| British Columbia Hydro and Power Authority
Energy Management System Upgrade Project Application |
| Decision and Order G-39-23 |
| February 28, 2023 |
|
|
| Before: E. B. Lockhart, Panel Chair W. M. Everett, KC, Commissioner A. Pape-Salmon, Commissioner |
TABLE OF CONTENTS
Page no.
1.4 Legal and Regulatory Framework
2.0 Project Need and Justification
2.1 Purpose and Function of EMS
2.3 Current EMS is at End-Of-Life
3.0 Description and Evaluation of Alternatives
3.1 Description of Alternatives
3.2 Project Alternatives Evaluation
3.2.1 Full System Replacement Not Considered
3.2.2 Three Alternatives Rejected due to Level of Risk
3.3 Selection of Preferred Alternative
4.2 Description of BC Hydro EMS and IDS
5.0 Project Costs and Rate Impact
5.3 Software Upgrade Asset Class
6.0 Consultation and Engagement
6.1 First Nations Consultation
6.2 Public and Customer Consultation
7.0 Project Risk and Risk Management
7.1 Prior to Implementation Phase
7.2 During Implementation Phase
7.3 Cybersecurity during Project Implementation
8.0 Provincial Government Energy Objectives and the Integrated Resource Plan
9.0 Summary of Approvals and Directives
COMMISSION ORDER G-39-23
APPENDICES
Appendix A: Project Reporting
Appendix B: List of Acronyms
Appendix C: Exhibit List
On March 11, 2022, British Columbia Hydro and Power Authority (BC Hydro) applied to the British Columbia Utilities Commission (BCUC) for an order, pursuant to section 44.2 of the Utilities Commission Act (UCA), accepting a schedule of anticipated capital expenditures for the Energy Management System (EMS) Upgrade Project (Project) as being in the public interest (Application). The Project has a cost range of $24.5 million to $32.8 million.
The BCUC established a regulatory timetable for review of the Application, which included public notification, two rounds of BCUC and Intervener information requests and final and reply arguments. Three parties registered as interveners in the proceeding: BC Sustainable Energy Association; Residential Consumers Intervener Association and the Commercial Energy Consumers Association of British Columbia.
The Panel accepts that the EMS is critical to BC Hydro in order for it to monitor, control, and optimize the Bulk Electric System (BES) in a safe and reliable manner, and to support its function as Reliability Coordinator, Balancing Authority and Transmission Operator. In addition, the Panel is satisfied that the current EMS is at end-of-life, that both the software and hardware need to be upgraded, and that vendor support is a critical component of the EMS. It is unacceptable to operate the Bulk Electric System with an EMS that is beyond end-of-life and does not have vendor support.
The Panel also finds that the upgrade proposed for the intrusion detection system, which system is separate from the EMS, is integral to the Project. Having an intrusion detection system is essential to the safe and reliable operation of the EMS and the current intrusion detection system will be unable to support the upgraded EMS.
The Panel finds that the expenditure schedule that BC Hydro has proposed for the EMS upgrade is reasonable. The capital cost estimate is consistent with an AACE International Class 3 cost estimate, which is in alignment with the BCUC’s CPCN Guidelines. Further, the Panel considers that the estimated rate impacts are also reasonable.
The Panel accepts that BC Hydro’s proposed expenditure schedule for the EMS Project is in the public interest and necessary for BC Hydro to continue to operate the BES safely and reliably, deliver electricity, and comply with Mandatory Reliability Standards.
In addition, the Panel approves a Software Upgrade asset class for software assets with an expected useful life of seven years.
1.0 Introduction
1.1 Background
On March 11, 2022, British Columbia Hydro and Power Authority (BC Hydro) filed an application with the British Columbia Utilities Commission (BCUC) requesting acceptance of a cost range of $24.5 million to $32.8 million[1] in capital expenditures for the Energy Management System (EMS) Upgrade Project (Project), pursuant to section 44.2 of the Utilities Commission Act (UCA)[2] (Application).
The Project involves the upgrade of BC Hydro’s EMS and the associated Intrusion Detection System (IDS).
BC Hydro explains that the EMS is used to monitor, control, and operate BC Hydro’s generation resources, transmission lines, interconnections with neighbouring systems and associated equipment. Additionally, the EMS is used to analyze the performance of the Bulk Electric System[3] (BES) over time and plays a key role in enabling BC Hydro to comply with Mandatory Reliability Standards (MRS).[4] With respect to the IDS, BC Hydro explains that it provides real-time monitoring of network traffic into and out of the EMS and alerts about suspicious network traffic or messages such as cybersecurity threats.[5]
1.2 Approvals Sought
BC Hydro seeks acceptance of the capital expenditure schedule for its EMS Upgrade Project, pursuant to section 44.2 of the UCA. In addition, BC Hydro seeks approval of a Software Upgrade asset class for software assets with an expected useful life of seven years.
1.3 Regulatory Process
By Order G-102-22 dated April 14, 2022, the BCUC established a written public hearing process and a regulatory timetable for the review of the Application, which consisted of public notice, intervener registration, and one round of BCUC and intervener information requests (IRs).
By Order G-235-22, the BCUC established a further regulatory timetable for the review of the Application to include a second round of IRs, BC Hydro and intervener written final arguments, and BC Hydro written reply argument. The regulatory timetable for the second round of IRs and written arguments was subsequently amended by Orders G-168-22 and G-260-22.
Three parties registered as interveners in the proceeding:
• BC Sustainable Energy Association (BCSEA);
• Residential Consumers Intervener Association (RCIA); and
• Commercial Energy Consumers Association of British Columbia (the CEC).
Each of the above interveners actively participated in the proceeding. One individual, D. Haudenschild, registered as an interested party, and no letters of comment were received.
1.4 Legal and Regulatory Framework
Pursuant to section 44.2 of the UCA, a public utility may file an expenditure schedule with the BCUC containing a statement of capital expenditures the public utility has made or anticipates making during the period addressed by the schedule. The BCUC may accept an expenditure schedule filed under section 44.2 of the UCA if the BCUC considers it is in the public interest. The BCUC may also accept or reject part of an expenditure schedule.[6]
Pursuant to section 44.2(5.1) of the UCA, in considering whether to accept this expenditure schedule, the BCUC, in addition to considering the interests of persons in British Columbia who receive or may receive service from BC Hydro, must consider:
(a) British Columbia’s energy objectives, as provided in section 2 of the Clean Energy Act (CEA),
(b) The most recent of the following documents:
a. An integrated resource plan approved under section 4 of the CEA before the repeal of that section;
b. A long-term resource plan filed by the authority (BC Hydro) under section 44.1 of this Act,
1.5 Decision Framework
The structure of this Decision largely follows that of BC Hydro’s Application and the general framework of the BCUC’s CPCN Guidelines.[7] This Decision addresses the following key issues arising from the Application:
• whether BC Hydro has established a need for the Project;
• whether the preferred Project alternative is reasonable;
• whether the Project capital cost estimate is reasonable;
• whether BC Hydro’s consultation with stakeholders regarding the Project is adequate; and
• whether the Project is consistent with the Province’s energy objectives and BC Hydro’s most recently filed long-term resource plan.
2.0 Project Need and Justification
BC Hydro states that its current EMS is at end-of-life and needs to be upgraded from version 3.0 (current EMS), to version 3.3 (upgraded EMS). It explains that the Project consists of upgrading the EMS, as both the hardware and software of the current system are at end-of-life and an upgrade is required to maintain vendor support.[8] BC Hydro explains that EMS software vendor support primarily involves timely support to resolve software defects, and the regular release of software patches to ensure system security,[9] while EMS hardware vendor support involves providing troubleshooting, spares and repairs for hardware components such as disks, controllers and servers.[10] BC Hydro states that vendor support is critical as operating the EMS without vendor support would negatively impact BC Hydro’s ability to deliver electricity safely and reliably and would result in the BES being more exposed to cybersecurity threats.[11] In addition to the EMS, upgrade of the associated IDS is required as the current version will not be compatible with the upgraded EMS.[12] The Project is currently in the implementation phase with a Project completion date estimated to be in December 2024.[13]
BC Hydro states the only driver of the need for the Project is to address the end-of-life status of the existing EMS system.[14]
BC Hydro states that it does not intend as part of this upgrade to implement any new capabilities or meet any new business requirements not supported by the current EMS.[15]
In addition, as a result of upgrading the EMS, the associated IDS must also be upgraded because the current IDS will be unable to support the upgraded EMS.[16]
BC Hydro submits that the Project is in the public interest because it provides a cost-effective means for
BC Hydro to ensure that both the software and hardware components of the EMS have continuous vendor support, which supports BC Hydro to reliably operate the BES, deliver electricity to its customers, and protect the safety of its employees and contractors.[17]
2.1 Purpose and Function of EMS
BC Hydro asserts that the EMS is critical to monitor, control, and optimize the BES in a safe and reliable manner. In addition, the EMS also supports BC Hydro in carrying out the reliability functions that it is registered to perform pursuant to the MRS in British Columbia,[18] as discussed in Section 2.2. of this Decision.
