Electricity Today Magazine Article -- Annual Year in Review S to Y

During 2002, Saint John Energy completed its Enterprise Application Project. This project included new software, business process redesign and data collection of all distribution system assets. Advanced Utilities (Customer Information System), Great Plains, (Management Information System) and ESRI (Geographical Information Sys-tem) supplied the software installed during this project. These systems allow for greater flexibility by providing customer, business and operational information previously not supplied to staff and customers. This project, the largest Saint John Energy has attempted, was completed in November with the entire distribution system data collection being completed. At a cost of $2.4 million, this project is a significant investment in the future of the utility.

Also during 2002 Saint John Energy participated on the Market Design Committee. This government-created committee completed its mandate in May by delivering its report on market design to the Honorable Jeannot Volpe, Minister of Natural Resources and Energy. The Minister accepted all of the recommendations contained in the report with the exception of those related to environmental issues, which will be reviewed at a later date.

During the summer and early fall, Saint John Energy was busy preparing for several regulatory hearings. The refurbishment of the Cole-son Cove and Point Lepreau generating stations as well as the Transmission tariff were the topics of these hearings. With the exception of the Transmission tariff hearing, the Public Utilities Board has rendered decisions on the applications. Saint John Energy has participated in these hearings to ensure that our customers' interests are represented.

SASKPOWER

In 2002, we focused on strengthening SaskPower's core business - providing safe, reliable, cost-effective electricity to the people of Saskatchewan and its businesses.

The greatest uncertainty SaskPower faced through the latter half of 2002, and perhaps the biggest challenge we'll face in years to come, is the Kyoto Protocol. There are still many unanswered questions around Kyoto, and we look forward to additional clarity in the months ahead. In the interim, we're continuing to advance our commitment to environmental responsibility. We've undertaken a number of improvements at our largest coal-fired facility, Boundary Dam Power Station, including the installation of state-of-the-art electrostatic precipitators to virtually eliminate particulate emissions. We repowered the Queen Elizabeth Power Station with six Hitachi gas turbines in 2002. Using combined-cycle technology, the facility adds 150 MW of supply and reduces our greenhouse gas emissions by an amount equal to the emissions from 30,000 cars. Another environmentally progressive supply source, the Cory Cogeneration Station, will be operating in early 2003.

Building environmental solutions is a collaborative effort and we're encouraged by the productive partnerships that SaskPower is participating in to help reduce the impact of our operations. Our involvement with the Canadian Clean Power Coalition, an association of coal and coal-fired electricity producers, will contribute to the development of clean coal technology.

In a Canadian first, the forest sequestration project that we initiated with Saskatchewan Environment in 1999 was recently endorsed by the Greenhouse Emission Reduction Trading (GERT) pilot project after rigorous review. The project will offset greenhouse gas emissions in Saskatchewan by establishing more than 500,000 hectares of forest carbon reserves - existing forests that will be left unharvested - and result in the planting of approximately five million seedlings in northern forests. Three million seedlings have already been planted, and the project will generate 22 million tonnes of carbon dioxide offsets when complete. We've worked with industry and government to develop two wind power projects in Saskatchewan - the Sun-Bridge Wind Power Project and SaskPower's Cypress Wind Power Facility. Our EcoLogo-certified Green-Power product is now available to customers across Saskatchewan. Together, the two projects generate 17 MW of GreenPower, enough to serve about 7,000 homes. We're also participating in a number of pilot projects to explore alternative energies such as biomass and flare gas. Among our projects in 2002, we teamed up with the Regina Health District and SaskEnergy in a project at the Regina General Hospital that will enable us to gain practical experience in microturbine technology for cogeneration and build our knowledge about the feasibility of distributed generation.

As we advance our corporate initiatives, safety remains a top priority and we're working to implement a corporate-wide safety management system over the next two years. SaskPower had another strong year serving Saskatchewan in 2002, and we give credit to our employees, who make customer service excellence a top priority every day as we strive to achieve our vision - to excel in competitive energy markets.

