Topic:"Cost Considerations" in M12550

CONFIDENTIAL (Attachment Only) - 1 74N Springhill (PDF pages 74-240) - 2 2V Avon #2 Hydro (PDF pages 241-339) 3 4 For sites where IFC packages do not yet exist, please refer to scoping documents included 5 as Confidential Attachment 2 for...

AI summary The text discusses the estimated average costs for 11 remaining sites without an IFC package, including tasks like engineering, installation, and project management. It notes that some sites lack civil work and power meters, and highlights higher civil costs for 4S-Townsend St. Distribution due to a more extensive scope of work.

NON-CONFIDENTIAL Response IR-2: 2 1 (a) The methodology used is based on the project team's experience on prior RTU replacement projects, actual estimates received on material pricing, and anticipated cost changes from increased complexity...

AI summary The response outlines the methodology used for estimating project costs, referencing prior experience, material pricing, and lessons learned. It also notes the implementation of more standard contingency guidelines by NS Power after the first four projects.

5 Response IR-4: 6 7 (a-b) Please refer to the tables below for the calculation of Labour and Contractor AO. The 8 calculation is the total labour costs by charge type multiplied by the Labour AO rate for 9 the year.

AI summary The response provides a reference to tables containing the calculation of Labour and Contractor AO, which involves multiplying total labour costs by the Labour AO rate for the year.

NON-CONFIDENTIAL Contractor Overhead Calculation Charge Type 2024 2025 2026 and beyond Total Contracts 29,157 194,307 236,120 459,584 Contractor Overhead Rate 15.27% 14.46% 10.45% Contractor Overhead Cost ($) 4,453 28,101 24,682 57,236 1

AI summary The document presents a table outlining contractor overhead calculations for the years 2024, 2025, and 2026, including contract values, overhead rates, and associated costs. The data highlights changes in overhead rates and total costs over time.

16 Contractor AO Rates 17 18 The remaining eligible expenditures that are not allocated to capital through the labour AO 19 rates constitute the total eligible expenditures to be allocated through the Contract AO rate. 20 The contract labo...

AI summary The text explains how eligible expenditures not allocated to capital through labour AO rates are allocated through the Contract AO rate. The contract labour percentage is applied to determine eligible expenses to be capitalized, and the total eligible expenses are divided by total contract costs to determine the applicable AO rate.

Review of C0051815 - RTU Replacements Program - Phase 6 (NSEB M12550) NSPI Responses to NSEB Information Requests 1 Vehicle AO Rates 2 3 The vehicle AO rate is only attributed to Energy Delivery and is determined by calculating 4 the eligi...

AI summary The document discusses the calculation of vehicle administrative overhead (AO) rates for the RTU Replacements Program - Phase 6, which are attributed to Energy Delivery. These rates are determined based on eligible vehicle costs and prorated between capital and operating activities. The methodology follows NSEB-approved accounting policies, and there is no difference in approach between the latest submission and the original application. However, due to a cyber incident, a comparison table of original estimates is not available.

(i) Please identify all external parties whose advice or services informed the Contracts cost estimate (e.g., engineering consultants, installation contractors, OEMs), and for each, provide the relevant statements of work, proposals, rate...

AI summary The request asks for identification of external parties and internal groups involved in developing the Contracts cost estimate, along with documentation and explanation of how inputs were translated into final line-item amounts.

CI C0051815 – RTU Replacements Program – Phase 6 Filed Estimate: $5,959,915 Revised Estimate (Post-Refinement): $5,058,726 NSEB Matter M12550 Midgard Evidence Report

AI summary The RTU Replacements Program – Phase 6 has a filed estimate of $5,959,915 and a revised estimate of $5,058,726 after refinement. The matter is associated with NSEB Matter M12550 and the Midgard Evidence Report.

1.2 Report Structure - Midgard evaluates NSPI's rationale for proceeding with the Project, focusing on whether the justifications are - adequately supported by evidence from the application and NSPI's responses to subsequent Information -...

AI summary Midgard evaluates NSPI's rationale for proceeding with the Project, focusing on whether the justifications are adequately supported by evidence from the application and NSPI's responses to Information Requests (IRs). The report is structured into sections that review project context, execution strategy, project controls, cost reasonableness, and appendices with supporting data.

5 3.1.1 Conclusions – Installation Prioritization and Sequencing - 6 The installation sequence does not appear optimized to maximize work crew efficiency through progressive - 7 skill development. While NSPI employs process optimizations s...

AI summary The installation sequence for the Program is not optimized for maximizing work crew efficiency through progressive skill development. While NSPI uses process optimizations, the installation schedule is driven by risk mitigation rather than productivity gains. A learning-curve approach could improve efficiency and reduce costs, but the lack of Program-level productivity metrics makes it difficult to assess whether prior efficiency gains are being incorporated into Phase 6 estimates.

3.2 Process Standardization & Cost Reduction NSPI asserts that its execution strategy for the Project builds upon a foundation of historical experience, stating that: "The methodology used is consistent with prior phases and has been progr...

AI summary NSPI claims that its execution strategy for the Project is based on historical experience and has been refined through prior phases. It highlights improvements in standardization, quality assurance, and supply-chain efficiencies, though it acknowledges that Phase 6 involves significantly more complex requirements than earlier phases.