BC Hydro states that the EMS gathers real-time data from over 400,000 measurement and control points located throughout the BES which allows BC Hydro’s system operators to monitor the status of the entire BES.[19]
BC Hydro explains that control centre operators use the EMS to manage the flow of electricity, in real time, across more than 20,000 kilometres of transmission circuits, over 30 generating stations and over 300 substations.[20] The EMS transfers real-time data from and to BC Hydro’s measurements and controls, and to and from external entities in the Western Interconnection.[21]
BC Hydro states the EMS enables BC Hydro to:
• Maintain real time visibility and operational control of the BES and respond to changing operating conditions;[22]
• Maintain power system frequency and demand versus generation balance in real time through automatic generation control;[23]
• Achieve compliance with the MRS applicable to BC Hydro’s function as a Reliability Coordinator, Balancing Authority and Transmission Operator, and to accommodate evolving MRS requirements through reconfiguration, updates or customizations;[24]
• Conduct system planning studies over a desired time horizon to support Planning Coordinator functions through a study application;[25]
• Monitor, control and operate transmission interconnections with intermittent on-grid supply resources such as wind generation from independent power producers;[26]
• Integrate mitigation measures that rely on available environmental data such as ambient temperature, wind speed and river levels to respond proactively to weather events;[27]
• Communicate with BC Hydro’s field measurements and controls;[28]
• Monitor and preserve the reliability of the interconnected grid by data sharing over dedicated networks between the utilities in the Western Electricity Coordinating Council region;[29] and
• Ensure field worker safety when completing maintenance work by facilitating the safety tagging process for certain BES devices.[30]
The IDS is a combined hardware and software solution that is a separate system from the EMS and is used to monitor the EMS for malicious activity from external parties, such as cybersecurity threats.[31] The IDS provides real-time monitoring of network traffic into and out of the EMS and provides alerts to BC Hydro’s Cyber Security Operations department about suspicious network traffic or messages.[32]
2.2 Role in MRS Compliance
BC Hydro explains that the EMS plays a role in supporting BC Hydro’s ability to perform its functions under MRS, in its capacity as Reliability Coordinator, as well as Balancing Authority, Planning Coordinator and Transmission Operator.[33]
As discussed above, BC Hydro states that the EMS supports it in its role as the Reliability Coordinator for British Columbia.[34] BC Hydro describes the Reliability Coordinator as the entity with the highest level of authority and responsibility for the reliable operation of the BES in British Columbia.[35] The Reliability Coordinator’s primary role is to coordinate the management of actual or potential reliability issues on the system and to ensure stability and continuity of service and supply, because system instability can lead to cascading blackouts and widespread outages.[36] BC Hydro, as Reliability Coordinator in British Columbia, also works in conjunction with Reliability Coordinators in Alberta and in the United States and is responsible for the reliable operation of the BES in the Western Electricity Coordinating Council region.[37]
BC Hydro states that the EMS is an operational tool used in supporting its role as the Reliability Coordinator by providing real time insights into the state of the BES and enables BC Hydro to analyze the reliability of the BES on a continuous basis.[38]
BC Hydro states that the EMS includes an automatic generation control application, which maintains power system frequency as well as the demand versus generation balance in real time. The EMS operates and sustains automatic generation control to achieve full compliance applicable to the Balancing Authority function.[39]
BC Hydro further states that the EMS includes a study application that provides the capability to conduct system planning studies over a time horizon to support Planning Coordinator functions.[40]
In addition, BC Hydro states that the EMS includes capabilities to react to unplanned transmission outages to ensure the Transmission Operator function at BC Hydro remains compliant with MRS.[41] The EMS also includes Operator Training Simulator capabilities which allow BC Hydro staff in various MRS functions to maintain their North American Electric Reliability Corporation certification status as system operators and remain compliant with MRS.[42]
2.3 Current EMS is at End-Of-Life
BC Hydro states that the EMS is critical for BC Hydro to monitor, control and optimize the BES in a safe and reliable manner.[43]
BC Hydro explains that the current EMS software is at end-of-life, and an upgrade is required to maintain vendor support. BC Hydro defines end-of-life as the time at which a product is at the end of its useful life from the vendor’s perspective, and therefore will no longer receive updates[44] or be in a vendor supported state.[45] The usual life for software like the EMS is seven years; this will be the lifespan of the current EMS because it was placed into service in 2017 and will be decommissioned in 2024.[46]
BC Hydro states that vendor support is a critical component of EMS operation as it entitles BC Hydro to:[47]
- Receive services provided by the vendor to immediately resolve any system failures;
- Proactively address new cybersecurity threats;
- Receive code fixes for defects in the system identified by any of the vendor’s customers; and
- Receive software code updates to address new reliability standards or changes to the underlying operating system that may impact the operation of the EMS.
EMS software and software support are provided by General Electric.[48] BC Hydro states that a custom support agreement is in place with General Electric as the current EMS software reached end of vendor support in April 2021.[49] The custom support agreement is contingent on upgrading to version 3.3, is in place until completion of the project,[50] and does not have any adverse operational impacts.[51] BC Hydro confirms that it has relied on custom support agreements for previous technology projects.[52]
BC Hydro states that the EMS hardware is approaching end-of-life, with an anticipated end-of-life date in June of 2024.[53] BC Hydro identifies the following two factors as reasons for upgrading the EMS hardware as part of the Project:
1) The EMS software and hardware operate in an integrated manner, and the versions of each are designed to work with a specific version of the other. The current EMS hardware is therefore not compatible with the upgraded EMS software[54] and would invalidate the software support agreement should it remain in place.[55]
2) Replacement components for the EMS hardware are no longer commercially available.[56]
BC Hydro further explains that the current EMS hardware is supported under a three-year support agreement that can be extended if necessary and will expire upon decommissioning of the current EMS.[57]
BC Hydro states that if the EMS’s technical environment is not maintained in a vendor-supported state, potential failures will last longer and the EMS will be more exposed to cybersecurity attacks.[58] This could result in disruptions to the BES, including customer outages and interruptions in key control systems, increased likelihood and duration of system failures and increased exposure to reputational damage and potential financial penalties if it is unable to meet MRS requirements.[59]
With respect to the IDS, BC Hydro states that the IDS will be at end-of-life in June 2024,[60] and an update is required because the current version will not be able to support the upgraded EMS.[61] BC Hydro states that if the IDS were to operate past its end-of-life there would be increased risk of software failure and cybersecurity attacks, which would lead to disruption of BC Hydro’s operation of the BES.[62]
Positions of the Parties
BCSEA submits that the EMS is critical to the safe and reliable operation of the BES, and that the evidence establishes that the EMS software is at end-of-life. BCSEA agrees with BC Hydro that operating the EMS software beyond end-of-life with no vendor support would increase the risk of failure of the EMS due to software failure or a cybersecurity breach. In addition, it agrees that upgrading the software requires upgrading the hardware because the existing hardware will not support the new software. Finally, BCSEA also agrees that the IDS should be replaced because it will be reaching end-of-life and the end of vendor support. Therefore, BCSEA accepts that the Project is needed to continue the safe and reliable operation of the BES.[63]
The CEC acknowledges the need for the basic replacement upgrade of the EMS. It agrees that lack of vendor support would be a potentially critical problem and not an appropriate risk to take. It notes the significant disruption to EMS management that would arise if the BCUC did not approve the Project or imposed significant alterations as conditions for acceptance.[64]
RCIA acknowledges the importance to BC Hydro operations and BC Hydro ratepayers of upgrading the EMS software and hardware. In addition, RCIA agrees that BC Hydro must have vendor support in place.[65]
Panel Determination
The Panel accepts that the Project is in the public interest, in order that BC Hydro can continue to operate the BES safely and reliably, deliver electricity, carry out its MRS responsibilities and protect against cybersecurity attacks. The Panel accepts that the EMS is critical to BC Hydro in order for it to monitor, control, and optimize the BES in a safe and reliable manner, and to support its function as Reliability Coordinator, Balancing Authority and Transmission Operator. We are satisfied that the current EMS is at end-of-life, that both the software and hardware need to be upgraded, and that vendor support is a critical component of the EMS. Further, we find that it is unacceptable to operate the BES with an EMS that is beyond end-of-life and does not have vendor support.
Although the IDS and EMS are separate systems, we also find that the upgrade proposed for the IDS is integral to the Project because having an intrusion detection system is essential to the safe and reliable operation of the EMS and the current IDS will be unable to support the upgraded EMS.
3.0 Description and Evaluation of Alternatives
The following sections summarize the evaluation of Project alternatives considered by BC Hydro to address the Project needs.
3.1 Description of Alternatives
BC Hydro states it considered the following alternatives to address the Project needs, namely, the end-of-life and subsequent end of vendor support for the software and hardware components of the current EMS:[66]
1. Upgrade the current EMS hardware and software;
2. Maintain status quo. Upgrade neither the hardware nor software of the EMS, and continue to operate without vendor support;
3. Upgrade only the hardware component of the EMS but not the software; and
4. Upgrade only the software component of the EMS but not the hardware.
3.2 Project Alternatives Evaluation
BC Hydro explains that it carried out the following two-step process to assess the Project alternatives and select the preferred alternative:[67]
1. BC Hydro screened out alternatives with excessive cost, that were not technically feasible, or that violated a regulation or BC Hydro policy; and
2. BC Hydro examined alternatives that could reduce scope, risk or cost while addressing the Project needs.
A full system replacement was screened out in step one, while the four alternatives mentioned above were explored in step two.
