Enterprise-Wide Decision Making at Manitoba Hydro

• Anticipate and manage asset risks, and forecast long-term capital requirements 
• Create a robust and defensible 20+ year 
  investment plan
• Establish a more efficient and effective regulatory rate filing process to enable a better rate return

Manitoba Hydro wanted a solution that would integrate with existing financial, asset management, and project management systems, and that could be deployed across the entire organization, but implemented one line of business at a time.

The Solution

Risk-based planning & Investment optimization

In 2011, the Copperleaf C55™ Decision Analytics solution was implemented in the Generation Operations business unit. C55 was used to develop a 20-year capital investment plan based on the condition and risk associated with the company's generation assets.

Generation Operations had been investing an average of $75M annually on asset sustainment and renewal, however, historic trends had identified a drop in the availability of its generating units. As well, the 20-year asset condition outlook based on the approved capital expenditure forecast (CEF) highlighted concerns with a number of asset types (e.g. generators, breakers and governors), and indicated: "significant changes to current replacement rates will be required in the future to mitigate the negative impacts of aging infrastructure on our electrical system."

C55 was used to assess the state of the long-term availability of Manitoba Hydro's generating plants based on varying levels of reinvestment, and ultimately, determine the optimal level of capital spending. Sensitivity analyses were performed to test a number of scenarios such as: 

• What if the capital spend target is increased by increments of $10M, ranging from $75M up to $125M?
• What if cost estimates increase by 30% or 50%?
• What if the value of energy decreases

The analysis in C55 highlighted that an additional $20-$30M per year of investment was needed to maintain a sustainable and reliable electric system for Manitoba, and avoid the need for large or sudden rate increases in the future. Through this analysis, the Generation Operations business unit was able to provide key stakeholders with an understanding of the relationship between risk mitigation and level of spend, and justify the need for a higher level of investment.

This analysis was used to support the company’s rate application to the PUB in 2015. The ease and speed with which the Generation team was able to extract the necessary data to respond to questions asked during the rate hearings, led the company to embark on an initiative to expand C55 and the Copperleaf Value Framework across the entire organization.

In 2017, C55 went live in the Transmission business unit, the Customer Service and Distribution (CS&D) business unit (both electric and gas), and the Information Technology Services (ITS) Division. Manitoba Hydro now has a robust framework for valuing investment decisions across the entire organization.

Enterprise-wide decisions aligned with corporate strategy

During the 2014/2015 fiscal year, Manitoba Hydro managed a budget of over $600M in sustaining capital across all business units. Capital funds were allocated to individual business units considering long-term planning goals, asset condition, operational risks, and resource demands. While the overall framework for capital prioritization was consistently applied across the corporation, the risk management tools and investment prioritization processes were specific to the various asset categories and business units. 

Manitoba Hydro recognized the need to move to an environment where:

• The value of capital investments are assessed on a common basis across all areas of the company 
• Funds are allocated to projects and assets that optimize strategic value and/or mitigate risk

Manitoba Hydro engaged Copperleaf to expand the Value Framework across the entire organization. Through a series of workshops with stakeholders from all business units, a set of value measures were defined in support of each of the company's five key corporate objectives: safety, financial, system reliability, environmental impacts, and corporate citizenship. These objectives and their value measures (shown at left) are represented in the Copperleaf Value Framework and form the basis upon which investment decisions are made across the company. 

In C55, these value measures form the criteria against which investments are developed, risks are managed, and trade-offs are facilitated between investments. This approach ensures decisions are effective, transparent, and aligned with Manitoba Hydro's strategic objectives in the short- and long-term. It has also enabled the company to move toward its goal of aligning asset management practices with the ISO 55000 standard, providing greater confidence that funding and resources are being directed to the activities that will deliver the highest value.

"In 2011, we purchased the Copperleaf C55 software for Asset Investment Planning. There are thousands of assets, and we've got projects for a couple hundred of them. It helps us estimate what the capital requirements are. If it sees an asset that doesn't have a project against it, it'll actually, based on the data that we've put in, give us an estimated level of the investment that's required sometime in the future to deal with that. It helps us do the gap analysis between where we are today, and where we need to be." 

- Manitoba Hydro's General Rate Application 2014/2015 and 2015/2016, Transcript of Proceedings, p. 1611-12