Electricity Today Magazine Article -- Annual Year in Review A to E

It was a very busy year for all of us at AltaLink in 2002. Based in Calgary, Alberta, AltaLink became Canada's only independent transmission provider in April 2002, after completing the more than $800-million purchase of TransAlta Utilities' Alberta transmission assets. AltaLink was created in 2001 by a consortium of SNC-Lavalin Energy, the Ontario Teachers' Pension Plan Board, Macquarie North America Ltd. and Trans-Elect Inc. We bring together a unique combination of both technical and financial strengths committed to one thing - linking electricity customers together through transmission.

Today we are responsible for the maintenance and operation of more than 11,000 kilometres of transmission lines and more than 260 substations in Alberta. We take this responsibility very seriously, and as Alberta's largest supplier of safe and reliable transmission services, we are also moving forward in the prudent development of a transmission system that will continue to meet the growing needs of Albertans. Alberta's deregulated electric industry requires companies to be dynamic and flexible. AltaLink's team combines extensive skills and experience with a thorough understanding of the changing business environment in which we operate.

With the opportunity to start afresh, we strategically built a strong group of people who bring expertise from across the electric industry and beyond. And as part of the purchase, AltaLink gained the expertise of TransAlta's transmission staff. Combining their skills and knowledge of the transmission business with those of our own, we have built a team of professionals whose energy drives Alta-Link to succeed.

North America's electricity industry is changing rapidly. Transmission companies are being separated from their traditional partners of generation and distribution. AltaLink is already there, and since our only focus is transmission we place all of our effort into satisfying transmission users while providing the safest and most reliable transmission service possible - service that relative to our North America peers is in the top quartile in terms of cost, reliability and safety.

At AltaLink, we also believe there is more to our business than just the steel and wires of transmission. We have a strong sense of community, and we understand that organizations today must do more than focus solely on profits. In 2003, we started our "Powerful Giving" campaign as one way we can all be part of making our communities better places to live. With a 92 per cent employee-giving rate, AltaLink and our 220 employees contributed more than $125,000 to registered charities in Alberta. We're proud of the commitment that our employees show in supporting the communities in which we live and work through their generous donations of both time and money.

Not unlike other jurisdictions in Canada and across North America, we at AltaLink see the challenges in the electricity market. Alberta's transmission grid is congested, and the ability to move electricity from the primarily central Alberta generators to the load-heavy southern region of the province is hindered. And Alberta, with the fastest growing economy in Canada, is putting more strain on the electrical grid every day. In 2003, AltaLink is ready to meet those challenges by developing creative and cost-effective solutions that relieve the stress on the grid while remaining focused on providing quality transmission service for the benefit of Albertans.

AQUILA NETWORKS CANADA

Aquila Networks Canada experienced a dynamic 2002. Perhaps the single most significant change, certainly our most visible, was our move to the Aquila brand from UtiliCorp Networks Canada. The change has aligned Aquila Networks Canada with our Kansas City, Missouri-based parent company Aquila, Inc. and that company's recent name change from UtiliCorp United, Inc.

As Aquila we represent a global entity, focused on distribution networks. Within our specific service territories in Alberta and British Columbia, we concentrate on the safe, reliable and efficient delivery of electricity to more than 500,000 customers. An investor-owned utility, Aquila is distinct within the industry in Canada, operating utilities in two separate provinces. We operate and maintain a vast distribution network in Alberta and BC, an integrated utility including retail, distribution, transmission and hydro generation assets. Aquila is keenly interested and involved in the evolution of the industry. In 2002, we were encouraged by the direction taken by provincial governments in BC and Alberta, and are hopeful that further electricity reform in 2003 will result in customers realizing even greater benefits.

In late 2002, the government of British Columbia announced a framework to attract new investment into the province to help meet increasing electricity demand. The steps taken not only encourage new electricity producers, but also support projects like Aquila's planned $60 million substation to serve growing customer needs in the South Okanagan. However, more work needs to be done. It is Aquila's hope that over time, the provincial government will take further steps to encourage more private investment in BC's electricity distribution system, which would help relieve taxpayers from growing Crown debt and bring competitive practices to the distribution side of the business.