From a cost perspective, BC Hydro states that the four alternatives have estimated Project cost ranges as outlined in the following table:[68]
Table 1: Estimated Project Cost Range for Alternatives
| Alternative |
Estimated Project Cost Range ($) |
| Upgrade both the EMS hardware and software (preferred alternative) |
24.5 million to 32.8 million |
| Upgrade neither the EMS hardware nor software (status quo) |
0 |
| Upgrade only the EMS hardware but not the software |
14.2 million to 17.9 million |
| Upgrade only the EMS software but not the hardware |
13.2 million to 16.8 million |
BC Hydro states that because the EMS software is at end-of-life and the EMS hardware is nearing end-of-life, it conducted an assessment to determine whether it was viable to upgrade one or the other, both, or neither. As outlined below, BC Hydro rejected three of these alternatives and decided that the only viable option was to upgrade both the hardware and software.[69]
3.2.1 Full System Replacement Not Considered
BC Hydro states that it did not consider a full replacement of the EMS with another technology system from a different vendor for the following reasons: [70]
• BC Hydro does not have any new requirements or business drivers that would warrant a full system replacement. The existing EMS meets BC Hydro’s current requirements and is effectively supported by General Electric.
• BC Hydro expects that a full system replacement would cost several times what the Project is estimated to cost.
BC Hydro further states that a full system replacement would be a project much larger in scope than leveraging existing technology investments by upgrading the EMS software to a newer version. The increased scope would result in greater complexity and project risk, while having similar benefits to the Project.[71]
BC Hydro identifies the following business drivers as factors that may cause BC Hydro to assess whether a full system replacement is warranted:[72]
• If the vendor goes out of business;
• If BC Hydro is dissatisfied with the vendor product or support; and
• If the vendor does not have a clear roadmap for the future development of its product, or if BC Hydro is not satisfied with the direction the vendor is taking the product.
BC Hydro states that the last time it completed a full system replacement was from 2004 to 2008, and the main driver then was that the current system supplier had been purchased by another company that decided not to provide support for the system.[73] BC Hydro additionally states that the full system replacement had a cost of $44 million as identified and approved in Order C-1-05.[74] As outlined in the Decision to Order C-1-05, the BCUC found that the fundamental difference of opinion as to when it is appropriate for a new system to be developed largely turns on the amount of risk that the users of the system are willing to assume for the benefit of deferred costs.[75]
3.2.2 Three Alternatives Rejected due to Level of Risk
BC Hydro states that the alternatives involving upgrading either the software or hardware or retaining the status quo are not viable because BC Hydro would have to operate the EMS without vendor support, which presents an unacceptable level of risk to BC Hydro. [76] BC Hydro asserts that there are two main risks associated with operating the EMS without vendor support:[77]
1. Increased risk of failure of the software
a. With supported software, vendors routinely provide fixes for defects before they result in system issues; and
2. Increased cybersecurity risk
a. The resilience of the EMS would deteriorate as the vendor would no longer provide cybersecurity patches and updates.
BC Hydro states that these risks could result in:[78]
• Disruptions to BC Hydro’s operation of the BES, including customer outages and interruptions in key control systems which operate generation and transmission systems;
• Increased likelihood and duration of system failures, which would also increase operating costs due to the need to respond to unplanned system failures; and
• Exposure to reputational damage and potential financial penalties if BC Hydro is unable to satisfy its mandated roles for which BC Hydro is registered with the BCUC under the MRS program.
BC Hydro states that choosing to only upgrade the EMS hardware, or choosing to upgrade neither the EMS hardware or software, would result in no support from General Electric as the current software is at end-of-life and the custom support agreement in place is contingent on upgrading the software to version 3.3.[79] BC Hydro also states that upgrading only the EMS software would invalidate the support agreement with General Electric and result in a lack of vendor support due to the legacy hardware not complying with General Electric’s specifications for the new software.[80] BC Hydro states that the level of risk is unacceptable and therefore it rejected each of the three alternatives.
3.3 Selection of Preferred Alternative
BC Hydro submits that upgrading both EMS software and hardware is the only viable alternative and is therefore the preferred alternative for the Project.[81]
Positions of the Parties
BCSEA is satisfied that BC Hydro selected the appropriate alternatives for examination and agrees that upgrading both the software and hardware of the EMS is the only viable solution. Further, BCSEA agrees with
BC Hydro’s decision to reject a full replacement of the EMS with another technology solution.[82]
RCIA disagrees that BC Hydro considered all potential alternatives. It notes that although BC Hydro evaluated alternatives to address both the end-of-life and end-of-vendor support for both the software and hardware components of the EMS, BC Hydro did not consider changing vendors or a complete EMS replacement.[83]
According to RCIA, BC Hydro did not consider changing vendors because it “is in a captive relationship with the EMS vendor, General Electric (“GE”), and does not have sufficient influence to control the replacement cycle, project complexity, or costs for the EMS upgrade project.”[84]
RCIA agrees with BC Hydro that a full replacement of the EMS, such as would be required from another vendor, would cost much more than the single upgrade that is the subject of this Application. According to RCIA, however, the “alternatives analysis must be considered on a longer time scale than a single upgrade cycle to provide an equitable comparison (e.g., 15 or 20 years). BC Hydro must consider alternate vendors when evaluating project alternatives for future EMS upgrades or replacements.”[85]
In reply to RCIA, BC Hydro disagrees that it is a captive customer of General Electric because it did not consider other vendors and does not control the EMS software upgrade schedule, complexity, and costs. According to BC Hydro, it can change software vendors and has done so when necessary, as it did when it completed a full replacement of the EMS from 2004 to 2008.[86] BC Hydro also states that it has been able to negotiate the rates charged by General Electric for its resources on the Project.[87]
BC Hydro suggests that RCIA’s submission that BC Hydro should explore other vendors when analyzing alternatives and that the alternative to change vendors should be examined not in a “single upgrade cycle” but on “a longer time scale” is flawed in three aspects:[88]
1. BC Hydro may consider a change in vendor during the alternatives analysis but it excluded this option from the alternatives analysis because such a change is not warranted at this time;
2. the suggestion to compare alternatives on a longer time-scale is not feasible because it would require speculation about the timing, scope, cost, and complexity of potential upgrades from General Electric or from alternate vendors; and
3. the lifespan of the software for the EMS, whether provided by General Electric or another vendor, does not support the 15 to 20-year time scale that RCIA suggests.
The CEC agrees that lack of vendor support would be a potentially critical problem and not an appropriate risk to take. In addition, it supports BC Hydro not seeking a new EMS vendor and agrees that the costs of a new vendor would probably not outweigh the benefits.[89]
Panel Determination
The Panel is persuaded that BC Hydro has appropriately identified and evaluated the various alternatives for the EMS upgrade, based on the current constraints and requirements of the EMS. The Panel is satisfied that
BC Hydro’s preferred option of upgrading both the EMS software and hardware, as well as the IDS, is the best option, at this time.
During the proceeding, the Panel and interveners explored the degree to which BC Hydro examined various alternatives. We accept BC Hydro’s conclusion that a full replacement of the EMS is not necessary at this time because there are no new requirements or business drivers that would warrant a full system replacement; the current EMS meets BC Hydro’s requirements and is effectively supported by General Electric. Moreover, we accept that a full replacement would likely cost much more than the proposed upgrade. BCSEA and the CEC agree that the cost of a full replacement is not justified, and RCIA agrees with BC Hydro that such a replacement would cost much more than the upgrades that the Project contemplates.
In addition to its preferred option, BC Hydro identified three other alternatives to address the end-of-life and end of vendor support for the software and hardware components of the EMS. BC Hydro explains that it analysed these three alternatives: continuing with the status quo or upgrading either the hardware or the software components of the EMS. Each of these alternatives would require BC Hydro to operate the EMS without vendor support, which represents an unacceptable level of risk. Therefore, BC Hydro rejected each of these alternatives.
The Panel accepts that vendor support for the EMS is essential, and that BC Hydro would be taking on an unacceptable risk if it decided to operate the EMS without such support. Interveners also support BC Hydro’s emphasis on ensuring it retains vendor support.
RCIA suggests that BC Hydro’s analysis of alternatives is limited, largely because it focused on the short term rather than longer term, and questions whether BC Hydro should have looked further into the future when identifying the range of options. However, we accepted in Section 2 above, BC Hydro’s justification for the Project and that the current EMS is at end-of-life and needs to be upgraded. Thus, we consider that RCIA is addressing what amounts to a different project need. In other words, if BC Hydro had established that it needed a new EMS, rather than an upgraded EMS, then perhaps the alternatives would have incorporated longer term criteria.
Although beyond the scope of this Application, RCIA does raise a good point, which warrants some reflection: at what point should BC Hydro consider an entire replacement of the EMS instead of continuing to upgrade its current system? A convenient analogy is one’s personal vehicle – the decision to buy a new one when one can no longer justify the costs to repair and maintain the current vehicle, or when the parts and service expertise are no longer readily available. Similarly, at some point, for factors such as price, reliability, vendor support,
BC Hydro training needs, cybersecurity and product lifetime, BC Hydro may no longer be able to support the EMS simply by upgrading the software and hardware. Therefore, if it does not already do so, we encourage BC Hydro to embrace a longer-term vision for the EMS than strictly the next seven-year cycle of software upgrade and associated hardware.