NSPI also argues that: "The greater emphasis on pre-work, detailed planning and QA (Quality Assurance) enhancements have resulted in more efficient installation and commissioning work with greater predictability of time required and reduce...

AI summary NSPI claims that pre-work and QA improvements have increased efficiency and predictability in installation and commissioning. However, no empirical data is provided to support these claims, and historical baseline data was lost in a cyber incident, making it impossible to verify efficiency gains or track process improvements from prior phases.

8 3.2.1.2 Quantification & Measurement 1 Project management frameworks emphasize quantitative performance metrics as essential for validating process improvements. NSPI's reliance on qualitative assessments (e.g., "greater predictability,...

AI summary NSPI's use of qualitative assessments limits the ability to demonstrate measurable productivity gains and cost efficiencies from standardization efforts. Financial data from prior Program Phases show mixed results, with significant variances and an increase in contingency allowances, despite claims of improved estimating methodology.

3.2.1.3 Adaptive Learning in Phase 6 - Despite these historical gaps, NSPI has demonstrated adaptive learning and improved cost control mechanisms - within Phase 6 itself. The most significant evidence of this is the approximate $900,000 c...

AI summary NSPI has demonstrated adaptive learning in Phase 6, leading to a $900,000 cost reduction after completing the first two sites. The Project team is using real-time data to refine estimates, such as adjusting labour allocation for the Project Manager who supports multiple projects.

- dedicated resource model to a shared resource model. Similarly, the adjustment in Civil Construction costs - reflects a transition from generic assumptions to site-specific realities. These adjustments indicate that initial - Project cos...

AI summary The text discusses adjustments in project cost estimates, transitioning from generic assumptions to site-specific realities, indicating that initial estimates were higher than necessary and that adjustments were made early in the project due to cautious initial estimates rather than learning from prior phases.

3.2.2 Conclusions – Process Standardization & Cost Reduction - NSPI asserts it leveraged prior experience to implement tangible standardization in vendor selection, - technology platforms, labour role definition, and quality assurance proc...

AI summary NSPI claims that process standardization and operational refinements have improved execution consistency, but the lack of formal reviews, quantitative metrics, and discrepancies in budget estimates obscure the effectiveness of these measures in achieving cost reduction for RTU replacement activities.

1 Table 8: Summary of Findings – Process Standardization & Cost Reduction Report Section Question Midgard Commentary 3.2 Did NSPI leverage pre-Phase 6 experience to standardize the Project's designs, streamline its processes, and hence red...

AI summary The report section evaluates whether NSPI leveraged pre-Phase 6 experience to standardize designs and reduce costs. While NSPI claims to have applied prior experience to improve execution consistency, the lack of formal lessons-learned reviews and quantitative metrics suggests efficiency gains were not empirically validated.

1 Table 9: Project Execution Strategy Conclusions Report Section Question Midgard Commentary 3.1 Has NSPI optimized the Project's execution by prioritizing installations based on criticality, complexity, or opportunities for learning-curve...

AI summary The document evaluates NSPI's project execution strategy, noting that prioritization is based on asset criticality and risk rather than complexity or learning-curve benefits. It also questions whether NSPI effectively leveraged prior experience to standardize designs and reduce costs, citing a lack of formal lessons-learned reviews and quantitative metrics as limitations.

4 PROJECT CONTROLS & GOVERNANCE - This section evaluates NSPI's use of historical data from Phases 1-5 to inform Phase 6 planning and execution, examining whether the utility maintained adequate productivity tracking, applied lessons learn...

AI summary This section evaluates NSPI's use of historical data from Phases 1-5 to inform Phase 6 planning and execution, focusing on productivity tracking, lessons learned, and cost-effectiveness of internal versus external resources. It also examines the methodology supporting the Phase 6 Capital Cost Estimate classification and contingency allowance.

4.1 Delivery Model Justification - NSPI's Capital Expenditure Justification Criteria (" CEJC ") mandates the "Evaluation of alternative means of acquiring technologies including design and build (NSPI owned)... or contract to others," and...

AI summary NSPI's Capital Expenditure Justification Criteria (CEJC) require evaluating alternative delivery models using financial metrics like NPV, but no such analysis was performed for Phases 1 to 6 of the Program. NSPI instead relied on qualitative justifications and internal resource availability, despite capacity constraints driving the decision to use external contractors.

4 4.1.1 Conclusions – Delivery Model Justification - 5 NSPI fails to demonstrate that its internal resource model is more cost-effective than external alternatives. - 6 NSPI's indication that no formal comparative cost analysis was underta...

AI summary NSPI has not demonstrated that its internal resource model is more cost-effective than external alternatives. The lack of formal comparative cost analysis undermines the validation of its delivery model's efficiency as required by the CEJC. Qualitative justifications for internal resources are not supported by financial data or market benchmarks, raising concerns about the prudence of the overhead premium paid for internal labor.

11 Table 10: Summary of Findings – Delivery Model Justification Report Section Question Midgard Commentary 4.1 Did NSPI demonstrate that its reliance on internal resources was more cost-effective than external alternatives? NSPI acknowledg...