In Alberta, where market reform has been evolving for several years, electricity policy continues to be refined. Substantial benefits of reform have been realized, including new generation investment to ensure supply. As a regulated, investor-owned utility focused on distribution, with poles and wires that span more than 100,000 kilometres, we believe that still more change is needed to streamline the regulatory process and ensure a level playing field that will provide fairness and opportunities for all electricity distribution utilities, regardless of ownership structure. Essential fairness will ultimately mean lower rates for our largely rural customers. We continue to pursue positive change and await changes to the Electric Utilities Act, which will be presented to Albertans early in 2003.

Highlights of accomplishments and changes in 2002 include Aquila centralizing its customer service centre, which allows customers throughout BC and Alberta greater access to the company, 24 hours a day, seven days a week. Necessary regulatory approvals were obtained and work was started on a significant transmission upgrade in the Columbia Basin, the $120 million Kootenay 230kV project, which will go into service in the spring of 2003.

Construction was completed on a new operations centre in Kelowna, and significant improvements began on our offices in Trail and Warfield, scheduled for completion in 2003. The construction projects improve the facilities where our people work which, in turn, helps us serve customers more effectively.

As the company responsible for electricity meter reading in Alberta, we faced complex, unique challenges in gathering, managing and transferring large volumes of data. We continue to refine our meter reading and data collection processes, to ensure accurate, timely data is sent to retailers and ultimately, customers. In 2002, we launched major internal initiatives to improve and refine the supporting technology behind these processes. Aquila continues to move forward on these initiatives and many others in 2003, with the pursuit of excellent customer service as the entire company's primary focus. Aquila Networks Canada operates assets valued at approximately $1.6 billion, which includes a vast electricity distribution network in rural Alberta and transmission, distribution networks and four hydro electric dams in British Columbia. Our company employs approximately 1,100 people - 700 in Alberta and 400 in British Columbia.

More information about Aquila Networks Canada can be found at www.aquilanetworks.ca.

ATCO ELECTRIC

For ATCO Electric, 2002 marked a year of change, challenge and opportunity. Adaptation and growth took place in the midst of refinements to Alberta's deregulated electric industry and growth in the province's robust economy.

After a worldwide search, in December ATCO announced the sale of its retail gas and electric businesses to Direct Energy for $130 million. Direct Energy is part of the U.K.-based Centrica plc. - a supplier of energy and home services with more than 44 million customer relationships worldwide. Subject to certain legislative changes and regulatory approvals, the sale is expected to close by mid-2003. ATCO is selling the right to supply electricity to Regulated Rate Option (RRO) customers currently supplied by ATCO Electric. The sale will allow ATCO Electric to focus on its core business - maintaining and operating power lines and ensuring the safe, reliable delivery of electricity to its customers.

Meanwhile, the Alberta government announced that it will make further changes to utility legislation in order to improve the environment for competition and encourage new retailers to enter the province. The government intends to introduce a new Electric Utilities Act in spring, 2003. Market prices for electricity, which had dropped in mid-2001, remained low throughout 2002. ATCO's customers benefited from the continuing low prices, which are passed through to customers through the regulated rate option (RRO).

(In Alberta's deregulated market, residential customers and other eligible groups can continue to buy energy from their local utility through a regulated rate. Alternatively, customers may choose to buy energy from a retailer.)

During 2001, the provincial government had capped the RRO at 11 cents per kWh for all consumers in the province. In January 2002, ATCO Electric's rate dropped to approximately 4.8 cents - the lowest energy charge of any RRO provider in the province. In June, ATCO Electric received final approval from the Alberta Energy and Utilities Board to begin collecting deferral accounts related to high energy prices in 2000 and 2001. However, for customers on ATCO Electric's regulated rate option, this charge was offset by a refund for 2001. During 2001, the company was able to buy energy for its customers for less, on average, than it collected.

In December, the AEUB approved a change in ATCO Electric's approach to buying energy for customers on the RRO. The company would move to a direct flow-through of market price in 2003. A flow-through rate is based on the actual spot market price for the energy used during each billing period.

All of Alberta's vast oil sands resources lie within ATCO Electric's service territory, and sustained development in this sector requires transmission capacity to support it. ATCO Electric has recently completed more than $50 million worth of transmission projects in the Fort McMurray area. During 2002, ATCO carried out preliminary work on a third transmission line to Fort McMurray. Construction of this 400-km, $90-million project will begin next year.

The ATCO Group of companies will donate $1 million for a new learning centre at the internationally renowned Royal Tyrrell Museum in Drumheller, one of the province's premier visitor attractions and educational research facilities. An official sod-turning for the ATCO Learning Centre took place on June 20, with Alberta's deputy premier, the Hon. Shirley McClellan, in attendance.