4.0 Project Description
4.1 Project Scope
The Project as proposed includes the following components:[90]
• Upgrading the current EMS software from version 3.0 to version 3.3;
• Purchasing, configuring, and deploying new hardware upon which the upgraded EMS will run;
• Decommissioning and disposing of the current EMS hardware;
• Deploying a new Intrusion Detection System for the upgraded EMS;
• Migrating existing BC Hydro specific customizations in the current generation and network analysis applications, Supervisory Control and Data Acquisition and the Operator Training Simulator; and
• Developing and deploying new BC Hydro specific customizations where BC Hydro’s current EMS base functionality is modified in the upgraded EMS software.
4.2 Description of BC Hydro EMS and IDS
BC Hydro provides a general overview of BC Hydro’s EMS and its main elements, applicable to both the current and upgraded EMS, as shown in Figure 1 below:[91]
Figure 1: Energy Management System Overview
BC Hydro states that the EMS is an operational technology system used to monitor, control, and optimize the BES and assist in the delivery of safe and reliable electricity through the various EMS subsystems as summarized in the table below:[92]
Table 2: Subsystems of the EMS
| Subsystem |
Function(s) |
| Supervisory Control and Data Acquisition |
Controls the movement of data between Bulk Electric System measurement devices and controls and other EMS subsystems. |
| Generation Applications |
Controls the balance between demand and production of electricity by ramping up and down generating units as needed and managing energy interchange with neighbouring utilities. |
| Network Applications |
Uses data collected by the Supervisory Control and Data Acquisition subsystem to assess the state and stability of BC Hydro’s transmission network and issues corrective commands to network control devices. Detects bad data in the system, warns of possible instances that can cause the Bulk Electric System to operate outside of set parameters, and performs load flow calculations for the transmission lines. |
| Operating System and Platform Applications |
Contains services such as process management, high availability, configuration management and data replication management and access controls. |
| Operator Training Simulator |
Used to train system operators and enables them to practice responding to various simulated operating conditions. |
BC Hydro further defines the EMS as a suite of software and applications that run on hardware housed in
BC Hydro’s two fully redundant control centres located in the Fraser Valley and Southern Interior. Hewlett Packard Enterprise provides the EMS hardware components including disks, controllers, and servers. [93] Hewlett Packard Enterprise[94] also provides hardware support. General Electric provides the EMS software and the hardware specifications for running the software.[95]
BC Hydro states customizations are required to integrate the vendor’s core product with BC Hydro’s system. According to BC Hydro, it is typical for utilities to customize their EMS software due to the variance between utility control schemes, communication protocols, types of generators, study factors and other requirements.[96] The required customizations are specific to BC Hydro and the number of customizations has been reduced from 99 in the current EMS to 91 in the upgraded EMS.[97] The following table summarizes the customizations for each subsystem required for the upgraded EMS:[98]
Table 3: Customizations for each Subsystem
| Subsystem |
Number of Customizations in EMS 3.3 |
Customization Example |
| Supervisory Control and Data Acquisition |
18 |
Special controls to match requirements of field devices and field device configurations that are unique to BC Hydro. |
| Generation Applications |
16 |
Calculating minimum water usage for generating units at all operating conditions and load levels for BC Hydro’s unique combination of dams and generating units. |
| Network Applications |
44 |
Total Transfer Capability – calculates the flow limits and the amount of energy that can be transferred between utilities. |
| Operator Training Simulator |
13 |
Producing correct responses to simulated field controls and simulated Bulk Electric System disturbances including blackouts and restoration drills. |
External to the EMS is the IDS. The IDS is a separate software and hardware solution that is used to monitor the EMS for malicious activity from external parties such as cybersecurity threats.[99] Upgrade of the IDS is included in the scope of the Project, which BC Hydro explains will provide improved cybersecurity capabilities for cybersecurity compliance.[100]
4.3 Project Schedule
BC Hydro provides the following schedule of critical milestones for the Project:[101]
Table 4: Phase Milestones and Activities
| Task |
Start Date |
End Date[102] |
| Updating BC Hydro specific customizations |
October 2021 |
November 2022 |
| BC Hydro specific customizations functionality and integration testing |
November 2022 |
March 2023 |
| Pre-Factory Acceptance Testing |
April 2023 |
May 2023 |
| Factory Acceptance Testing |
June 2023 |
July 2023 |
| Site Acceptance Testing |
July 2023 |
October 2023 |
| Parallel Operations |
November 2023 |
February 2024 |
| In-Service Date |
April 2024 |
|
| Stabilization |
March 2024 |
May 2024 |
| Project Closure |
May 2024 |
August 2024 |
| Project Completion Date |
October 2024 |
Positions of the Parties
BCSEA submits that the Project is cost effective and appropriately scoped.[103]
RCIA acknowledges the importance of the project to upgrade both software and hardware to BC Hydro operations and ratepayers.[104]
The CEC agrees with BC Hydro as to the public interest considerations for maintaining the functionality of the EMS and keeping up with General Electric’s supported versions of the software and meeting the related hardware needs.[105]
Panel Discussion
The Panel finds that the scope of work as proposed for the Project is appropriate to address the public interest. In addition, we find that it is appropriate to upgrade the IDS, given its importance for cybersecurity. The Panel notes that BCSEA and the CEC support the Project as being reasonable. RCIA, despite its concern that BC Hydro did not consider longer term alternatives, also agrees that the Project is important to BC Hydro operations and ratepayers.
5.0 Project Costs and Rate Impact
5.1 Project Costs
BC Hydro’s estimated cost range for the Project (Project Cost Range) is $24.5 million to $32.8 million for the implementation phase. The Project Cost Range is based on an expected cost (Expected Cost) estimate of $27.2 million with an estimating accuracy range of +15 percent / -10 percent, and an authorized cost (Authorized Cost) estimate of $32.8 million. [106] BC Hydro states that the Expected Cost corresponds with an AACE International Class 3 cost estimate based on the plan, schedule of activities and designs developed in the Definition phase for the Project.[107] The variability assigned to the estimated Project Cost Range is based on professional opinion and BC Hydro expects to deliver the Project within the forecast range.[108] In addition, all estimates are in real dollars due to the short duration of the Project.[109]
Expected Cost
A detailed breakdown of the Expected Cost of $27.2 million is provided in Table 5 below, with the dollar amounts redacted and provided by BC Hydro in the confidential evidence:
Table 5: Expected Cost Estimate ($ millions)[110]
With respect to Table 5 above, BC Hydro explains that all costs up to the end of the Project Definition phase (Rows A and B) are the actual recorded costs.[111] The estimated total direct cost for the Project Implementation phase (Row D) is peer reviewed internally, in accordance with BC Hydro’s standard practice, by a senior
BC Hydro Project Manager and includes the following direct cost components: hardware, server related software, server dismantling costs, General Electric and other vendor costs, and BC Hydro resource costs.
BC Hydro states that the dollar amounts for these cost components are either based on quotations from suppliers or estimated by BC Hydro using resource driven bottom-up estimates considering the resources required to deliver BC Hydro’s scope of work and provide support for General Electric’s scope of work.[112]
With respect to the Project contingency (Row F), BC Hydro outlines that the contingency has been calculated as 15 percent of the total of the Implementation phase direct costs in accordance with BC Hydro’s standard practice for technology projects. Approval from the Project’s Steering Committee is required to access the contingency.[113]
BC Hydro states interest during construction (Row I) is an estimate of the interest incurred over the life of the Project and applies to the capital cost only.[114]
Authorized Cost
In addition to the Expected Cost, BC Hydro provides an Authorized Cost estimate for the Project of $32.8 million. The Authorized Cost is the sum of the Expected Cost plus: project reserve (Project Reserve), special reserve (Special Reserve), and incremental interest during construction.[115]
BC Hydro’s Project Reserve estimate mitigates unknown risks, whereas the Special Reserve estimate considers the cost impacts associated with three discrete known risks to the Project:[116]
• Poor product quality within Project customizations developed by BC Hydro, resulting in system defects and schedule delays that require additional BC Hydro or vendor costs;
• COVID-19 related issues such as further travel restrictions causing schedule delays; and
• Exchange rate variability resulting in additional costs for U.S. dollar-based contracts.
BC Hydro provided estimates and supporting assumptions for each of the known risks in the confidential information.[117] In addition, as explained by BC Hydro, access to the Project Reserve and Special Reserve requires additional financial approval from BC Hydro’s President and Chief Executive Officer. Further, access to the Special Reserve is only available if the known risk to which it relates materializes.[118]
During the IR process, BC Hydro explained that the Authorized Cost of the Project was previously $15.6 million at the time the Project entered the Definition phase. Following the Definition phase, the Authorized Cost estimate was increased to $32.8 million, as described above, due to an increase in the complexity of the Project’s detailed design and increased vendor costs, among other things. For example, BC Hydro explains that one of factors contributing to the estimated cost change is its decision to increase the use of General Electric resources in certain areas due to General Electric’s skill, experience and availability and BC Hydro’s resource constraints.[119]
5.2 Rate Impact
During the IR process, BC Hydro provided the rate impact of the Project under three cost scenarios in the Project Cost Range. The Project affects the following elements of BC Hydro’s revenue requirements: amortization, finance charges, and operating costs.[120] Ongoing support costs for the EMS are included in BC Hydro’s revenue requirements applications and are captured in the Real Time Systems department non-labour costs within the overall budget for transmission and distribution system operations.[121] For the purpose of each rate impact analysis under the three cost scenarios, BC Hydro outlined that it included $0.2 million of base operating costs.[122]
BC Hydro states that the highest revenue requirements (in dollar terms) and cumulative incremental rate impacts (in percentage terms) are expected to occur in Fiscal 2026 in all scenarios, corresponding to the first full year after the Project is placed into service, and are as follows:[123]
• $4.5 million and 0.08 percent for the lower end of the Project Cost estimate of $24.5 million;
• $5.0 million and 0.09 percent for the Expected Cost estimate; and
• $5.9 million and 0.10 percent for the Authorized Cost estimate.