TORONTO HYDRO CORPORATION

Toronto Hydro-Electric System Limited operates the largest municipal distribution utility in Canada and delivers electricity to a broadly diversified, economically robust customer base of 660,470 residential and commercial consumers. We distribute 20 per cent of the electricity in Ontario, have a system peak load of approximately 5,000 MW and revenues of $2 billion.

In 2002, we were very focused on preparing for the opening of Ontario's electricity marketplace to competition. Our customer service and information systems staff worked hard to ensure that our company could smoothly handle the transition to the competitive retail environment. We are proud of our accomplishments and stand as a leader in the industry.

An aggressive Enterprise Resource Planning (ERP) system implementation is providing valuable information to help us make "fact-based decisions" which are essential for managing our increasingly complex business. Understanding the value of MCRS and using it properly is a priority for the company. The preliminary results are very positive. An essential element in ERP's success was the co-ordination with our re-engineering processes and structural change management. We have entrenched health and safety into our business plan and have created a corporate Environment, Health and Safety unit. We've already seen an impressive improvement in our statistics. One of our most outstanding achievements over the last four years has been a reduction in our lost time injuries by 75 per cent, with a comparable decrease in the number in days lost (2002 being our best year ever). Our long-term goal is to have zero disabling injuries.

We continue to transform our business to meet the Ontario Energy Board's (OEB) performance-based regulation requirements. We are pleased to report that we are exceeding OEB requirements in all areas. One example worth highlighting is the significant improvement in our call centre and emergency response. When we first began tracking these items, we were amalgamating call centres across the city, all with different technical systems. Today, we've completed our call centre integration and improved our answer rate to 85 per cent of calls within 30 seconds. This exceeds the OEB requirement of 65 per cent of calls to be answered this quickly. Much of the credit goes to our dedicated call centre staff who have coped with an increased volume of calls with expertise and understanding. They are at the heart of our customer service and branding strategies, and they have undergone significant cultural change to achieve these results.

So far, our operating costs per customer, including restructuring costs, are down by 12.5 per cent over the last three years. Our facilities cost is down by 17 per cent. Our fleet cost is down by 35.5 per cent. Toronto Hydro-Electric System Limited is a regulated affiliate of Toronto Hydro Corporation. Toronto Hydro Corporation also operates three subsidiaries that carry on the business of integrated energy services, telecommunications and street lighting.

TRANSALTA

TransAlta Corporation is Canada's largest non-regulated electric generation and marketing company, with more than $7 billion in assets and 9,000 megawatts of capacity either in operation or under construction. As one of North America's lowest-cost operators, TransAlta's growth is focused on developing coal- and gas-fired generation in Canada, the US and Mexico.

TransAlta's growth strategy aims to increase generation capacity to 15,000 megawatts. By operating existing assets efficiently while managing risks in the electricity industry and continuing to maintain strict financial targets, the company will realize its goal. As part of TransAlta's risk management strategy, the company also seeks to balance its portfolio geographically, by both fuel and market.

In 2002, a number of projects allowed TransAlta to grow its generation capacity. TransAlta commissioned the Big Hanaford natural gas combined-cycle power plant located in Centralia, Washington. The 248-megawatt facility will provide additional flexibility to the Centralia coal-fired plant.

TransAlta's purchase of Vision Quest Windelectric Inc. for $37 million in December 2002 increased its renewable and small generation portfolio. The $50-million total investment in Vision Quest is the cornerstone of the company's renewable energy strategy. It also reflects TransAlta's commitment to a multi-fuel, balanced approach to electricity generation and a commitment to sustainable development.

TransAlta also continued construction on two gas-fired cogeneration projects. Campeche, a 252MW gas and diesel combined cycle plant, is expected to be online in March 2003. Chihuahua, a 259-MW combined-cycle plant south of El Paso, Texas is expected to be online in July 2003.

