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Business Units


NB Power announced its plans to establish business units in 1996. Each business unit will work toward specific performance targets to ensure that overall corporate objectives are achieved. This organizational structure will allow NB Power to meet the challenges of a changing business environment and respond to the significant issues emerging under deregulation. The plans of each business unit follow.

Marketing and Customer Service

Fiscal Year ended March 31, 1997
Residential customers 271,756
Industrial customers 1,669
General service customers 22,924
Street light customers 2,529
Regular positions (April, 1997) 122
1997-98 OM&A budget ($millions) 15.8
1997-98 Capital budget ($millions) 0.5

The Marketing and Customer Service business unit has primary responsibility in three areas:

  • Customer Satisfaction
  • Profitability
  • Market Share
NB Power has been active in marketing and sales activities for many years in export markets and with its largest in-province customers. We must now make similar efforts with our other customers and find new opportunities for growth in the evolving competitive environment. The marketplace is changing and customers want choice. NB Power is determined to respond to those changes by forging more strategic relationships with customers, better understanding their needs and ensuring our products and services reflect their expectations.

Our immediate priority is to establish a more customer-oriented focus throughout the Corporation. New attention to market research and improved market intelligence will enhance our understanding of customer characteristics and evolving customer demands. This understanding will aid NB Power in delivering more responsive and higher quality customer service. NB Power will also offer its customers choices, including flexible billing and payment methods, customized rate packages and other customer-focused services. These and other initiatives will help NB Power retain its customers and, in so doing, create the opportunities for selling them related products and services.

As the host utility within New Brunswick, NB Power faces challenges that future entrants to the market will not experience. For example, the host utility has had and will likely continue to have an obligation to serve all customers. Competitors will want to serve the more profitable customers. Host utilities everywhere are further constrained by a myriad of existing rate structures and service policies that have evolved over many years in a regulated utility environment. Some of these rates and policies involve cross-subsidization between and within customer groups. Rapid adjustments to existing rate structures by the host utility are difficult because the gains of one customer group generally become the pains of another. Again, the new market entrant needs only to deal with the customers who gain from competition. Conscious of these challenges, the Marketing and Customer Service business unit will work aggressively to retain market share within the province.

Performance Measures

Performance measures for the Marketing and Customer Service unit will focus on customer satisfaction, profitability and market share by market segment and by product line. This data will be treated as proprietary and confidential for competitive reasons. However, annual publication of NB Power's Business Plan will continue to provide overall financial information and broad sectoral information.

NB Power at the Fredericton Lifestyles Home Show, April, 1997.

Generation

The Generation business unit includes generating stations, fuels management and plant operations engineering. NB Power generates electricity using a diverse range of fuels including hydro, coal, heavy fuel oil, light fuel oil, Orimulsion«, and uranium. This diversity allows the flexibility to choose the most economic fuel subject to demand and purchase power options.

Generating stations account for the utility's largest segment of investment and represent 75% of fixed assets. Annual operations, maintenance and fuel expenses represent 40% of the total corporate costs. One half of NB Power's staff is employed by the Generation unit.

IN-PROVINCE GENERATION AND PURCHASES
(Forecast 1997-98)


Strategic Direction

Today the operation of NB Power's generating stations is closely integrated with the Transmission & Distribution business unit (T&D). Stations are dispatched by an energy control centre in T&D, using an economic model that incorporates demand, incremental operating costs, interconnection opportunities and conditions, and system reliability requirements

In a deregulated environment, the generation of electricity will be functionally unbundled from its delivery to customers. Decisions regarding station availability will be made in Generation, based on price signals and market conditions. Generation will ultimately compete in an open market.

During the plan period, the Generation business unit will prepare for deregulation. It will monitor industry developments to ensure it is positioned to respond quickly and effectively as competition is introduced. It will increasingly move to a profit centre model, broadening its operations to include management of revenues and expenses and the evaluation of business opportunities. It will focus on reducing costs and improving productivity to be more competitive. It will be staffed and structured to be effective in a competitive environment with a new business culture inherent in its operations.