COLUMBIA POWER CORPORATION

Columbia Power Corporation (CPC) is a Crown corporation wholly owned and controlled by the Province of British Columbia. CPC's primary mandate is to undertake power project investments as the agent of the Province on a joint venture basis with Columbia Basin Trust (CBT).

In 1996, CPC and CBT made their first investment with the purchase of the 125 MW Brilliant Generating Station near Castlegar, BC. Since then, a number of projects have been completed at the generating station to increase generating capacity and extend the life span of the structure. All four turbine units have been upgraded, increasing generating capacity at the dam by approximately 20 MW, a new switchyard was built, and seismic stabilization work has been completed. Together, these projects employed local people and increased the reliability and safety of the dam.

Nearby, construction of the 185 MW Arrow Lakes Generating Station has reached commercial operation. CPC and CBT took over management of the project from the design-build contractor on January 1, 2003. The related 48-kilometre Arrow Lakes to Selkirk Substation Transmission Line was completed in the spring of 2002. The transmission line links the generating station to the BC Hydro grid at the Selkirk Substation.

As part of the construction of the Arrow Lakes Generating Station, CPC and CBT have protected and preserved environmentally sensitive wildlife habitat and associated seasonal streams within the construction site. A new 1.4-hectare year-round wetland area was created with input from Fisheries and Oceans Canada, Ducks Unlimited and other environmental specialists, just upstream from the project. The area has become home to a variety of amphibians and birds. Reclamation work on the project site and transmission line has been completed, with over 67,000 native shrubs and trees planted and most areas seeded with natural grasses.

Planning for the construction of a new powerhouse below the Brilliant Generating Station, the Brilliant Expansion Project, is well underway. In the fall of 2001, a Project Approval Certificate from the Environmental Assessment Office was received, and the preferred design-build proposal was chosen in the fall of 2002. The proposed design, which received an amended PAC approval in late 2002, includes the construction of a new powerhouse, power tunnel and tailrace adjacent to the eastern end of the Brilliant Dam. Construction of the Brilliant Expansion Project is planned to begin in 2003 following a review of the amended design and other approvals. Planning for the construction of an additional powerhouse below the Waneta Dam is also underway. Engineering studies and environmental and fisheries work is continuing at the project site. These studies will be used in the preparation of the project definition report, which will outline the various project options. Construction of the Waneta Expansion Project is scheduled to begin in 2007.

In addition to providing clean renewable energy, CPC and CBT power projects have been shown in several independent studies to help reduce excess dissolved gas levels harmful to downstream aquatic habitat. The Brilliant Expansion dissolved gas reduction benefits have been endorsed by nine US agencies, including the US Environmental Protection Agency and the Fish and Wildlife Service.

For more information about CPC and its power projects, please visit www.columbiapower.org.

ENMAX

For ENMAX Corporation, 2002 was a year of building for the future. Across the entire company, our 1,450 employees focused on building a solid foundation for competition, growth and increased profitability. The year was highlighted by prudent business management, investments into billing systems and ENMAX's foray into generation with what will be the largest wind farm in Canada.

ENMAX delivered strong financial results in 2002, despite a 70 per cent reduction in Power Pool of Alberta (Power Pool) prices that squeezed retail margins and limited energy trading opportunities. ENMAX credits responsible management, debt reduction, lower costs and aggressive bids on new business for the strength of its balance sheet.

In 2002, ENMAX continued to win large-scale competitive bids including the contract to build an extension to Calgary's Light Rail Transit (LRT) extension and a three-year streetlight retrofit program for the City of Calgary.

The improvement of call centre services was an essential part of 2002. ENMAX hired and trained more staff to shorten customer wait time, upgraded technology, implemented one phone number for across-the-province customer service and extended call centre hours.

On the billing front, ENMAX is in the final stages of a major effort to resolve billing and settlement issues that the industry encountered during market restructuring. A significant amount of time and more than $10 million was invested.

At the end of 2002, ENMAX announced plans to pursue a business arrangement with Accenture, the world's leading management consulting and technology services company, to obtain greater capabilities and efficiencies in customer care services provided to ENMAX's customers. The two companies expect to complete the arrangement in the first quarter of 2003.

