract with TransCanada Pipelines Ltd. to convert one of its compressionunits to electric power from natural gas. Other efforts now involve proceeding with theimplementation of hand-held technology to increase productivity in meter reading, removingcashiering from a number of low-volume locations, and reviewing all policies and charges.
Transmission and Distribution wasted little time in undertaking several restructuring initiativesincluding replacing six distribution regions with four, saving over two million dollars a year. Theunit is also implementing a Geographic Information System to more efficiently manage corporatefacilities data.
Power Production adopted a policy of life extension and incremental improvements as acost-effective approach to ensure a reliable supply of electrical energy. In December, the unit setand broke its own 24-hour peak load delivery several times, with the new all-time record standingat 2603 megawatts.
Systems Operations and Decision Support is replacing the existing System Control and DataAcquisition system with one that will enable the dispatch of power production more economicallyand with greater security. The unit also entered into a voluntary agreement with the other westernprovinces to facilitate the interprovincial transfer of power using neighbouring utilities'transmission lines.
Progress in the Corporate and Business Services Group saw SaskPower and our two unionsdevelop an employment equity policy to ensure that all employees are hired and promoted onmerit and job-related requirements. Work is under way to establish cross-cultural training for allstaff, create network support groups, and establish a disabled accommodation review.
In furthering SaskPower's environmental commitment, an Environmental Risk and SiteAssessment section was created. Community involvement included an award-winning lead role inaddressing youth suicide province-wide, while safety communications took a new approach. Thetwo-year, multi-media Need a better reason campaign speaks to why safety is important toindividuals and their families, rather than what to do in a given situation.
The new Finance group is playing a key role in the meeting and setting of financial targets,including SaskPower's internal cost-cutting measures. By 1998, these measures will see annualcapital expenditures reduced by $80 million and operating expenditures reduced by $66 million,producing significant decreased borrowing and debt retirement benefits.
The revenue-neutral rate adjustments reduced the level of subsidy to farm and residentialcustomers, enabling the Corporation to negotiate more attractive rates with our most at-risk,large-volume customers. The adjustments include an eight per cent increase for residential andfarm electricity rates, a two per cent decrease for commercial and public organizations likeschools, hospitals and skating rinks, and a freeze on all rates until at least January 1, 2000. Ratereductions for industrial customers will be negotiated for 1996, 1997 and 1998.
The flat-rate reconstruction charge will assist SaskPower in renewing and rebuilding capitalfacilities with less borrowing and lower interest costs.
All pricing changes were announced on December 1 by SaskPower's shareholder, theGovernment of Saskatchewan, after a 45-day public notification and review process. The reviewprocess confirmed the value of communicating the changing business environment to ourcustomers, which we will continue to do as we shape SaskPower for competitive markets.
SaskPower Commercial, launched as a subsidiary in 1994, is also enhancing our competitiveability. SaskPower Commercial is fostering working relationships with Canadian consultingcompanies, and is developing business relationships with overseas partners that requireSaskPower's expertise. The subsidiary has secured local and international projects, exposingSaskPower to exciting new revenue and employee development opportunities.
With the considerable and difficult task of organizational restructuring largely behind us,SaskPower will be able to direct more effort in the coming year to process re-engineeringactivities.
Looking back at what we have accomplished in 1995, and the employee involvement andinnovation that contributed to our progress, I am confident of our future. The challenge now andin the critical months ahead is to continue to move our workforce forward to complete therenewal of SaskPower.