Generating Station Data Chart

Station First
Production of
Electricity*
Net
Generating
Capacity (MW)
Fuel Role
Point Lepreau (1) 1983 635 Nuclear base load
Belledune 1993 450 Coal base load
Grand Lake 1963 57 Coal base load
Coleson Cove 1976 1006 Heavy Fuel Oil base load/intermediate
Courtenay Bay (2) 1961-1967 253 Heavy Fuel Oil intermediate
Dalhousie (1) 1969-1979 306 Orimulsion« base load/intermediate
Millbank (3) 1991 400 Light Fuel Oil peaking
Grand Manan 1989 28 Light Fuel Oil peaking
Ste. Rose 1991 100 Light Fuel Oil peaking
Mactaquac 1968-1980 672 Hydro base load/peaking
Beechwood 1956-1962 113 Hydro base load/peaking
Grand Falls 1928-1931 63 Hydro base load
Tobique 1953 20 Hydro base load/peaking
Sisson 1965 9 Hydro peaking
Milltown 1911-1969 4 Hydro base load
Total
4116

*In stations with more than one unit, dates indicate first production of first unit and last unit.
(1) 25MW of Point Lepreau and 20MW of Dalhousie are contracted to other utilities.
(2) A 50MW turbine is out of service at this station.
(3) 400MW peaking capacity contracted to another utility will be reduced to 300MW in 1998 and to 200MW in 2002. Contract expires in 2011.

Work Plans and Programs

Point Lepreau:
The following programs will be implemented over the plan period to focus specifically on the variables that contribute directly and indirectly to Point Lepreau's performance:
  • a study of the station's utilization and economic life. This study will explore technical, regulatory, economic and human interaction issues for maximizing economic benefits from Point Lepreau over its remaining life.
  • a station work-quality program. This program will be implemented to improve safety culture and work quality. The lifetime capacity factor at Point Lepreau since its inception in 1983 is 85.3%. The business plan reflects an average 85% capacity factor over the next five years.

A New Business Culture:
Reorganization will expand Generation's operating parameters. In that regard, the following initiatives will be undertaken over the plan period:

  • establishing the guidelines for which business transactions will occur within the business units and corporate services;
  • implementing revenue and expense management practices that fit a profit centre environment. This will include unit-specific decision-making and analysis processes;
  • developing pricing and marketing strategies for generation-related products.

Reorganization also places control of fuel management and plant engineering within the Generation unit, facilitating the integrated management of these functions. This will enable the Generation unit to manage its total costs.

Cost Reduction:
Fuel expenses of more than $200 million and OM&A expenses of $139 million are incurred annually in the generation of electricity. The Generation unit will focus on cost-reduction programs like the following to improve the overall efficiency of generating stations:

  • on-line heat rate monitoring programs at thermal facilities to reduce controllable losses in plant operations;
  • regionalization programs to add value and increase workforce flexibility. Initiatives include: cross-utilization of work skills, negotiating flexibility in union contracts, reducing the use of external resources, and eliminating duplication by realigning staff and increasing the shared use of technical expertise among stations;
  • reduction of fuel and material inventory, improved procurement practices, transportation and handling management.
  • sale of combustion by-products to generate revenue and to reduce the cost of handling and landfills.

Capital Programs:
Capital spending in Generation will average $20 million annually over the plan period. This level is reduced significantly from the early- to mid-1990s when the Corporation underwent major expansion and modernization of its generation facilities. Major programs include:

  • life extension programs for generators at Mactaquac and Beechwood;
  • Dalhousie Orimulsion« ash densification process;
  • Phase-2 ash site at Belledune;
  • Alkali-Aggregate Reactivity project at Mactaquac;
  • piers and gate hoists at Grand Falls.

Performance Measures

Performance measures include such areas as safety and accident statistics, budget management, plant operating efficiency and overall availability. Additional measures in productivity and financial performance will be developed.

NB Power will continue to work with the EUCG (an association of electrical utilities) to develop benchmarks that will compare the performance of NB Power's generating facilities to others in the industry. Benchmarking will permit the objective evaluation of performance and foster employee ownership in process and practice improvements.

At Point Lepreau, additional performance measures will be developed as the station work quality program is implemented. Emphasis will be placed on areas such as improved work processes, safety culture, and low-level event indicators that can help predict potential performance problems.

Belledune Generation Station

Transmission and Distribution

Transmission system insulator repair

The Transmission and Distribution (T&D) business unit is responsible for the planning, construction, operation and maintenance of that part of the electrical system that transports electricity between the generating stations and the customer.

The T&D business unit includes an energy control centre where day-to-day operations of the transmission and distribution systems are coordinated. At this time the control centre also manages production-unit dispatch and buys and sells electricity. Historically T&D's service staff, from meter reading to call-centres, have represented the primary front-line contact between NB Power and its customers.

Parameters
Kilometres transmission lines (March, 1997) 6,660
Kilometres distribution lines (March, 1997) 25,326
Interconnection capabilities (MW) 2,610
Regular positions (April, 1997) 767
1997-98 OM&A budget ($ millions) 68
1997-98 capital budget ($ millions) 40

Strategic Direction

Deregulation requires functional unbundling of the production and marketing of electricity from its transmission and distribution to customers. The deregulated model that will be adopted is as yet unclear, but transmission and distribution will likely continue to be regulated while production and marketing will not. The T&D unit will not manage production-unit dispatch as it does today, requiring changes in the interaction and operation of the T&D and Generation business units. T&D's interaction with customers will change as well. Marketing & Customer Service will increasingly assume responsibility for sales and service relationships, while T&D will provide the service to support those relationships.