Part of TransAlta's mandate for 2002 was to reduce overhead and variable costs. The company worked hard to realize a $132-million reduction.

Centralia's coal production team played an important role in achieving that goal when they beat a 28-year record for production in July. The installation of a scrubber also allowed for improved plant performance and reduced fuel costs.

EPCOR Utilities Inc. and TransAlta announced in May 2002 the signing of a Memorandum of Understanding (MOU) to exclusively negotiate TransAlta's purchase of a 50 per cent interest in EPCOR's Genesee Phase 3 project. The transaction, finalized in January 2003, gives TransAlta a 50 per cent financial stake in the $395-million Genesee unit.

TransAlta's investment portfolio ensures no more than 30 per cent of the company's business is in one fuel market. The investment in wind power generation this past year helped further diversify the company's fuel mix.

The sale of TransAlta's regulated Alberta-based transmission business to AltaLink generated $821 million in cash proceeds, helping to support a strong balance sheet and a healthy cash flow. While 2002 presented numerous challenges within the industry, TransAlta is well positioned for what 2003 has to bring.

VERIDIAN CORPORATION

As one of Ontario's largest electricity distributors, Veridian was on the frontline of change as the provincial government experimented with a competitive electricity marketplace during 2002.

Wholesale and retail competition was simultaneously introduced to the Ontario marketplace on May 1. This bold initiative dramatically affected Veridian's role as a distribution company. Systems and processes had to be put into place to administer retail electricity contracts, customer invoice statements were changed to separately identify previously bundled charges, and new financial settlement processes were needed to deal with the Independent Electricity Market Operator, embedded generators, retailers and others.

These challenges were readily met. At market opening, all of Veridian's 90,000 customers had access to the competitive marketplace, and nine licensed retailers were actively selling fixed-price retail contracts in our service areas. By fall of 2002, almost 18,000 customers had enrolled with these retailers. The rest were being billed at market-based prices that fluctuated from billing period to billing period.

By late 2002, higher-than-expected electricity prices had forced the Ontario government to reconsider its commitment to an unfettered marketplace. Price protection was introduced for residential, small business and other designated customers. Once again, Veridian played a crucial role in implementing a 4.3-cent per kWh commodity rate freeze, and in processing retroactive bill adjustments based on this new fixed electricity price.

The ongoing changes to Veridian's external business environment prompted internal changes as well. One key development was the establishment of a new state-of-the-art billing and call centre in Pickering, Ontario. This new facility employs the latest call processing management software, broadband communications infrastructure and modular workstations. Staff took occupancy in April 2002. A skilled and experienced staff leverages the technology employed in this new facility. This staff was assembled from seven predecessor utilities that were brought together through Veridian's recent merger and acquisition activity, and has been bolstered by several new customer care specialists. This team has proven its capabilities in what has been a very challenging year.

With the capacity to meet the billing and settlement needs of more than 200,000 electricity customers, the services of this facility are being marketed to Ontario's electricity distributors. A first client with about 6,000 end-use customers contracted for this service early in the year.

A key milestone for our distribution business was the successful implementation of a new Supervisory Control and Data Acquisition (SCADA) system. Purchased from METSO Automation, this system has brought together the disparate systems of our predecessor distribution companies. We now monitor about 250 devices on a real-time basis, and have remote switching capabilities at almost 50 locations. Further expansion of this SCADA system is planned, but we have already realized improvements in the reliability of the electricity supply to our geographically diverse customer base.

The expansion of the distribution network to support customer growth was another focus for the year's activities. Due to continuing strength in the local economy, new customer connections surged to over 2000 residential and 28 high voltage commercial services. A total of $7.2 million in capital investments in distribution infrastructure was needed to support this growth.