AI summary NSPI did not conduct a formal make versus-buy analysis for Phase 6, and no quantitative evidence was provided to demonstrate that relying on internal resources was more cost-effective than external alternatives, despite competitive tendering for some aspects of the project.

13 4.2 Estimate Basis and Risk Quantification - 14 NSPI's methodology supporting the Phase 6 estimate relies on qualitative expert judgment rather than - 15 quantitative historical baselines, deviating from a strictly data-driven approach....

AI summary NSPI uses qualitative expert judgment rather than quantitative historical data for its Phase 6 estimate, classifying it as an AACE Class 3 Estimate. While this classification is technically supported, the lack of historical calibration and granular data from previous phases increases uncertainty. NSPI's contingency determination is based on qualitative risk assessments rather than quantitative modeling.

Table 11: Historical RTU Program Costs and Contingency Allocations (Phases 1-6)[53](#page-25-1) CI Approved Actual Cost Contingency Number Phase Amount ($) ($) Variance ($) Contingency ($) (%) 38142 - $512,974 $410,229 -$102,745 $6,000 1%...

AI summary The data in Table 11 shows that contingency allocations for RTU Program Phases 1-6 have shifted from 0-2% to a flat 10% for Phases 4, 5, and 6, despite varying risk levels. NSPI does not assign monetary values to identified threats or use probabilistic modeling to calculate risk reserves, suggesting the 10% contingency is a static policy allowance rather than a risk-based reserve.

4.2.1 Conclusions – Estimate Basis and Risk Quantification - While NSPI's estimate classification (Class 3) aligns with the level of engineering definition (via its representative IFC packages), the valuation of that estimate and its conti...

AI summary The document discusses NSPI's estimate classification (Class 3) and its reliance on heuristic judgment rather than empirical data. It highlights the lack of historical productivity metrics and the absence of a data-driven approach for the 10% contingency applied to Phase 6 costs, which excludes internal administrative overhead and capitalized interest.

1 Table 12: Summary of Findings – Estimate Basis and Risk Quantification Report Section Question Midgard Commentary 4.2 Is the Phase 6 Capital Cost Estimate classification and contingency allowance supported by a data-driven methodology? N...

AI summary The Phase 6 Capital Cost Estimate by NSPI is classified correctly but lacks empirical calibration. The base unit rates and 10% contingency are based on judgment rather than quantitative risk analysis, with no clear linkage from the risk register to expected risk costs.

3 4.3 Overall Project Prudence & Ratepayer Interest - 4 The following summarizes Midgard's conclusions from the review of the Project: - 5 1. Delivery Model Justification: NSPI defaults to an internal resource model for core execution with...

AI summary Midgard's review of the Project highlights concerns with NSPI's delivery model and estimate basis. NSPI did not conduct a comparative financial analysis for internal resource allocation, and the Phase 6 estimate lacks historical data calibration, relying instead on judgment rather than probabilistic risk modeling.

19 Table 13: Project Controls & Governance Conclusions Report Section Question Midgard Commentary 4.1 Did NSPI demonstrate that its reliance on internal resources was more cost-effective than external alternatives? NSPI acknowledges that n...

AI summary The document discusses NSPI's reliance on internal resources for Phase 6 without conducting a formal make versus-buy analysis, and highlights that core technical work was assigned internally without market testing, with no quantitative evidence provided.

5 ASSESSMENT OF COST REASONABLENESS - 2 This section evaluates the reasonableness of NSPI's cost estimate for the Project to determine whether the - 3 proposed expenditure represents a prudent allocation of ratepayer funds, considering the...

AI summary This section assesses the reasonableness of NSPI's cost estimate for the Project, focusing on whether the proposed expenditure is prudent. It examines increases in labor requirements, equipment and material costs, and indirect cost components to ensure appropriate cost recovery and value for ratepayers.

20 Table 15: Summary of Findings – Labour Hour Escalation & Scope Justification Report Section Question Midgard Commentary 5.1 Are the substantial increases in labour requirements, per RTU, substantiated by objective evidence of expanded s...

AI summary Table 15 discusses findings related to labour hour escalation and scope justification, noting a 33% variance between NSPI's estimate and an independent allocation, and recommending a 30% reduction in labour hours due to unresolved disputes and lack of task-level traceability.

9 5.2.1 Conclusions – Material Procurement & Cost Competitiveness NSPI utilized appropriate competitive tendering processes for major equipment and leveraged established service agreements for labour and civil works, ensuring pricing refle...

AI summary NSPI used competitive tendering for major equipment and service agreements for labour and civil works, ensuring current market pricing. Cost variances are justified by increased functional requirements and macroeconomic factors like inflation and currency devaluation. The material costs represent reasonable value for enhanced functionality.

16 Table 16: Summary of Findings – Material Procurement and Cost Competitiveness Report Section Question Midgard Commentary 5.2 Has NSPI demonstrated that equipment and material costs reflect competitive procurement practices and represent...

AI summary The document confirms that NSPI has demonstrated competitive procurement practices and reasonable value for equipment and material costs, supported by competitive tendering and justified cost variances due to functional increases and inflation.

