FORTISBC INC. PRUDENCY REVIEW KETTLE VALLEY SUBSTATION EXHIBIT A2 5

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1 ALANNA GILLIS ACTING COMMISSION SECRETARY web site: SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, BC CANADA V6Z 2N3 TELEPHONE: (604) BC TOLL FREE: FACSIMILE: (604) Log No VIA electricity.regulatory.affairs@fortisbc.com January 4, 2012 Mr. Dennis Swanson Director, Regulatory Affairs Regulatory Affairs Department FortisBC Inc. Suite 100, 1975 Springfield Road Kelowna, BC V17 7V7 FORTISBC INC. PRUDENCY REVIEW KETTLE VALLEY SUBSTATION EXHIBIT A2 5 Dear Mr. Swanson: Re: FortisBC Inc. Expenditure Review regarding the Kettle Valley Distribution Source Project Commission staff submits the following document for the record in this proceeding: FortisBC Progress Report No. 6 to September 30, 2008 for the Kettle Valley Distribution Source Project. elm Enclosure cc: Registered Interveners RR (FBC RR RI) Registered Interveners Kettle Valley Project (Fortis KettleValley RI) Yours truly, Alanna Gillis PF/FBC Kettle Valley Prudency Review/A2 5_Progress Report No. 6

2 Joyce Martin Manager, Regulatory Affairs FortisBC Inc Esplanade PO Box 130 Trail, BC V1R 4L4 Tel Fax October 31, 2008 Via Ms. Erica Hamilton Commission Secretary BC Utilities Commission Sixth Floor, 900 Howe Street, Box 250 Vancouver, BC V6Z 2N3 Dear Ms. Hamilton: Re: FortisBC Inc. ( FortisBC ) Kettle Valley Distribution Source Project Pursuant to Commission Order C-5-06, please find attached FortisBC s Progress Report No. 6 to September 30, 2008 for the Kettle Valley Distribution Source Project. Yours truly, Joyce Martin Manager, Regulatory Affairs Enclosed

3 FortisBC Inc. Kettle Valley Distribution Source Project Order C-5-06 Project Status Report No. 6 to September 30, Project Status: This report is the sixth quarterly report to be completed on the Kettle Valley Distribution Source Project ( Kettle Valley Project ), approved by Commission Order C-5-06 on August 9, General Project Status: Construction at the Kettle Valley Substation is complete; the apparatus and protection commissioning was completed in the first quarter of The substation transformers were energized on April 9, Construction on the main double circuit line between the Ingram Bridge and Midway is complete. The main line to Midway and the Midway step-down station are complete and energized. Engineering on the Greenwood step-down station is complete. Engineering on the main line from Midway to Greenwood is being adjusted due to routing issues. In December 2007, crews completed the installation of the communications cable between Oliver and Grand Forks. The new multiplexers at the Oliver and Grand Forks Terminal stations and the Kettle Valley Substation are in service and transporting network and telephony signals. Total Project Cost is forecast to be $28.44 million. 1.2 Project Accomplishments and Challenges: Distribution Source: The station construction schedule is complete. The substation transformers were energized on April 9, Voltage Conversion: Line stringing in the section from Ingram Bridge to Midway is complete. The Midway step-down station is complete and was energized September 9, Construction on Kettle Valley South Road is complete. FortisBC crews completed customer extensions on the Kettle Valley East Road enabling the line to be energized from the new distribution source. The conversion of main line customer taps up to Midway is proceeding with FortisBC crews and is scheduled for completion in November Kettle Valley Progress Report No. 6 Page 1

4 Engineering for the Greenwood step-down station is complete and construction is proceeding and scheduled to be complete late fourth quarter of Detailed engineering for the line construction (Phase 3) between Midway and Greenwood identified permitting and land issues. Routing of this portion is being adjusted to deal with these issues. This portion is now scheduled to have engineering completed and ready for construction within the first quarter of 2009 with construction to start shortly after. Construction is scheduled to be completed in the second quarter of A salvage plan has been established for the removal of 9 Line and 10 Line. High Capacity Communication Upgrade: The environmental deficiencies that were identified by KRM and Associates have been corrected. There are three instances on 11 Line where the new communications cable resides above the existing marker balls on a marked crossing. A solution is under review with regard to scope and costing. 1.3 Activities for Next Quarter: Project activities scheduled to the end of December 2008 include: Distribution Source: Energizing the distribution circuits as the work is completed. Load will be transferred to the station as the sections of the voltage conversions circuits are brought online. Continuation of project close out phase. Voltage Conversion: Complete the conversion of main line customer services by late November Engineer an alternative solution to supply Greenwood step-down station with 25 kv by the first quarter Continue construction of Greenwood step-down station. Develop a tender package for the salvage work. High Capacity Communication Upgrade: Transport Canada marker ball relocation. Project close out. 2. Project Cost: The current financial forecast to complete the project is $28.44 million. The variance is mainly driven by world-wide material markets (metal commodities) and Western Canada labour pressures on trades and engineers. Comprehensive explanations were provided in FortisBC s letter to the Commission dated August 22, A summary of project costs to September 30, 2008 is shown below. FortisBC continues to actively manage the project in an effort to reduce costs. Kettle Valley Progress Report No. 6 Page 2