After Fiscal 2026, the cumulative incremental rate impact decreases, driven by lower finance charges as amortization recovered from ratepayers is used to pay down the assumed debt over time. The cumulative incremental rate impact is zero in Fiscal 2032 at the end-of-life of the Project assets.[124]
5.3 Software Upgrade Asset Class
As noted above in Section 1.2, BC Hydro seeks approval of a Software Upgrade asset class with an expected useful life of seven years (14 percent depreciation rate).
BC Hydro states that the expected useful life of the upgraded EMS software is approximately seven years based on discussions with the vendor about its product roadmaps. Considering that the vendor’s product roadmap indicates when a vendor plans to end support for a software (or a version of a software) and when the user of the software (or a version of the software) needs an upgrade or replacement, BC Hydro views that the vendor’s product roadmap provides the most reliable estimate of useful life for accounting purposes. Since BC Hydro expects a useful life of seven years for the upgraded EMS software and it does not currently have a software asset class with a seven-year life for accounting purposes, BC Hydro requests approval of the necessary Software Upgrade asset class in this Application. BC Hydro states it is appropriate to use a seven-year asset class in order to align the amortization expense of the upgraded EMS software to the asset life.[125]
In responses to IRs, BC Hydro acknowledged a concurrent BC Hydro Fiscal 2023–2025 Revenue Requirements Application (F2023-2025 RRA) proceeding, in which it requests, among other things, approvals related to depreciation rates. BC Hydro clarifies that the request for approval of a Software Upgrade asset class with a life of seven years in this Application is separate from the depreciation-related requests in the BC Hydro F2023-2025 RRA because the Software Upgrade (seven-year life) asset class is a new asset class which did not exist at the time BC Hydro conducted its depreciation study for the F2023-2025 RRA. Therefore, this asset class has not been reviewed as part of the depreciation study and does not form part of the approvals sought in that proceeding.[126]
BC Hydro states that the approval of a Software Upgrade (seven-year life) asset class will only affect the upgraded EMS software and BC Hydro does not expect it to impact any other existing software assets. However, if future significant software projects have information from the vendor regarding end of support or platform change dates estimated at seven years, or approximately seven years, BC Hydro submits that this new asset class would be appropriate to use in those instances as well.[127]
Positions of the Parties
BCSEA agrees with BC Hydro that the estimated costs for the Project are reasonable.[128] In addition, it supports BC Hydro’s request for a new Software Upgrade asset class with a seven-year amortization period and accepts the rationale for a seven-year amortization based on the expected life of the Project software.
The CEC finds the costs and cost estimates to be appropriate for the Project and suitable for a project of this size, nature, and importance to continued effective operation of the BC Hydro electrical system. The CEC also submits that the rate impacts are reasonable and appropriate.[129] The CEC supports the approval of a Software Upgrade (seven-year life) asset class, although it also recommends that the BCUC direct BC Hydro to seek options for longer useful lives of projects and to develop flexibility for life extensions as part of all software assets that BC Hydro proposes to place in the Software Upgrade class.[130]
In reply to the CEC, BC Hydro states that the direction the CEC recommends is not appropriate. It submits that a vendor’s roadmap for its product provides the most reliable estimate of the useful life for accounting purposes. In addition, whether BC Hydro can extend the life (beyond the useful life for accounting purposes) depends on a number of factors, such as entering into a vendor agreement to extend support for BC Hydro.[131]
RCIA submits that the cost increases during the Definition phase of the Project (costs increased by 80 percent over the forecast total capital cost at the time of BC Hydro’s F2020-2021 RRA proceeding, or $13.1 million) demonstrate that “BC Hydro does not have the influence in this captive relationship” to manage General Electric, including controlling the scope, timing and cost of the Project. RCIA submits that this prevents BC Hydro from planning and operating cost-effectively “while locked into a single EMS vendor.” For example, according to RCIA, more than 60 percent of the $13.1 million cost increase from September 2020 to March 2022 was related to requirements General Electric dictated for the EMS and additional work performed by General Electric. One of the items General Electric required was “to deploy and configure new Intrusion Detection System hardware for the Energy Management System version 3.3 software ($1.9 million).”[132]
In reply, BC Hydro submits that RCIA’s conclusion regarding General Electric’s role in the cost increase is “misplaced.” In its view, the evidence shows how the Project costs have become more refined and the estimated cost accuracy range has become narrower as the Project progresses from the Definition phase to the Implementation phase. Cost increases were not because of requirements dictated by General Electric.[133]
BC Hydro also clarifies that General Electric is not the vendor for the IDS and it did not specify the requirements of the IDS.[134]
Panel Determination
The Panel finds BC Hydro’s Project Cost Range ($24.5 million to $32.8 million), as well as the Expected Cost estimate of $27.2 million for the Project are reasonable. We are satisfied with the estimated costs for the Project, including the calculation of the Expected Cost, Authorized Cost, Project Reserve and Special Reserve amounts. BC Hydro expects that the Project will be delivered within the forecast range of $24.5 million to $32.8 million. The capital cost estimate is consistent with an AACE International Class 3 cost estimate, which is in alignment with the BCUC’s CPCN Guidelines.
Further, the Panel is also satisfied that BC Hydro has appropriate controls in place to govern the circumstances when the contingency, Project Reserve or Special Reserve can be accessed. We accept that this provides for appropriate due diligence above the Expected Cost of the Project including contingency.
The Panel acknowledges the substantial increase in Authorized Cost from the Definition phase to the Implementation Phase. We are not persuaded by the RCIA submission that this increase demonstrates that
BC Hydro is beholden to General Electric, or that this is a captive relationship which permits General Electric to control the cost of the Project. There is no evidence to suggest that the substantial increase in costs estimated during the Definition phase is a consequence of BC Hydro being captive to General Electric. Indeed, BC Hydro adequately explains the reasons for the increased costs, including increased complexity of the Project design and higher vendor costs due to using more General Electric resources because of its particular expertise and BC Hydro’s resource constraints.
The Panel considers that the estimated rate impacts are reasonable. Our review of the evidence did not reveal any reason to question the accuracy of BC Hydro’s estimated cumulative incremental rate impact. The Panel notes that the CEC finds the rate impact to be reasonable and appropriate.
The Panel is satisfied that a new Software Upgrade asset class is appropriate and approves BC Hydro’s establishment of this 7-year asset class. We accept the logic in aligning the amortization expense of the upgraded EMS software to the asset life. We do not accept, however, the CEC’s recommendation regarding specific directives for BC Hydro. In the particular case of software assets, we are satisfied that it is prudent for
BC Hydro to rely on the vendor’s roadmap and vendor’s support.
The Panel directs BC Hydro to file ongoing reporting to the BCUC for the duration of the EMS Upgrade Project, as detailed in Appendix A of this Decision.
6.0 Consultation and Engagement
6.1 First Nations Consultation
BC Hydro states that as the Project is a technology Project within BC Hydro’s existing control centres, there are no Indigenous consultation obligations arise from the implementation or ongoing operation of the Project.[135]
6.2 Public and Customer Consultation
No public or customer consultation has been submitted or discussed by BC Hydro. Indeed, BC Hydro states that since the Project is a technology project within BC Hydro’s existing control centres, there are no environmental or socio-economic impacts arising from the Project and therefore the requirements in the CPCN Guidelines to summarize public consultation are not applicable.[136]
Positions of the Parties
None of the interveners commented on matters regarding consultation or engagement.
Panel Discussion
The Panel is persuaded by BC Hydro’s submission that there are no Indigenous Nations consultation obligations arising from the implementation or ongoing operation of the Project because the Project is an EMS technology upgrade project within BC Hydro’s existing control centres. Furthermore, we are also persuaded that public and customer consultation was not necessary given the limited scope of the Project.
7.0 Project Risk and Risk Management
BC Hydro outlines its identification and assessment of the risks and associated risk management for the Project.
7.1 Prior to Implementation Phase
BC Hydro explains the material risks that it identified and mitigated prior to the Implementation phase of the Project:[137]
• Retaining vendor support for the current EMS software until completion of the Project;
• Completing detailed designs in the Definition phase in order to provide scope, cost and schedule certainty; and
• Including existing BC Hydro customizations in GE’s standard product to reduce the solution complexity and the risk of cost escalation.
In terms of mitigation strategies, BC Hydro states that it negotiated a custom support agreement with General Electric so that the software is fully supported until the Project is complete. BC Hydro further states that it completed the detailed designs during the Definition phase. Additionally, BC Hydro states that it worked with General Electric to identify several BC Hydro specific customizations in the current EMS software that can be incorporated into the standard upgraded EMS software, thus reducing the number of customizations and complexity in BC Hydro’s upgraded EMS. [138]
7.2 During Implementation Phase
BC Hydro states that it has identified material risks for the Implementation phase and developed mitigation plans accordingly. It explains that material risks for this Project are those risks that it classifies as a medium risk, pursuant to the assessment level of risk based on risk likelihood and impact. The risks are presented based on
BC Hydro’s technology project delivery categorization, grouped into the following categories:[139]
• Technology risk: those risks related to the maturity of the technology;
• Project Delivery risk: those risks related to BC Hydro’s ability to deliver the Project on time and on budget; and
• Readiness risk: those risks related to the ability of BC Hydro to execute the Project.