In 1998, ENMAX was the first Canadian utility to give customers the option to support development of wind-generated power through a program called Greenmax. Four years later, ENMAX, together with partner Vision Quest, began construction of a 75-megawatt, $100-million wind farm in southern Alberta. The wind farm marks ENMAX's first generation project. When completed in 2003, it will produce about 235,000 megawatt hours per year from 114 Vestas wind turbines. The investment strengthens ENMAX's long-term electricity supply portfolio and highlights the company's commitment to environmentally responsible operations.

In 2002, ENMAX met its goals to effectively manage its energy supply portfolio, improve customer service and efficiency and actively pursue business ventures, while still supporting the communities in which we live and do business.

Investing more than $2 million annually, ENMAX places high importance on community investment. Investments are made in these key areas: youth and education, community development, sports and recreation and arts and culture. In addition, we support our charity of choice, the Kids Cancer Care Foundation of Alberta. Programs include the popular ENMAX Rinklighter program, which rebates lighting costs to outdoor community rinks. Started in Calgary, the program was expanded in 2002 to include communities in Red Deer. Plans are to include Edmonton communities in 2003.

The spirit and dedication of the employees is noteworthy. Whether they are dealing with a customer query, restoring power after a severe ice storm or volunteering to serve ice cream to kids with cancer, not only do ENMAX employees bring a wealth of knowledge, skills and experience, they bring a sense of compassion to Alberta.

ENMAX employees, whatever the challenges, rise to the occasion. The people, who make up the character of this company, never seem to stop believing that challenges also present opportunities. ENMAX Corporation provides energy transmission, distribution, supply and retail services in Canada's first deregulated electricity market.

EPCOR

For EPCOR, 2002 was a year of challenge and change as it helped build a new energy market and transformed itself into a national energy company.

EPCOR is one of Canada's top providers of energy and energy-related services and products. It now has over $4 billion in assets and a footprint that extends across Alberta into British Columbia, Ontario and the US Pacific North-west. For the third year in a row, it was recognized as one of Canada's Top 100 Employers based on a survey of 47,000 firms by Mediacorp Canada Inc.

EPCOR's position as an integrated energy company - the first strategic linking of power, water and natural gas utilities in Canada - allowed it to maintain momentum in 2002 despite a "down cycle" in the electricity industry. EPCOR's risk is spread across both the regulated infrastructure market and the unregulated energy market, including generation, retail and merchant capital. Integration also makes EPCOR more competitive, providing one-stop service for customers and lowering costs.

EPCOR continued to respond to the unparalleled opportunities offered by deregulated energy markets by building new generation. In 2002, it opened a natural gas, combined-cycle 250-MW plant at Frederickson, Washington. EPCOR currently has eight power plants in operation with a total of 14 generating units outputting 2,387 MW. Two units are under development with a combined increase of 476 MW, including Genesee Phase 3 that will be the most technologically advanced coal-fired unit in Canada.

EPCOR is also using the most innovative technologies in its water treatment systems. For example, it is helping communities in Western Canada explore whether an ultraviolet disinfection system can meet their needs. It installed a new UV system for the Town of Canmore in 2002. Earlier in the year, EPCOR installed UV technology at its own E.L. Smith Water Treatment Plant in Edmonton. The Edmonton system, the largest of its kind in the world, adds an additional safety factor against organisms like Cryptosporidium.

EPCOR operates in Ontario largely through Union Energy, a pioneer in the deregulated energy services sector. Union Energy rents water heaters and supplies and services heating and air conditioning systems. In April, Union Energy, a wholly owned subsidiary of EPCOR Utilities Inc., purchased retail assets of Ontario Hydro Energy Inc. that included 395,000 electricity, natural gas and water heater customer contracts and rental agreements. The purchase brought EPCOR's total Ontario customer base to nearly 1.3 million.

Although the Ontario government's move in 2002 to cap electricity rates is expected to impact potential cross-market growth in the retail power business, EPCOR's investment remains secure since natural gas sales and the water heater and HVAC (heating, ventilating and air conditioning) businesses are not affected. EPCOR's greatest challenge in 2002 concerned billing and meter readings, especially in areas in Alberta where EPCOR is the retailer and not the wire provider. EPCOR has risen to the challenge, expanding call centres and customer service teams. Although EPCOR has not yet reached the service level targets that were set, it is making progress.

After several years of considerable growth in which the company went from a customer base of 250,000 to almost two million, EPCOR's focus for 2003 will be on operational excellence rather than expansion, on fine-tuning its systems and processes. This will put EPCOR in a strong position to respond to further opportunities for growth and change in the dynamic new energy markets.

Continued with Hydro Ottawa (H to O)

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