In preparation for deregulation, T&D will focus on maintaining a high standard of reliability, improving responsiveness to customer demands, ensuring public and employee safety, and containing costs. The unit, working closely with Marketing & Customer Service, will enhance systems and processes to optimize delivery of service and improve customer satisfaction.

Throughout the plan period, NB Power will continue the functional unbundling of generation from transmission and distribution. T&D will develop new relationships with all business units, other utilities, marketers and regulatory entities. It will develop and update operational and administrative systems and structures to ensure maximum benefits to NB Power's customers. Despite the magnitude of these impending changes, the over-riding objective of the unit will continue to be the reliable supply of electricity.

Work Plans and Programs

System Operations changes:
T&D is reviewing the requirements to facilitate open access. Changes will be implemented to address the following issues:
  • mandatory compliance with system reliability standards set by the Northeast Power Coordinating Council(NPCC) and their legal implications in Canada;
  • the effects of orders issued by the Federal Energy Regulatory Commission (FERC) affecting exports and their effect on Canadian utilities and regulatory processes;
  • determination of new software and networking requirements to operate in the new climate;
  • setting appropriate transmission tariffs and pricing of ancillary services;
  • requirements for an independent system operator (ISO) to ensure non-discriminating transmission operation.

Delivery of service to customers:
T&D will improve those areas of operations which are important to customers. Customer surveys show the most important areas are:

  • timely delivery of new service;
  • reliable supply;
  • fast restoration of service when interruptions occur;
  • safety of the public and employees;
  • rates.

The following initiatives will be implemented to address these areas:

  • streamline work planning and delivery process for service;
  • implement revised operation and maintenance criteria to extend the life of facilities;
  • review and update work methods and safety procedures to continue to ensure safety in the workplace;
  • review and revise planning criteria to ensure compliance in a deregulated environment;
  • undertake a communications study to formulate the appropriate communications strategy and architecture to economically meet the needs of NB Power and our customers.

Capital Programs:
Capital spending in T&D will average $40 million annually over the plan period, reflecting a reduction from the extensive capital expansion programs in the early- and mid-1990s. Capital programs include such items as:

  • supply new service to customers;
  • various terminal and substation upgrades to improve customer service;
  • transmission line upgrades;
  • insulator replacement programs;
  • teleprotection and mobile communication systems upgrades;
  • replacement of unit transformers at Dalhousie and Point Lepreau.

Performance Measures

Performance measures include: budget management, interruption statistics, Northeast Power Coordinating Council performance criteria, safety and accident statistics, and completion time for customer service functions. New performance measures will be developed to augment the working relationships with Generation and Marketing and Customer Service.

Open access in the US markets may result in new technical and commercial considerations for the operations of the interconnections. T&D will continue to monitor developments in the US and collaborate with other entities to set appropriate criteria across the system.

Corporate Services

When it makes business and organizational sense, specific functions are maintained outside the three business units. This currently includes corporate planning, human resource support, financial services, information technology, public affairs, materials management, technical services and environment management. The following initiatives are planned corporately.

Corporate Initiatives in Human Resources:

During the past few years, NB Power, like most other electric utilities, has significantly reduced its workforce. This staff reduction, in excess of 23%, has occurred despite the addition of one major plant to our grid, and the staffing of a new Marketing and Customer Service business unit in an attempt to be more responsive to ever-increasing customer demands. The often-quoted adage "more with less" will be one of the major challenges in the efficient management of our human resources. NB Power will respond to this challenge by introducing and implementing innovative approaches conducive to maximizing the effort made by each employee. These approaches will become part of a fully integrated and comprehensive Human Resources strategy.

The underlying theme in this process will be the "team concept". Sound staffing principles will be fundamental to formulating complementary and supportive work units. A new "team-based" recruiting approach is being introduced to address this issue. The traditional advertising and interviewing process, which often leads to "cloning", will be replaced by a technology-driven staff selection system that will be more objective, cost effective and responsive to our recruitment strategy. Consistent with this strategy, compensation programs will be introduced to ensure that NB Power attracts and retains the best and brightest employees to meet the specialized needs of an electric utility.

Effective communication with our staff will also be an important factor in our human relations. Information and awareness sessions have been introduced and will continue in order to keep all employees abreast of the latest corporate developments. A new Performance Management Program is being implemented to enhance communication with the employee on an individual basis.