Within each category, BC Hydro describes the individual risk and explains that it assesses the likelihood of a risk occurring as well as the impact of a risk on the Project should it occur. BC Hydro also outlines how it determines the overall level of risk based on the combined risk likelihood and impact scores.[140]
With respect to Technology risk, BC Hydro has identified two risk events/threats relating to software defects. The first risk, that software defects delay project delivery, is assigned a risk level of medium by BC Hydro.
BC Hydro has developed the following three mitigation plans for this Technology risk:[141]
• General Electric will provide BC Hydro with updates on its work on other EMS 3.3 implementation and upgrade projects to help identify any issues that may impact the delivery of the Project;
• General Electric is a member of the Project delivery and working team and will attend Steering Committee meetings as required to provide updates on other utility implementations; and
• Special reserve funding has been allocated to any additional effort and schedule required to resolve any issues with custom developed code that may have a higher risk of defect.
BC Hydro identifies the second Technology risk as software defects impacting production operations. BC Hydro states that mitigation involves use of extensive parallel operations and a phased cutover, similar to successful previous upgrades. BC Hydro also assigns a risk level of medium to this risk. [142]
With respect to Project Delivery Risk, BC Hydro has identified four risk events/threats, each with a risk level of medium. These risks are:[143]
• Increased costs due to foreign exchange rates for US-based vendors;
• Impacts on Project delivery due to the COVID-19 pandemic;
• Supply chain delays for hardware may impact delivery schedule; and
• Poor product quality may result in higher number of defects than anticipated and cause schedule delays.
BC Hydro explains that in the event these risks impact on-budget delivery, for example, increased costs due to foreign exchange rates or in case poor product quality requires additional rounds of product testing, it has added Special Reserve funding. Additionally, BC Hydro also explains that to mitigate risks to on-schedule delivery, it placed hardware orders at the start of the Implementation phase to provide the longest possible lead time before the equipment is required, and it has included a 3-month contingency schedule for the Implementation phase in case of COVID-19 pandemic impacts.[144] In response to IRs, BC Hydro states that due to supply chain issues, the original delivery date for hardware of April 2022 was moved to August 2022, and while the key milestone dates were not impacted, it remains a risk that is being managed.[145]
With respect to Readiness risk, BC Hydro has identified one material risk event/threat: resource constraints of key BC Hydro technical experts required for the deployment and configuration of the EMS. BC Hydro states it will mitigate this risk by securing additional contract resources to augment the team of Real Time Systems engineers during Project delivery. BC Hydro assigns a risk level of medium to this risk.[146]
7.3 Cybersecurity during Project Implementation
BC Hydro states that the cybersecurity risk for delivering the Project on-time and on-budget is low.[147] It applied protections for the Project development environment based on the MRS for Critical Infrastructure Protection (CIP Standards). These protections included mandatory personnel risk assessments and training, electronic security perimeters including firewalls and security event monitoring, restrictions on use of transient cyber assets and removable media and information protection in accordance with the Mandatory Reliability Standard CIP-011[148] information protection program.[149]
BC Hydro further states that as part of its Information Technology Delivery Standard Practices methodology, it completed a cybersecurity risk and North American Electric Reliability Corporation (NERC) CIP compliance assessment in the Definition phase to give the cybersecurity team an early-stage indication of the security risk of the Project. The assessment also gives the project manager a high-level view of cybersecurity requirements for the Project.[150]
In addition, BC Hydro states that a solution design document was completed outlining the entire solution including the setup, configuration, integration, network access, and access privileges of the hardware and software. BC Hydro defines the solution design document as the key document that outlines how the Project will meet and implement the cybersecurity and NERC requirements identified in the assessment. BC Hydro’s Cyber Security and Compliance department reviewed and approved this document.[151]
BC Hydro states that successful implementation of the cybersecurity requirements will be determined by a cybersecurity assessment toward the end of the Implementation phase that will include evidence and documentation of compliance with applicable CIP Standards, internal scans for vulnerability detection and review and approval by BC Hydro’s Cyber Security and Compliance department.[152]
BC Hydro submits that it “has an effective cyber program focused on implementing capabilities and controls across the company that can reduce the likelihood of a cyber incident, …, while mitigating the impact of an incident should one occur.”[153] The program is managed and budgeted for at an enterprise level.[154]
Positions of the Parties
BCSEA submits that BC Hydro has appropriately identified and assessed risks and associated risk treatments for the Project.[155]
The CEC recommends that the BCUC conclude that BC Hydro is prudently developing the Project and managing risk.[156] Notwithstanding its general support, the CEC offers several observations regarding Project risks and recommendations regarding risk management. First, the CEC encourages BC Hydro to negotiate the annual service contracts for the EMS early, to provide reasonable stability of the annual support costs for the EMS. Second, the CEC recommends that BC Hydro adopt a more robust plan for learning from other utilities about the success of the new EMS version. Last, the CEC suggests that BC Hydro ensure that both the vendor implementation team as well as BC Hydro’s own team have adequate experience.[157]
In reply, BC Hydro agrees that discussions with other utilities about their experience with the new EMS version is important and that it has already incorporated that process into its standard practice.[158]
Panel Discussion
The Panel accepts that BC Hydro adequately identified the Project risks and mitigation strategies prior to the Implementation phase. Retaining vendor support pending project completion, completing detailed designs, and identifying BC Hydro customizations to incorporate in the standard upgraded EMS software all reflect forward thinking that is important to risk management.
The Panel is satisfied that BC Hydro has appropriately considered risks and risk management during the Implementation phase. We consider that BC Hydro has methodically assessed the likelihood of a risk occurring as well as the impact of a risk on the Project should it occur and therefore, we are satisfied that its process to mitigate risks during Project execution is reasonable.
The Panel is satisfied that BC Hydro has appropriately assessed the cybersecurity risk level for the Project as low. There is no evidence that cybersecurity issues will impact BC Hydro’s ability to deliver the Project on-time or on-budget.
Further, we are persuaded that BC Hydro has adequately addressed cybersecurity issues for the Project. In this regard, we note that BC Hydro applies the Mandatory Reliability Standards regarding Critical Infrastructure Protection. Further, it approaches cyber security on an enterprise, rather than a project, level, and therefore can implement capabilities and controls across the company. The Panel accepts that this can reduce the likelihood of a cyber incident, while mitigating the impact of an incident should one occur.
Finally, the Panel acknowledges the CEC’s sensible recommendations regarding early negotiation of annual support contracts to support cost stability and ensuring the teams implementing the Project have adequate experience.
8.0 Provincial Government Energy Objectives and the Integrated Resource Plan
As stated in Section 1.4 of this Decision above, section 44.2 (5.1) of the UCA provides that the BCUC must consider British Columbia’s energy objectives and the most recent long-term resource plan filed by BC Hydro in determining whether to accept an expenditure schedule filed by BC Hydro.
British Columbia’s Energy Objectives
Section 2 of the CEA sets out British Columbia’s energy objectives. BC Hydro states that the Project is supportive of the energy objective set out in section 2(f) of the CEA “to ensure the authority’s rates remain among the most competitive of rates charged by public utilities in North America.” Further, the Project is being advanced to allow for BC Hydro’s continued use of the EMS cost-effectively, without undertaking the additional cost of replacing the current EMS with a new technology solution.[159]
BC Hydro’s Long-Term Resource Plan
BC Hydro states that its most-recent long-term resource plan, filed with the BCUC on December 21, 2021 under section 44.1 of the UCA, is the 2021 Integrated Resource Plan. BC Hydro explains that the Project supports the Integrated Resource Plan by helping to ensure the safe and efficient operation of its generation and transmission systems in order to deliver energy resources to customers in an efficient and safe manner.[160] The Panel has not considered subsections 44.2(5.1) (c) and (d) of the UCA because these are not applicable to this Application: there are no prescribed targets or guidelines under section 19 of the CEA, and the Project schedule does not include expenditures related to demand-side measures.[161]
Positions of the Parties
Interveners made no submissions on BC's energy objectives or alignment with BC Hydro's Integrated Resource Plan.
Panel Discussion
The Panel considers that the Project supports section 2(f) of the CEA, keeping BC Hydro’s rates competitive, because the Project allows for the continued use of the EMS, without undertaking the additional cost of replacing the current EMS with a new technology solution.
The Panel also considers that the Project supports the Integrated Resource Plan by helping to ensure the safe and efficient operation of BC Hydro’s generation and transmission systems in order to deliver energy resources to its customers in an efficient and safe manner.
9.0 Summary of Approvals and Directives
Pursuant to section 44.2(3) of the UCA, the Panel accepts the capital expenditure schedule for the EMS Upgrade Project submitted by BC Hydro with an estimated cost range of $24.5 million to $32.8 million. The Panel finds that the expenditure schedule is in the public interest. In making this determination, the Panel has examined each of the relevant considerations set out in section 44.2(5.1) of the UCA and finds that these considerations support acceptance of the expenditure schedule and approval of the Software Upgrade asset class with an expected useful life of seven years. The Panel also notes the interveners’ overall support for the Application.
Dated at the City of Vancouver, in the Province of British Columbia, this 28th day of February 2023.