Table 17: Comparative Overhead Rates (Internal vs. Contractor)[73](#page-34-1) Year Internal Labour AO Rate Contractor AO Rate 2024 57.79% 15.27% 2025 56.63% 14.46% 2026+ 53.98% 10.45% - To mitigate ratepayer burden during periods of high...

AI summary The document presents comparative overhead rates for internal and contractor labor from 2024 to 2026, highlighting a significant difference between the two. It also mentions an adjustment for overtime labor to mitigate ratepayer burden during high resource utilization periods.

5.3.1 Conclusions – Indirect Cost Allocation & Transparency - NSPI adheres to NSEB-approved accounting policies for Administrative Overhead and AFUDC. The specific - exclusion of 50% of overtime labour from overhead application and the gra...

AI summary NSPI follows NSEB-approved accounting policies for Administrative Overhead and AFUDC. The exclusion of 50% of overtime labour and detailed separation of travel expenses show a prudent approach to cost allocation, making indirect cost mechanisms reasonable. Focus should be on direct labour management rather than overhead methodologies.

3 5.4 Overall Project Prudence & Ratepayer Interest - 4 The following summarizes Midgard's conclusions from the review of the Project: - 5 1. Labour Hour Escalation and Scope Justification: The filed labour estimate of 1,939 hours per RTU...

AI summary Midgard's review of the Project highlights concerns with the labour estimate, noting insufficient evidence for the 1,939 hours per RTU. It recommends a 30% reduction in labour hours and enhanced reporting requirements. Material costs are deemed reasonable, and indirect cost allocation is considered prudent.

7 Table 19: Assessment of Cost Reasonableness Conclusions Report Section Question Midgard Commentary 5.1 Are the substantial increases in labour requirements per RTU substantiated by objective evidence of expanded scope, infrastructure com...

AI summary The document assesses the reasonableness of costs for a project, with Midgard commenting that while NSPI's complexity drivers are valid, the substantial increase in labor requirements per RTU is not fully substantiated. A 30% reduction in labor hours is recommended. Equipment and material costs are deemed reasonable due to competitive procurement, and indirect cost components are calculated using transparent methodologies.

2 6.1 Conclusions - 3 [Table 20](#page-37-0) summarizes Midgard's findings regarding NSPI's Project execution strategy, controls and governance, - 4 and cost estimating decisions for the Project.

AI summary This section concludes the analysis of Midgard's findings on NSPI's Project execution strategy, controls, governance, and cost estimating decisions.

5 Table 20: Summary of Conclusions Report Section Question Midgard Commentary 3.1 Has NSPI optimized the Project's execution by prioritizing installations based on criticality, complexity, or opportunities for learning-curve benefits? Prio...

AI summary The analysis evaluates whether NSPI optimized project execution by prioritizing installations based on criticality and risk mitigation, and whether prior experience was leveraged to standardize designs and reduce costs. The commentary notes that prioritization was not based on complexity or learning-curve benefits, and that efficiency gains were not empirically validated.

A.1 Methodology - The allocation methodology applies a conservative benchmarking approach. Following review of ECS and SOD documentation for all fourteen sites, the three sites with - complete IFC packages (91V Fourth Lake Hydro, [77](#pag...

AI summary The document outlines a methodology for allocating labour based on the workload derived from IFC packages at selected sites, scaling labour proportionally to signal scope and accounting for travel time based on site presence. This approach was applied to evaluate engineering, design, and commissioning activities across multiple sites.

Senior Electrical Engineer - Represented Wood as Senior Electrical Engineer in BC Hydro's substation Projects. - Reviewed the design basis, planning, constructability, staging and maintainability of the substation projects. Provided soluti...

AI summary A Senior Electrical Engineer at Wood provided technical expertise on substation projects for BC Hydro, addressing design, cost, and execution challenges. They introduced 230 kV HIS equipment to resolve layout constraints and evaluated bids for GIS equipment, preparing deficiency lists and recommendations.

Request IR-1: - Reference : With respect to Midgard's statement that NS Power's execution strategy uses - "sequential execution" (p. 13) and that: - The installation sequence does not appear optimized to maximize work crew efficiency throu...

AI summary Midgard is asked to evaluate NS Power's use of sequential execution in the RTU Replacements Program, including its impact on operational efficiency, cost, and scheduling. The inquiry also explores whether earlier filing or alternative execution strategies could have reduced costs and improved efficiency.

Request IR-2: - Reference : With respect to Midgard's finding (p. 21) stating, "Using materials cost as the proxy - for the complexity of the equipment, Phase 6 materials costs are comparable with those in Phase 5," - please provide the su...

AI summary Midgard responds to a request for supporting analysis on materials costs for Phase 5 and Phase 6, providing an Excel workbook (Exhibit N-3(C)-(i)) that includes cost comparisons and CPI escalation methodology. Phase 6 materials costs are 10.2% higher than Phase 5 when normalized to 2025 dollars.

Request IR-4: - Reference : With respect to Midgard's recommendation (p. 36) stating, "Midgard recommends a - 30% reduction in labour hours to align the estimate with reasonable productivity levels supported - by technical documentation":...

AI summary Request IR-4 seeks clarification on Midgard's recommendations regarding labour hour reductions, overtime, contingency costs, and overhead rates. It asks for revised project budgets, explanations of discrepancies, and insights into how Midgard evaluated contractor and internal labour productivity.