Changes in our management/supervisory style will also be necessary to achieve our objectives. Supervisors will be called upon to be leaders, facilitators and coaches. An intensive and comprehensive Supervisory Certification Program is being implemented to assist our supervisors in learning how to provide their staff with the necessary leadership and support to maximize productivity.

Significant attention will be placed on work attendance. Clear and measurable targets will be established and supported by leading-edge approaches in the areas of safety, wellness and attendance management. These initiatives will encourage and enable employees to live healthier lives, while at the same time assisting the Corporation in improving attendance, productivity and control of health care costs.

Over the years, an increasing number of staff have become members of the International Brotherhood of Electrical Workers union. Sound labour/management practices will be imperative in reaching our goals. NB Power, in conjunction with IBEW Locals 2309 and 1733, has introduced a "Renewed Partnership Program" that will focus on joint participation, conflict resolution and an interest-based bargaining process.

Corporate Communication Initiatives:

New Brunswickers are both owners and customers of NB Power. The Corporation will enhance its effectiveness in public communications to ensure New Brunswickers, as owners, know how their utility is being operated and how their investments are being managed. Communication strategies will also further Marketing's efforts in ensuring New Brunswickers, as customers, recognize value in NB Power's rates and services.

Effective corporate communications will become increasingly important as critical issues in deregulation undergo public debate and competition becomes a reality in New Brunswick. NB Power will be proactive in ensuring New Brunswickers know the issues, understand the value of their investments, and appreciate NB Power's plan to provide a sound energy future.

Corporate Environment Initiatives:

The Corporation will meet or exceed existing environmental requirements as stipulated by its operating licenses and permits. This is assured by ongoing monitoring and regulatory compliance reporting. Specific programs include environmental auditing, sulphur dioxide emissions control, a registered action plan under Canada's Climate Change Voluntary Challenge, and acid deposition monitoring.

A more formal employee environmental awareness program will be implemented to assist employees in making environmentally responsible decisions. NB Power's existing environmental policies, practices, activities and procedures will be better documented and more fully comparable with international standards. The Corporation will continue to move towards such standards. We will issue our first environmental annual report in 1997, which will deal specifically with NB Power's 1996 environmental achievements and results.

Corporate Initiatives in Information Technology:

Information technology must provide flexible information systems that respond quickly to the ongoing demands of the business units. System enhancements and employee training will be emphasized to ensure that business units are properly equipped for the changing environment.

An important initiative will be a new Customer Information/Billing system to improve NB Power's ability to deal with current and potential customers. The system will provide the customer with a greater degree of choice (personalized billing statements, range of payment options, control of service delivery times); provide alternate methods to request and receive services (interactive voice, Internet); and provide customers with easy access to relevant information (billing and consumption history, services used, services available). Also important is providing information for the Marketing business unit in developing strategies to improve market share, customer service and profitability.

Corporate Initiatives in Materials Management:

NB Power continues to purchase goods and services on a competitive basis to achieve the lowest cost consistent with optimum quality, delivery and service reliability. The Corporation will decrease inventory over the next five years to aid in achieving cash flow and debt reduction targets.

Decreasing materials inventory will be accomplished in various ways. Low-value commonly-available items will be removed from stock and, in future, purchased as required using a new purchasing card method. Material will be relocated from overstocked areas to areas of usage, allowing more economical management. New efforts will be made in re-engineering and re-manufacturing of surplus and used material. Efforts towards identifying obsolete and surplus material and standardization have already begun. Materials requirement planning will improve, ensuring proper stocking levels are maintained based on replenishment lead times at locations.

Corporate Finance Initiatives:

Over the plan period, responsibility and support for business unit financial reporting, financial performance measurement and financial analysis will increasingly move to their respective units. This will enhance accountability and improve decision making in operational affairs. Transaction processing, corporate reporting, and cash and debt management will remain corporate activities, as will overall financial planning and internal audit support.

Corporate initiatives will streamline transaction processing to reduce costs, enhance reporting for improved transparency and accountability, and maximize the use of technology. As the business units become profit centers, transfer prices will be developed to promote effective interaction and maximize benefit to the Corporation as a whole. To enhance accountability and assist the business units in managing their affairs, new approaches to internal auditing will be introduced, including operational audits and a risk-assessment approach to audit selection.

Corporate Technical Support:

The engineering design and project management functions for the Corporation will continue to be provided by technical services. This group will provide expertise and staff to the business units for engineering, procurement, construction and commissioning activities for capital and maintenance projects.

Over the plan period, the group will increasingly offer expertise in areas where the Corporation currently employs outside services. This will reduce costs and better serve the business units. The group will also broaden its activities to include corporate studies and marketing support for the Marketing and Customer Service business unit.



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