Original signed by:
____________________________________
E. B. Lockhart
Panel Chair / Commissioner
Original signed by:
____________________________________
W. M. Everett, KC
Commissioner
Original signed by:
____________________________________
A. Pape-Salmon
Commissioner
British Columbia Hydro and Power Authority
Application for Approval of Capital Expenditure Schedule for the
Energy Management System Upgrade Project
PROJECT REPORTING
The scope of Project reporting for the duration of the Project will comprise the following:
1 Semi-annual Progress Reports
Each report is required to detail:
• Actual costs incurred to date compared to the Project cost breakdown estimate provided in Table 5 and Table 6 of the Confidential Application, highlighting variances with an explanation of significant variances;
• Any access to the Special Reserve funding, with an explanation of the amount and reason(s) for accessing the Special Reserve funding;
• Updated forecast of costs, highlighting the reasons for significant changes in Project costs / savings anticipated to be incurred; and
• The status of identified risks noted in section 5.2 of the Application, highlighting the status of identified risks, changes in and additions to risks, the options available to address the risks, the actions that BC Hydro is taking to deal with the risks and the likely impact on the Project’s schedule and cost.
BC Hydro must file semi-annual progress reports within 45 days of the end of each semi-annual reporting period, with the first report covering the period ending June 30, 2023. Each report must provide the information set out above.
2 Material Change Reports
A material change (Material Change) is a change in BC Hydro’s plan for the Project that would reasonably be expected to have a significant impact on the schedule, cost, or scope, such that:
• There is a schedule delay of greater than six months compared to the schedule provided in Table 10 of the Application;
• The total Project cost exceeds 10 percent of the estimated Project cost of $24.5 million to $32.8 million; or
• There is a change to the Project scope detailed in section 4.1 of the Application.
In the event of a Material Change, BC Hydro must file a Material Change report with the BCUC explaining the reasons for the Material Change, BC Hydro’s consideration of the Project risk and the options available, and actions BC Hydro is taking to address the Material Change. BC Hydro must file the Material Change report as soon as practicable and in any event within 30 days of the date on which the Material Change occurs.
3. Final Report
A Final Report within three months of substantial completion or the in-service date of the Project, whichever is earlier. The report is to include:
• The final cost of the Project, including a breakdown of the final costs and an explanation for any Special Reserve funding accessed;
• A comparison of the final costs to the estimates provided in Table 5 and Table 6 of the Confidential Application; and
• An explanation and justification for any material cost variances that exceed 10 percent for any of the cost items provided in Table 5 and Table 6 of the Confidential Application.
BC Hydro and Power Authority
Energy Management System Upgrade Application
List of Acronyms
| Acronym / Glossary |
Description |
| AACE International |
The Association for the Advancement of Cost Engineering International |
| Application |
Application requesting acceptance of a cost range of $24.5 million to $32.8 million in capital expenditures for the Energy Management System Upgrade Project, pursuant to section 44.2 of the UCA |
| BC Hydro |
British Columbia Hydro and Power Authority |
| BCSEA |
BC Sustainable Energy Association |
| BCUC |
British Columbia Utilities Commission |
| BES |
Bulk Electric System |
| CEA |
Clean Energy Act |
| CEC |
Commercial Energy Consumers Association of British Columbia ( |
| CIP Standards |
Critical Infrastructure Protection |
| CPCN |
Certificate of Public Convenience and Necessity |
| EMS |
Energy Management System |
| F2023-2025 RRA |
Fiscal 2023–2025 Revenue Requirements Application proceeding |
| GE |
General Electric |
| IDS |
Intrusion Detection System |
| IRs |
Information Requests |
| MRS |
Mandatory Reliability Standards |
| NERC |
North American Electric Reliability Corporation |
| Project |
Energy Management System Upgrade Project |
| RCIA |
Residential Consumers Intervener Association |
| UCA |
Utilities Commission Act |
BC Hydro and Power Authority
Energy Management System Upgrade Application
EXHIBIT LIST
Exhibit No. Description
Commission documents
| A-1 |
Letter dated April 6, 2022 – Appointing the panel for the review of the BC Hydro 2022 Energy Management System Upgrade Project
|
| A-2 |
Letter dated April 14, 2022 – Order G-102-22 establishing a regulatory timetable with public notice |
| A-3 |
Letter dated May 31, 2022 – BCUC Information Request No. 1 to BC Hydro |
| A-4 |
Letter dated June 20, 2022 – BCUC Order G-168-22 establishing an amended timetable |
| A-5 |
Letter dated August 17, 2022 – BCUC issuing Order G-235-22 establishing further regulatory process |
| A-6 |
Letter dated September 8, 2022 – BCUC issuing Information Request No. 2 to BC Hydro |
| A-7 |
CONFIDENTIAL - Letter dated September 8, 2022 – BCUC issuing Confidential Information Request No. 2 to BC Hydro |
| A-8 |
Letter dated September 16, 2022 – BCUC Order G-260-22 establishing an amended timetable |
| A-9 |
Letter dated January 30, 2023 –Commissioner Andrew Pape-Salmon Notice to Parties |
Applicant documents
| B-1 |
BC Hydro and Power Authority (BC Hydro) - 2022 Energy Management System Upgrade dated March 11, 2022
|
| B-1-1 |
CONFIDENTIAL – BC Hydro 2022 Energy Management System Upgrade dated March 11, 2022
|
| B-1-2 |
Letter dated July 20, 2022 – BC Hydro submitting errata to the public application |
| B-1-3 |
CONFIDENTIAL - Letter dated July 20, 202 – BC Hydro submitting errata to the confidential application
|
| B-1-4 |
Letter dated October 20, 2022 – BC Hydro submitting update to the Draft Order filed March 11, 2022
|
| B-2 |
Letter dated May 5, 2022 – BC Hydro submitting G-102-22 Compliance providing Public Notice of Application
|
| B-3 |
Letter dated June 17, 2022 – BC Hydro submitting extension request to file responses to BCUC and Intervener Information Requests No. 1
|
| B-4 |
Letter dated July 20, 2022 – BC Hydro submitting responses to BCUC Information Request No. 1
|
| B-4-1 |
CONFIDENTIAL - Letter dated July 20, 2022 – BC Hydro submitting confidential responses to BCUC Information Request No. 1
|
| B-4-2 |
CONFIDENTIAL – Letter dated October 20, 2022 – BC Hydro submitting revised confidential responses to BCUC Confidential Information Request No. 2
|
| B-5 |
Letter dated July 20, 2022 – BC Hydro submitting responses to Intervener Information Request No. 1
|
| B-5-1 |
CONFIDENTIAL – Letter dated July 20, 2022 – BC Hydro submitting responses to Intervener Information Request No. 1
|
| B-5-2 |
Letter dated July 28, 2022 ─ BC Hydro submitting response to RCIA IR 1.2.3 |
| B-6 |
Letter dated September 14, 2022 – BC Hydro submitting extension request to file Information Request No. 2 responses
|
| B-7 |
Letter dated October 20, 2022 – BC Hydro submitting responses to BCUC Information Request No. 2
|
| B-7-1 |
CONFIDENTIAL – Letter dated October 20, 2022 – BC Hydro submitting confidential responses to BCUC Information Request No. 2
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| B-8 |
Letter dated October 20, 2022 – BC Hydro submitting responses to Intervener Information Requests No. 2
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| B-8-1 |
CONFIDENTIAL - Letter dated October 20, 2022 – BC Hydro submitting confidential responses to Intervener Information Requests No. 2
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| B-9 |
CONFIDENTIAL – Letter dated October 20, 2022 – BC Hydro submitting responses to BCUC Confidential Information Request No. 2
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| B-9-1 |
PUBLIC – Letter dated October 20, 2022 – BC Hydro submitting public responses to BCUC Confidential Information Request No. 2
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Intervener documents
| C1-1 |
Commercial Energy Consumers Association of British Columbia (CEC) – Letter dated May 25, 2022 submitting request to intervene by Chris Weafer
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| C1-2 |
Letter dated June 9, 2022 – CEC submitting Information Request No. 1 to BC Hydro
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| C1-3 |
Letter dated July 22, 2022 ─ CEC submitting Confidentiality Declaration and Undertakings |
| C1-4 |
Letter dated July 27, 2022 – CEC submissions on further process |
| C1-5 |
Letter dated September 8, 2022 – CEC submitting Information Request No. 2 to BC Hydro
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| C2-1 |
Residential Consumer Intervener Association (RCIA) – Letter dated May 26, 2022 submitting request to intervene by Matthew Matusiak
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| C2-2 |
Letter dated May 26, 2022 – RCIA submitting Confidentiality Declaration and Undertaking
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| C2-3 |
Letter dated June 8, 2022 – RCIA submitting Information Request No. 1 to BC Hydro
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| C2-4 |
Letter dated July 26, 2022 – RCIA submissions on further process
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| C2-5 |
Letter dated September 8, 2022 – RCIA submitting Information Request No. 2 to BC Hydro
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| C3-1 |
BC Sustainable Energy Association (bcsea) – Letter dated May 27, 2022 Request to Intervene by Thomas Hackney and William J. Andrews |
| C3-2 |
Letter dated June 9, 2022 – BCSEA submitting Information Request No. 1 to BC Hydro |
| C3-3 |
Letter dated July 21, 2022 – BCSEA submitting Confidentiality Declaration and Undertaking
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| C3-4 |
Letter dated July 27, 2022 – BCSEA submissions on further process |
| C3-5 |
Letter dated September 8, 2022 – BCSEA submitting Information Request No. 2 to
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Interested party documents
| D-1 |
Haudenschild, Denise (Haudenschild) – Submission dated December 26, 2022 request for Interested Party Status |
[1] Exhibit B-1-2, pp. 1-2.