Veridian has developed impressive engineering and construction capabilities to serve its growing customer base. These services are also being marketed to others. During 2002, we delivered a diverse range of distribution system services including safety and maintenance audits, engineering designs and construction. A series of other accomplishments during 2002 have provided Veridian with a solid foundation for future success. These include the receipt of an "A" credit rating from Dominion Bond Rating Services (DBRS), and the successful negotiation of a multi-year collective agreement containing a corporate gain-sharing provision. It is expected that Ontario's electricity industry will continue its rapid evolution over the next few years. At Veridian we look forward to these changes and stand ready to provide business solutions to the marketplace.

YUKON ENERGY

Yukon Energy continued to pursue their mission "to provide safe, reliable and cost-effective energy services while following sound business practices and demonstrating leadership in protecting the environment."

Last year was an extremely eventful year - we faced a number of significant challenges and our employees can look back on this year with pride.

Yukon Energy's resources in 2002 were very much focused on building a new transmission line - the largest capital project undertaken in the history of the Corporation. The 230-kilometre line extends from the Mayo hydroelectric facility to Dawson City and will be completed in the first quarter of 2003. Along with supplying the communities with renewable, non-greenhouse gas emitting electricity, the new line will result in a C02 emission reduction of approximately 11,321 tonnes per year. Estimated utility savings over the project's 40-year life are in excess of $100 million.

The provision of cost-effective energy is also expected to support new regional economic development opportunities along the corridor. The company was able to further co-operative relationships with the Nacho Nyak Dun and Tr'ondek Hwech'in First Nations involved in this project, through joint initiatives - including the implementation of specific Benefits Agreements.

In partnership with its parent company, Yukon Development Corporation, Yukon Energy also began work on corridor identification, technical feasibility and environmental assessment for transmission lines to other Yukon communities as part of its goal to advance electrical infrastructure to the Territory.

Yukon Energy was successful in securing a 17-year renewal of the water license for their Aishihik Lake hydro generating facility, after initiating the re-licensing process almost 11 years ago. Aishihik supplies about 30 per cent of the total hydro energy of the Whitehorse-Aishihik Faro system and has been in operation for 25 years.

The company reached a comprehensive agreement for environmental mitigation and monitoring with the Yukon Government, Champagne and Aishihik First Nations (CAFN), the Department of Fisheries and Oceans (DFO) and the Department of Indian Affairs and Northern Development (DIAND). In addition to securing the license, the company signed a precedent-setting agreement with DFO based on an adaptive fish management plan for Aishihik Lake.

Yukon Energy will be working with the CAFN to proceed with implementation of certain mitigation measures and will be assisting the First Nations in the redevelopment of their traditional home at the north end of the village.

Yukon Energy expanded its Renewable Power Sales Incentive Program in 2002 to sell surplus hydro-electricity, available to commercial and institutional customers for space heating, at a discounted rate. The competitive price enables participants to reduce their energy costs by using renewable energy to displace fossil fuel heating.

Yukon Energy continued to advance the territory's wind energy regime in 2002. A territorial commercial wind-monitoring program, as part of ongoing energy supply planning was conducted.

Yukon Energy was the proud recipient of the 2002 Territorial Attractions Canada Award for its Whitehorse Rapids Fishway under two categories: Natural Outdoor Site and Attraction of International Interest.

The fish ladder and viewing facility were built in 1959 as part of the construction of the Whitehorse Rapids Dam, and is believed to be the longest wood fish ladder in the world. Each year, the Fishway attracts over 35,000 visitors from all over the world.

Yukon Energy introduced two new scholarship programs in 2002 - one for each of the First Nations of Nacho Nyak Dun and Tr'ondek Hwech'in as part of the Mayo/Dawson Transmission Line Project.

Including existing programs, as part of its commitment to the people and the communities that it serves, the company awarded six outstanding post-secondary students last year.

Established in 1987, the Yukon Energy Corporation is the primary generator and transmitter of electrical energy in the territory. It is a wholly owned subsidiary of Yukon Development Corporation. ET

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