Midgard Response IR-4: a) i. Based on the revised labour analysis, aligning NSPI's estimated labour hours to the 1,291 hours supported by technical documentation yields an average direct cost of $88,327 per RTU. This represents a 33.4% red...

AI summary Midgard recommends a 30% reduction in NSPI's estimated labour costs for RTUs, citing a 33.4% reduction based on revised labour hours. The revised budget excludes overhead adjustments and travel expenses, and contingency funds are not intended for systematic overtime.

1 2 spending is unrelated to Midgard's recommendation of a 30% reduction to baseline labour hours. 3 4 b) 5 i. No. NSPI allocated 64 overtime hours per site for each field resource (the electrician and 6 the technician), which equates to 8...

AI summary The document discusses NSPI's allocation of overtime hours for field resources and the impact on project schedules, noting that the RFW documentation does not capture the full project scope. Midgard's recommendations are based on professional engineering judgment and are considered reasonable.

Midgard Response IR-5: - a) Midgard assesses the 10% contingency as a matter of cost reasonableness, utilizing NSPI's non- binding guidelines as an industry reference for Class 3 estimating practices rather than conducting a compliance aud...

AI summary Midgard assesses the 10% contingency as a matter of cost reasonableness, referencing NSPI's non-binding guidelines for Class 3 estimating practices. It also discusses the implications of the Board accepting or rejecting a 30% labour reduction and confirms its engagement scope.

Request IR-8: - Reference : In Appendix A, p. 40, Midgard discusses the average commute time for RTU - replacement project staff. Related to operational efficiency in dispatching staff and other resources, - NS Power has reported on the in...

AI summary The document requests Midgard to describe the team's familiarity with IBM Maximo and Salesforce software, evaluate their potential to improve operational efficiency in the RTU Replacements Program, identify evidence of cost minimization by NS Power, and recommend balancing operational efficiency with learning-curve benefits.

Request IR-9: - Reference : In Exhibit N-2, NSEB RIR-8(a), NS Power provides its "most reasonable estimate" of the qualitative factors that affect the overall labour effort for the RTU replacements project. - a) Please confirm that Midgard...

AI summary Request IR-9 asks NS Power to clarify whether Midgard included NS Power's labour estimates in its report and to evaluate the reasonableness of specific estimates related to RTU replacements, including increases due to infrastructure complexity and scope changes.

Request IR-3: 2 Reference: Page 39, Midgard Commentary on Report Section 5.1. "While NSPI identifies valid complexity drivers, the specific magnitude of labour increases remains unsubstantiated. A 33% variance exists between NSPI's filed e...

AI summary Midgard Commentary questions the validity of NSPI's labour hour estimates, pointing out a 33% variance between NSPI's filed estimate and an independent allocation. The variance is attributed to unresolved disputes over installation duration and lack of task-level traceability. Midgard recommends reducing labour hours by 30% to reflect reasonable productivity levels.

supported by technical documentation." - (a) Please confirm that applying the recommended 30% reduction in labour hours would reduce the prudent capital cost for the project. If not, please explain. - (b) With reference to the revised esti...

AI summary The text contains three questions requesting confirmation and recalculations related to a project's prudent capital cost, specifically addressing a 30% reduction in labour hours, revised estimates, and adjustments to overhead, contingency, and AFUDC.

Midgard Response IR-3: a) Midgard confirms that a 30% reduction in labour hours will reduce the total capital cost of the Project. As stated in Section 5.1.1 at page 32 of its Evidence Report: "Considering the lack of comparative data prov...

AI summary Midgard recommends a 30% reduction in labour hours to align capital cost estimates with a technically supportable baseline. The labour subtotal from NSPI's budget is $1,411,802, excluding non-labour items. The prudence of capital costs is determined by the Board.

more complex installations, noting that "such an approach would front-load productivity 20 improvements, reducing unit costs for later installations while compressing overall project 21 duration". 22 23 NS Power's capital investment decisi...

AI summary NS Power's capital investment decisions are based on asset management principles, prioritizing high-risk equipment replacement regardless of complexity. However, the lack of Program-level productivity metrics makes it difficult to assess whether efficiency gains from prior phases are reflected in Phase 6 cost estimates.

uld 28 not necessarily eliminate internal labour requirements, as internal technical presence and 29 coordination may still be required to supervise and support the work at site due to the familiarity DATE FILED: April 10, 2026 Page 9 of 2...

AI summary The document discusses the use of internal resources by NS Power, noting that even with external labor, internal oversight is required due to familiarity with systems and standards. It highlights increased labor and travel costs, suggesting inefficiencies and higher reliance on overtime and remote site logistics.

17 2.4 Classification and Contingency Allowance 18 19 The Midgard Evidence provided the following conclusion regarding the NS Power estimate 20 classification and contingency allocation: 21 22 NSPI's Phase 6 estimate is classification‑comp...

AI summary The Midgard Evidence concludes that NSPI's Phase 6 estimate is classification-compliant but not empirically calibrated, with the base unit rates and 10% contingency being judgment-based. Contingency allowances have trended upward in recent phases, despite NSPI acknowledging the use of such funds.