[2] Utilities Commission Act, R.S.B.C. 1996, c. 473
[3] The Bulk Electric System is defined as the electrical generation resources, transmission lines, interconnections with neighbouring systems and associated equipment, generally operated at voltages of 100 kV or higher.
[4] Exhibit B-1, pp. 1-2.
[5] Ibid, p. 8.
[6] Utilities Commission Act, R.S.B.C. 1996, c. 473, Section 44.2.
[7] Appendix A to Order G-20-15, BCUC 2015 Certificate of Public Convenience and Necessity Guidelines (CPCN Guidelines). Available at https://docs.bcuc.com/documents/Guidelines/2015/DOC_25326_G-20-15_BCUC-2015-CPCN-Guidelines.pdf
[8] Exhibit B-1, p. 2.
[9] Exhibit B-4, BCUC IR 4.10.
[10] Ibid., BCUC IR 4.11.
[11] Exhibit B-1, p. 2.
[12] Ibid., p. 30.
[13] Ibid., p. 3.
[14] Exhibit B-4, BCUC IR 2.3.
[15] Exhibit B-5, CEC IR 2.1.
[16] Exhibit B-1, p. 30.
[17] Ibid., p. 16.
[18] Ibid., p. 23.
[19] Ibid., p. 1.
[20] Ibid., p. 5.
[21] Exhibit B-1, p. 6, Figure 1; Exhibit B-4, BCUC IRs 1.2.10, 1.4.2, 1.20.1. Western Interconnection refers to the geographic area that is overseen by the Western Electricity Coordinating Council (WECC) to assure a reliable Bulk Electric System.
[22] Ibid., BCUC IR 14.2 and Exhibit B-8, CEC IR 2.29.1.
[23] Ibid., BCUC IR 18.1.
[24] Ibid., BCUC IR 18.1; Exhibit B-8, CEC IR 2.29.1.
[25] Exhibit B-4, BCUC IR 18.1.
[26] Ibid., BCUC IR 14.1.
[27] Ibid., BCUC IR 14.2.1.
[28] Ibid., BCUC IR 1.4.2; Exhibit B-1, p. 6, Figure 1.
[29] Exhibit B-4, BCUC IR 20.1.
[30] Exhibit B-1, p. 9.
[31] Ibid., p. 8.
[32] Exhibit B-4, BCUC IR 7.1.
[33] Ibid., BCUC IR 18.1.
[34] Exhibit B-1, p. 8.
[35] Ibid., p. 9.
[36] Ibid.
[37] Ibid.
[38] Ibid.
[39] Exhibit B-4, BCUC IR 18.1.
[40] Ibid.
[41] Ibid.
[42] Ibid.
[43] Exhibit B-1, p. 23.
[44] Ibid., p. 2.
[45] Exhibit B-4, BCUC IR 2.6.
[46] Exhibit B-5, RCIA IR 8.1.
[47] Exhibit B-1, p. 2.
[48] Ibid., p. 10.
[49] Ibid., p. 25.
[50] Ibid., pp. 10-11.
[51] Exhibit B-4, BCUC IR 3.4.
[52] Ibid., BCUC IR 3.3.
[53] Exhibit B-1, p. 10.
[54] Ibid., p. 25.
[55] Ibid., p. 28.
[56] Exhibit B-1, p. 3.
[57] Exhibit B-4, BCUC IR 3.5.
[58] Exhibit B-1, pp. 25-26.
[59] Ibid., p. 26; Exhibit B-4, BCUC IR 2.7.
[60] Exhibit B-4, BCUC IR 7.3.
[61] Exhibit B-1, p. 30.
[62] Exhibit B-7, BCUC IR 24.1.
[63] BCSEA Final Argument, p. 3.
[64] CEC Final Argument, p. 9.
[65] RCIA Final Argument, p. 10.
[66] Exhibit B-1, p. 28.
[67] Exhibit B-4, BCUC IR 4.6.
[68] Ibid., BCUC IR 4.1.
[69] Exhibit B-5, CEC IR 2.2.
[70] Exhibit B-1, p. 27.
[71] Exhibit B-4, BCUC IR 4.3.
[72] Ibid., BCUC IR 4.5.
[73] Ibid., BCUC IR 4.5.
[74] Ibid., BCUC IR 4.4.
[75] British Columbia Transmission Corporation Application for a Certificate of Public Convenience and Necessity System Control Modernization Project, Decision and Order C-1-05 dated February 14, 2005, p. 28.
[76] Exhibit B-1, pp. 28-29.
[77] Exhibit B-4, BCUC IR 2.7.
[78] Exhibit B-1, p. 26.
[79] Ibid., pp. 10-11.
[80] Ibid., pp. 28-29.
[81] Ibid., p. 29.
[82] BCSEA Final Argument, pp. 6-7.
[83] RCIA Final Argument, p. 6.
[84] Ibid.
[85] Ibid., pp. 6-7.
[86] BC Hydro Reply Argument, p. 2.
[87] Exhibit B-5, RCIA IR 1.1.
[88] BC Hydro Reply Argument, p. 5.
[89] CEC Final Argument, item 73, p. 9.
[90] Exhibit B-1, pp. 29-30.
[91] Ibid., p. 6.
[92] Ibid., pp. 7-8.
[93] Exhibit B-4, BCUC IR 1.4.11.
[94] Ibid., BCUC IR 4.8.
[95] Ibid., BCUC IR 4.13.
[96] Ibid., BCUC IR 5.1.1.
[97] Ibid., BCUC IR 2.11.
[98] Ibid., BCUC IR 5.1.
[99] Exhibit B-1, p. 8.
[100] Exhibit B-4, BCUC IR 2.2.1, Att. 1, p. 3.
[101] Exhibit B-1, p. 42, Table 10
[102] Where multiple end dates are listed, the earlier is the earliest possible for that specific task.
[103] BCSEA Final Argument, item 14, p. 3.
[104] RCIA Final Argument, Section 3, p. 10.
[105] CEC Final Argument, item 5, p. 1.
[106] BC Hydro Final Argument, p. 19.
[107] Exhibit B-1, p. 36.
[108] Ibid.
[109] Exhibit B-1, p. 36.
[110] Exhibit B-1, p. 37.
[111] Ibid.
[112] Ibid., pp. 37–39. BC Hydro states that General Electric’s cost estimates were provided in U.S. dollars and converted to Canadian dollars based on an exchange rate of 1.2575 as published (as of October 2021) in the BC Hydro Finance Common Rates.
[113] Ibid., p. 39.
[114] Ibid.
[115] Ibid., p. 40.
[116] Ibid., pp. 40–41, Table 9; Exhibit B-4, BCUC IR 11.2.
[117] Exhibit B-4-1, BCUC IR 11.3.
[118] Exhibit B-1, Section 4.4.1.6, p. 40.
[119] Exhibit B-4, BCUC IR 10.1; BC Hydro Final Argument, pp. 19-20.
[120] Ibid., BCUC IR 13.3.
[121] Ibid., BCUC IR 12.1.
[122] Exhibit B-4, BCUC IR 13.3, Footnote 1.
[123] BC Hydro Final Argument, p. 19; Exhibit B-4, BCUC IR 13.3.
[124] Exhibit B-4, BCUC IR 13.3.
[125] Ibid., BCUC IR 2.6; Exhibit B-7, BCUC IR 23.1.2; BC Hydro Final Argument, p. 25.
[126] Exhibit B-7, BCUC IR 23.3.
[127] BC Hydro Final Argument, p. 25.
[128] BCSEA Final Argument, p. 8.
[129] CEC Final Argument, p. 11.
[130] Ibid., pp. 2, 14.
[131] BC Hydro Final Argument, pp. 9 and 10.
[132] RCIA Final Argument, p. 8.
[133] BC Hydro Reply Argument, p. 4.
[134] Ibid.
[135] Exhibit B-1, p. 4.
[136] Ibid., pp. 4, 20.
[137] Exhibit B-1, p. 43-44.
[138] Ibid.
[139] Ibid., pp. 43-45.
[140] Ibid., p. 45.
[141] Exhibit B-1, p. 47.
[142] Ibid., pp. 46-47.
[143] Ibid., p. 49.
[144] Ibid., pp. 48-49.
[145] Exhibit B-4, BCUC IR 15.1.
[146] Exhibit B-1, p. 50.
[147] Exhibit B-4, BCUC IR 17.2.1.
[148] MRS Standard CIP-011 titled Cyber Security – Information Protection.
[149] Exhibit B-4, BCUC IR 17.2.
[150] Ibid., BCUC IR 21.1.
[151] Ibid., BCUC IR 21.1.1.
[152] Ibid., BCUC IR 22.8.
[153] Ibid., BCUC IR 17.2.
[154] Ibid., BCUC IR 17.2.2.
[155] BCSEA Final Argument, p. 8.
[156] CEC Final Argument, p. 15.
[157] CEC Final Argument, pp. 12-13.
[158] BC Hydro Reply Argument, p. 6.
[159] Exhibit B-1, p. 17.
[160] Ibid.
[161] Ibid.