5 FortisBC Kettle Valley Substation Project BCUC Order No. C-5-06 Report No. 6 BCUC Actuals to Budget Sep 30/08 EAC Variance WBS $ millions $ millions $ millions % Comments / Explanation KV SUBSTATION 2005 Dollars +/- 10% LINE WORK % CIVIL & SITE & BUILDINGS % STATION EQUIPMENT & APPARATUS & STRUCTURES & BUS WORK % STATION COMMUNICATION & SCADA EQUIPMENT % PROTECTION & CONTROL AND METERING % ENGINEERING % COMMISSIONING % PROJECT MANAGEMENT & SUPERVISION % OVERALL KETTLE VALLEY SUBSTATION DEVELOPMENT COST % Unforeseen additonal grounding requirements coupled with commodity market increases. Variance due to cost increase on transformers. Commodity market increases and unforeseen equipment requirements. Market pressures on fees for professional engineering consultants and startup delays. Equipment commissioning contract competively tendered and awarded to the lowest bidder. KV DISTRIBUTION UPGRADE 2005 dollars +/- 25% MATERIALS % CONSTRUCTION % OTHER CONTRACT (Telus) % LAND / ROW % ENGINEERING % PROJECT MANAGEMENT & SUPERVISION % OVERALL KETTLE VALLEY DISTRIBUTION UPGRADE COST % Commodity market increases. Forecast to receive material credits to project. Variance due to increased rubber glove work required to minimize outages in addition to labour market increases. Variance due to market pressures. EAC costs are consistent with overall Distribution Upgrade costs. Project Management costs are consistent with overall Distribution Upgrade costs. KV HIGH CAPACITY COMMUNICATIONS 2005 dollars +/- 25% MATERIALS % $0.4 million savings on fibre offset by market increases. CONSTRUCTION % Variance due to Western Canada labour pressures. Work competitively bid and awarded to the lowest bidder. ENGINEERING % Design package produced as part of earlier project could not be used as expected. Reengineering required. PROJECT MANAGEMENT & SUPERVISION % OVERALL KETTLE VALLEY HIGH CAPACITY COMMUNICATION COST % Line and Substation Salvage % Substation Land / ROW / Easement Issues % Total % Project Management costs are consistent with overall High Capacity Communication cost. Kettle Valley Progress Report No. 6 Page 3

6 2.1 Project S Curve: Thousands 30,000 25,000 20,000 15,000 10,000 5,000 0 May-05 Jul-05 Cumulative Monthly Costs Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Kettle Valley Progress Report No. 6 Page 4 Actual Forecast 3. Project Schedule: The Gantt chart below provides a status of milestones and activities as of September 30, Highlights of the schedule are: Engineering: Engineering is nearing completion on this project. The distribution station and communications upgrade are in the project closeout stage. Major milestones remaining for engineering include construction support for the Midway taps, the distribution line to Greenwood and the step-down station in Greenwood. Major Procurement: All major procurement is complete. Budget Construction: Construction is complete at the distribution source. Efforts have shifted to the conversion of main line taps as well as the Greenwood step-down station. Construction of the revised feed to Greenwood from Midway is scheduled to proceed in the first quarter of In Service: The in-service milestones are expected to remain consistent with the schedule based on the April 2008 energization of the distribution source. Salvage: Planning for the line and station salvage work has begun with the work to be completed over the next 12 months.

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8 Scope Control: With the intent to mitigate cost variances as well as various land issues, the third phase of distribution line construction (Midway to Greenwood) has been adjusted. Land issues have forced FortisBC to build on the existing 9/10 Line right-of-way, therefore, the decision was made to utilize 9 Line as a distribution feed to Greenwood. Estimates for the salvage are higher than was originally budgeted. FortisBC is in the process of reviewing various options to mitigate the increase. 4. Project Risks: Distribution Source: No further risks Voltage Conversion: Right-of-way issues have created issues with the Midway to Greenwood (Phase 3) main line route. This portion is now being modified to utilize the existing 9 Line to supply Greenwood. As no engineering has been completed for this solution, potential rebuilds and upgrades to 9 Line may exist. Copper credits for the salvage of 9 Line and 10 Lines have been ascertained at August values and used in the salvage estimates. As commodity pricing changes, the net cost to complete the salvage will be affected. A salvage plan is attached at Appendix A, in confidence. High Capacity Upgrade: The application for aeronautical clearance from Transport Canada s requirement for maker balls on wires is a cost risk for the project. The scope and cost of this work is not fully defined. Kettle Valley Progress Report No. 6 Page 6