12 Exhibit N-3, Midgard Evidence, February 18, 2026, page 19, lines 5-10. 1 Although on its surface, the application of contingency may seem unnecessary given utilization of 2 funds were largely not required in prior phases, the timing bet...

AI summary The document discusses NS Power's use of contingency funds and labor estimates for a project. While NS Power argues that contingency is appropriate due to potential risks, Midgard recommends reducing the labor budget by 30%. NS Power disagrees, citing unresolved disputes and the limitations of RFW documentation.

13 Exhibit N-3, Midgard Evidence, February 18, 2026, page 39. 1 2 The reduction in Project Management hours indicates an optimization of overhead resources, shifting from a dedicated resource model to a shared resource model. 3 Similarly,...

AI summary The text discusses adjustments in project management and civil construction costs, noting a shift to a shared resource model and site-specific cost adjustments. NS Power disagrees with Midgard's assertion that initial estimates were too high, arguing that the changes reflect prudent cost control. NS Power agrees with Midgard's conclusions on procurement practices and indirect cost methodologies.

1 Regarding installation duration reconciliation, although a reconciliation exercise can be valuable 2 to provide context and highlight areas where installation activities were under- or over-budgeted, 3 RTU replacement installation durati...

AI summary NS Power explains that installation duration reconciliation may not yield uniform productivity metrics due to varying site conditions. It also notes that PM allocation should be documented for consistency, but actual labour requirements will depend on project needs.

1. Introduction An RTU refers to a Remote Terminal Unit, a microprocessor-controlled field device that collects data from field equipment and sends or receives information to and from a central control system (SCADA) for process control. N...

AI summary NS Power proposed Phase 6 of the RTU Replacements Program in the 2025 ACE Plan, but the Board did not approve it due to insufficient justification for increased labour hours. The Board engaged Midgard Consulting Inc. to review the project and assess the reasonableness of costs, with various stakeholders submitting evidence and responses throughout the proceeding.

Midgard Evidence – Exhibit N-3: - Compared to Phase 5, the Phase 6 material costs per RTU increased by only 10.2%. Regular Labour costs per RTU increased by 36.8%, suggesting either greater technical scope or reduced workforce efficiency....

AI summary Phase 6 material costs per RTU increased by 10.2% compared to Phase 5, while regular labour costs rose by 36.8% and overtime labour increased by 228%, indicating higher technical complexity or reduced workforce efficiency and increased reliance on overtime.

- An approximate $900,000 budget reduction following just two completed Phase 6 sites suggests that initial estimates either did not rely on available historical efficiency Document: 331396 - data, or the historical data was not relevant,...

AI summary The document discusses a budget reduction of approximately $900,000 following the completion of two Phase 6 sites, suggesting initial estimates may have been inaccurate. Labour estimates for the project were found to be 33% higher than what Midgard considers appropriate, based on technical documentation. Disputes over installation duration and lack of task-level traceability are cited as reasons for the variance.

NS Power Rebuttal Evidence – Exhibit N-7: - NS Power's capital investment decisions are grounded in asset management principles, as outlined in Section 6.2 of the Board-approved Capital Expenditure Justification Criteria (CEJC). This frame...

AI summary NS Power explains its capital investment decisions are based on asset management principles and the Board-approved CEJC. The company highlights variability across sites and acknowledges challenges in baseline data due to a cyber incident. NS Power also emphasizes accurate cost estimates and adaptive cost management in its December 2025 filing.

6. Conclusion After reviewing the evidence and submissions in this matter, the Board has determined that a 13% reduction in labour hours for the revised project cost is warranted. The Board directs NS Power to resubmit the capital approval...

AI summary The Board has approved a 13% reduction in labour hours for the revised project cost and directed NS Power to resubmit the capital approval form CI C0051815 within two weeks. The Board also advised NS Power to improve overall efficiency for the RTU Replacements project.

Request IR-2: - At Page 2 of 6 of the Application CI C0051815 RTU Replacements Program Phase 6 (Exhibit N-1), NS Power states: - Contingency is determined using a combination of internal subject matter expert judgment (professional enginee...

AI summary The text outlines a series of questions directed at NS Power regarding the methodology, contingency usage, productivity tracking, and risk management in the RTU Replacements Program Phase 6. It requests detailed information on estimate development, historical data usage, and lessons learned from earlier phases.

- i. Identifies each piece of equipment (including, at a minimum, RTUs, power meters, communications cables, test equipment, and any associated telecommunications or networking components). - ii. Shows, for each item and for each phase: de...

AI summary The text outlines detailed requirements for identifying and documenting equipment and cost variances across different project phases. It emphasizes transparency in pricing, vendor information, and documentation for RTUs, meters, and other components. It also requests explanations for material and labor cost variances between phases.

- b) For each variance identified in Part (a), please explain whether the change is attributable to: - i. A change in measurement Unit (e.g., from Days to PD); - ii. A change in Quantity (with quantification of the delta); - iii. A change...

AI summary The document requests detailed explanations regarding variances in cost estimates, breakdowns of specific costs such as vehicle overhead, and the calculation methodology for AFUDC in capital cost estimates. It also asks for comparisons between original and updated estimates and clarification on assumptions related to AFUDC.

1. Please provide the methodology used to develop the Class 3 Estimate. For example, is the estimate based on historical data or NSPI’s prior RTU replacement experience? 2. Please confirm if the methodology used to develop the Class 3 Esti...

AI summary The text contains a series of questions directed at Nova Scotia Power (NSP) regarding the methodology and contingency usage in RTU replacement projects across multiple phases. It seeks details on historical data usage, differences in methodology, contingency usage breakdowns, and productivity tracking and its impact on Phase 6 estimates.

ficant labor cost variances, identifying how differences in equipment scope, site conditions, installation methodology, or commissioning/testing requirements contributed to the labor estimate changes. At Attachment 1 of the letter filed by...

AI summary The document discusses labor cost variances in a capital project, including internal and contractor labor administrative overhead (AO) costs, and requests detailed breakdowns of these costs. It also references an updated Capital Project Cost Estimate and compares methodologies used in different estimates.

lecting the current delivery model for Phase 6. 2. Please provide equivalent analyses for Phases 1 to 5, comparing the estimated cost and labour hours of the delivery model used with those of any alternative delivery models, and provide th...

AI summary The document requests equivalent analyses for Phases 1 to 5 of a delivery model, comparing estimated costs and labour hours with alternative models, and the rationale for selecting the final approach. It also asks NS Power to populate a table with labour hours per RTU for Phase 1, using the format and detail provided for Phase 6.

1. Please provide a comparison of the original Capital Cost Detailed Estimate as filed in Exhibit N-1 versus the updated Capital Cost Detailed Estimate included in NS Power's letter dated December 9, 2025, in the form of an Excel spreadshe...

AI summary The document requests a detailed comparison of original and updated capital cost estimates, explanations for variances, breakdowns of specific costs, and clarification on AFUDC calculations. It emphasizes transparency in cost changes, categorization, and assumptions related to capital expenditures.

1 Request IR-1: 2 With respect to Midgard's statement that NS Power's execution strategy uses "sequential 3 execution" (p. 13) and that: 4 5 The installation sequence does not appear optimized to maximize work crew 6 efficiency through pro...

AI summary The document includes a request to Midgard for their opinion on NS Power's execution strategy for the RTU Replacements Program, including the use of sequential execution, phased implementation, and potential cost reductions through earlier filing and operational efficiency improvements.

21 Request IR-4: 20 22 With respect to Midgard's recommendation (p. 36) stating, "Midgard recommends a 30% 23 reduction in labour hours to align the estimate with reasonable productivity levels supported by 24 technical documentation": - 2...

AI summary The document outlines a request for clarification and revised project budgeting based on Midgard's recommendations regarding labour hours and overtime. It asks for a revised budget, explanation of reconciling findings, and evaluation of labour hour assumptions and overhead rates.

dictated by risk mitigation (asset condition and criticality) rather than managing sequencing to compound learning and productivity in the service of managing Program costs and execution risk. (p. 14)

AI summary The approach to managing program costs and execution risk is dictated by risk mitigation considerations, such as asset condition and criticality, rather than sequencing that could enhance learning and productivity.

rm labour, including consideration of administrative overhead rates). Please provide supporting analysis in an excel workbook, such as a variant scenario based on Exhibit N-3(i)(C). Request IR-2: With respect to Midgard’s finding (p. 21) s...

AI summary The text contains several information requests directed at Midgard, asking for supporting analysis on cost comparisons between project phases and clarifications on the methodology used, including why technical comparisons were not made with phases other than Phase 1 and whether additional data would improve the report.

1. On p. 18, Midgard finds that, “Overtime Labour rose by approximately 228%, indicating a materially higher reliance on premium hours relative to historical norms.” On p. 25, Midgard quotes NS Power as stating that, “Risks intended to be...

AI summary The text discusses concerns raised about overtime labour costs and contingency planning in a project budget, requesting a revised budget that incorporates a 30% reduction in labour hours, prioritizing the reduction of overtime hours. It also questions the methodology used by Midgard in comparing estimates and contingency cost assumptions.

recommendation. In your response, please state whether such a decision would, in Midgard’s opinion, be reasonable even if it is not Midgard’s recommendation. 3. With respect to Table 21 in Appendix A, how did Midgard evaluate labour hours...

AI summary The document contains a series of questions directed to Midgard regarding its analysis and recommendations on labour hours, overhead rates, and contingency amounts. The focus is on evaluating assumptions and potential incentives related to internal versus external labour resources.

1. Please provide Midgard’s opinion regarding whether NS Power’s 10% contingency budget is consistent with NS Power’s non-binding contingency guidelines, as directed by the Board in its 2020 ACE Plan Decision, Matter No. M09499 (June 25, 2...

AI summary The text requests Midgard's opinion on NS Power's contingency budget, its alignment with the Board's guidelines, and the application of those guidelines. It also asks about risk register documentation, and whether RTU replacement projects are routine with low cost risk, referencing previous proceedings and exhibits.

8 Request IR-3: 9 Reference: Page 39, Midgard Commentary on Report Section 5.1. "While NSPI identifies valid complexity drivers, the specific magnitude of labour increases remains unsubstantiated. A 33% variance exists between NSPI's filed...

AI summary The Midgard Commentary questions the validity of NSPI's labour cost estimates, noting a 33% variance between NSPI's estimate and an independent allocation. Midgard recommends a 30% reduction in labour hours, prompting a request for confirmation of the impact on prudent capital costs, clarification of the labour subtotal, and a full recalculation of the project's total cost.

1. 1. At page 11, Midgard states it assessed “whether the Project, as proposed, is justified, reasonable, and aligned with regulatory expectations for prudent utility investment”. Please explain what Midgard considers to be NSEB “regulator...

AI summary Midgard evaluated the Project's prudence and alignment with regulatory expectations, identifying a 33% variance in labour estimates. It recommended a 30% reduction in labour hours for cost reasonableness. Questions are raised about the impact of this reduction on prudent capital costs, the labour subtotal used, and a full recalculated total.

Background This proceeding arises from the Nova Scotia Energy Board's decision concerning the 2025 Annual Capital Expenditure (ACE) Plan (M12012), where the Board stated its intention to engage an expert to review the scope of project CI C...

AI summary This proceeding concerns the Nova Scotia Energy Board's review of NS Power's 2025 Annual Capital Expenditure (ACE) Plan, specifically the RTU Replacements Program Phase 6, which involves replacing outdated remote terminal units across Nova Scotia. Midgard Consulting Inc. was commissioned to assess the reasonableness of the estimated project costs, which were later reduced by $0.90M.

the factual record of the report and enable direct empirical comparison with Phase 1 data." As this information was not provided, there would appear to be somewhat of an evidentiary gap on this point. In the absence of a technical comparis...

AI summary The Consumer Advocate agrees with Midgard's findings that NS Power's labour estimate has a 33% variance compared to technically supported data, suggesting a 30% reduction in labour hours. However, NS Power argues that certain activities, such as SM Electrician and Engineering tasks, may account for this variance, though it does not quantify them.

The CA states that it: …acknowledges NS Power's assertion that Midgard's assessment appears not to have taken into account certain activities which NS Power says "drive significant labour hours," including various SM Electrician and Engine...

AI summary The Consumer Advocate acknowledges NS Power's assertion that Midgard's assessment may have overlooked certain labor-intensive activities but notes that NS Power has not quantified these activities or shown they account for the 33% variance. The CA suggests a reasonable reduction in Midgard's range is supportable.

The CA further states: While the Consumer Advocate appreciates that the scope of the Board's review concerned the fourfold increase in labour hours, we would submit that further information concerning the other phases could have been instr...

AI summary The Consumer Advocate argues that the lack of historical data on Phase 1 of a project creates an evidentiary gap, while NS Power claims the data was lost in a 2025 cyber incident and that the absence is not due to a lack of cooperation. NS Power also states that characterizing the data gap as a reason for budget reduction is unreasonable.

1. Introduction An RTU refers to a Remote Terminal Unit, a microprocessor-controlled field device that collects data from field equipment and sends or receives information to and from a central control system (SCADA) for process control. N...

AI summary The Nova Scotia Energy Board evaluated NS Power's justification for increased labour costs in Phase 6 of the RTU Replacements Program, finding insufficient detail and not approving the phase. The Board engaged Midgard Consulting Inc. to review the project and provide cost analysis, with multiple parties submitting evidence and responses.

Midgard Evidence – Exhibit N-3: - Compared to Phase 5, the Phase 6 material costs per RTU increased by only 10.2%. Regular Labour costs per RTU increased by 36.8%, suggesting either greater technical scope or reduced workforce efficiency....

AI summary In Phase 6, material costs per RTU increased by 10.2%, while regular labour costs rose by 36.8% and overtime labour costs surged by 228%, indicating potential increases in technical complexity or reduced workforce efficiency.

- An approximate $900,000 budget reduction following just two completed Phase 6 sites suggests that initial estimates either did not rely on available historical efficiency Document: 331396 - data, or the historical data was not relevant,...

AI summary The document discusses a budget reduction of approximately $900,000 following the completion of two Phase 6 sites, suggesting initial estimates may have been inaccurate or based on irrelevant data. It also highlights discrepancies between NS Power's labour estimates and those recommended by Midgard, with a 33% variance and a recommended 30% reduction in labour hours.

NS Power Rebuttal Evidence – Exhibit N-7: - NS Power's capital investment decisions are grounded in asset management principles, as outlined in Section 6.2 of the Board-approved Capital Expenditure Justification Criteria (CEJC). This frame...

AI summary NS Power's rebuttal evidence highlights its capital investment decisions based on asset management principles and the variability in project complexity. It acknowledges challenges in evidencing baseline data post-cyber incident but notes accurate estimating and cost management practices, as reflected in its amended cost estimate from December 2025.

Item Variance (Current – Original) Variance Explanation SM Electrician $(232,620) For current estimate reduced quantity of SM Electrician days due to duplication in original estimate and a minor reduction in expected reduction in days requ...

AI summary The document outlines variances in labor costs for an RTU replacement project, noting reductions due to duplicated work and changes in resource allocation. The Board criticizes NS Power for not adequately understanding the project scope, despite being in the sixth phase of RTU replacements, and suggests they should have evaluated each location individually.