Société en commandite Gaz Métro
Renouvellement du mécanisme incitatif à l’amélioration
de la performance de Gaz Métro, R-3693-2009
Engagement no 1
Référence : Audience du 24 novembre 2011
Index Research for Gaz
Metro’s Groupe de Travail
Dr. Mark Newton Lowry, President
PEG Research LLC
Original : 2011.11.28
Montreal, QC
24 Novembre 2011
Index Research for Gaz Metro’s Groupe de Travail
Gaz Métro – 5, Document 6
(52 pages)
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Plan of Presentation
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Intro
Credentials
Mandate
Key Results
Basic Concepts
i.
Inputs
ii.
Outputs
Use of Indexing in Regulation
Inflation Measures
Stretch Factors
Summing up
Appendix
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p4-5
p6
p7
p9-18
p11-14
p15-18
p19-24
p25
p26-27
p28-29
p30-51
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Introduction
The Gaz Metro Group de Travail has proposed a new “mécanisme
incitatif”
The mécanisme has escalation formulas for O&M and capital
expenses which have X factors
Pacific Economics Group (“PEG”) Research LLC was retained by
the Task Force to measure Gaz Metro’s productivity and help
choose X
A report on our research was completed in March
This presentation discusses our research
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Credentials
PEG Research LLC
Leading North American consultancy on incentive regulation (IR)
50+ man years of experience
Multinational practice, many Canadian projects
Diverse clientele
Services
Utilities
Trade Associations
Regulators
Consumer groups
IR plan design
Empirical (e.g. productivity) recherche
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Mark Newton Lowry
President, PEG Research
20+ years experience as regulatory economist
Testified 30+ times on IR issues
Previously
Assistant Professor, Pennsylvania State University
Visiting Professor, HEC Montreal
PhD Applied Economics, University of Wisconsin
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Mandate
1.
Calculated productivity trends of Gaz Metro 2000-2009


TFP, O&M, and capital expense (“capex”) productivity
Excluded costs (e.g. pensions & benefits) that would not
be subject to indexing in mechanisme incitatif
2.
Considered suitable inflation measures
3.
Considered appropriate stretch factors
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Productivity Research Results
Research on productivity trends widely used in North America to
design IR plans



Price Caps
Revenue Caps
Cost Targets
Two methodologies used


Productivity indexes
Econometric productivity targets
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Productivity Research Results
Productivity Growth (%)
O&M Capex TFP
Productivity Indexes
Gaz Metro (2000-2009)
0.73
2.08
1.66
Enbridge (2006-2010)
NA
NA
1.07
Union (2006-2010)
NA
NA
1.65
USA (1999-2008)
NA
NA
1.18
Econometric Productivity Target
1.55
1.92
1.11
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Basic Concepts
Productivity Indexes
Productivity is a measure of enterprise efficiency
Conventionally measured using indexes
An index makes comparisons using ratios
e.g.
Inflation Pgasoline = (Pgasoline2011/ Pgasoline2010) – 1
Indexes can summarize multiple comparisons by taking weighted
averages
e.g.
IPC d’EnsembleQuebec
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Basic Concepts
Productivity Indexes
Productivity index is ratio of output & input quantity indexes
Productivity = Outputs/Inputs
Thus,
Growth Productivity = growth Outputs – growth Inputs
Output quantities: e.g. number of customers, miles of line
Input quantities: e.g. number of employees, number of vehicles
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Productivity Indexes (cont’d)
Indexes can measure trends in multiple quantities using weighted
averages
e.g. Input Price & Quantity Indexes
With cost share weights, calculus shows that they measure
impact of input price & quantity growth on cost
e.g. Output Indexes
With cost elasticity weights, calculus shows that they
measure impact of output growth cost
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Basic Concepts (cont’d)
Input Quantity Indexes
Input indexes vary in scope of costs considered
Labor cost
Labor productivity
All O&M expenses
O&M productivity
Capex
Capex productivity
Total cost
Total factor productivity (“TFP”)
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Input Quantity Indexes (cont’d)
How to calculate multi-category input quantity indexes?
When input price and quantity indexes have cost share weights
growth Cost = growth Input Prices + growth Input Quantities
and
growth Input Quantities = growth Cost – growth Input Prices
For example,
growth Labor QuantityGasMetro
= growth Labor CostGasMetro – growth Labor Price IndexQuebec
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Capital Quantity Indexes
TFP indexes require measures of capital cost & quantity
CostCapital = PriceCapital x QuantityCapital
This concept has confused many regulators and stakeholders
PEG Research has developed method for decomposing capital cost
that mirrors the cost accounting in regulation


Cost = Depreciation + Return on Plant
Historical valuation of plant
Resultant capital prices is quite stable
Frequently used in Ontario
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Capital Quantity Indexes (cont’d)
Capital quantity based on many years of plant additions
Quantityt = f(Additionst, Additionst-1, Additionst-2, …)
Price
Price
Price
Need additions, construction cost index for 35+ past years
Gaz Metro has additions data only since 1995 (15 years)
Need to guess additions in earlier years
>>> Difficult to measure Gaz Metro’s total factor productivity
accurately
One argument for focus on capex productivity
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Elasticity-Weighted Output Indexes
Cost Elasticity = % change in Cost from 1% change Output
= Marginal Cost /Average Cost
Elasticities & marginal costs can be estimated econometrically
e.g. Given econometric model
ln Cost = a0 + = a1 ln Customers + a2 ln Line Km + a3 Trend
a1 and a2 are elasticities
We search for best output specification in our models
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Table A-2
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Econometric Model of O&M Expenses
VARIABLE KEY
N=
E=
UC =
CI =
Trend =
EXPLANATORY
VARIABLE
Number of Gas Customers
Number of Electric Customers
Urban Core Binary Variable
% Cast Iron Distribution Miles
Time Trend
ESTIMATED
COEFFICIENT
T-STATISTIC
P-VALUE
N
0.800
66.19
0.000
E
-0.014
-8.69
0.000
UC
0.147
6.75
0.000
CI
0.090
13.29
0.000
Trend
-0.012
-4.70
0.000
Constant
6.883
175.56
0.000
System Rbar-Squared
Sample Period
Number of Observations
1 output variable
identified (N)
Trend = 1.2%
0.939
1998-2008
363
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Basic Concepts (cont’d)
Econometric Productivity Targets
Denny, Fuss, and Waverman found that
growth TFP = Scale Effect + Business Condition Effects
+ Trend Effect
Econometric model can be used to estimate these effects
Can be tailored to local business conditions (e.g. customer growth)
Precedent: California
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Table 3
Productivity Indexes for Cost Efficiency Measurement
Costs
Year
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
O&M
Growth
Million $ Rate
94.4
NA
98.3
4.0%
101.6
3.3%
105.0
3.3%
108.6
3.4%
114.9
5.6%
123.2
7.0%
128.9
4.5%
133.2
3.3%
131.2
-1.5%
133.9
2.0%
139.4
4.0%
Cost
Share
34.3%
35.3%
36.1%
36.2%
36.4%
37.1%
37.9%
38.0%
39.2%
38.5%
38.9%
39.9%
Input Quantity Index
Capital
Growth
Million $ Rate
180.8
NA
180.0
-0.5%
179.6
-0.2%
185.3
3.1%
189.6
2.3%
194.6
2.6%
201.8
3.7%
210.2
4.1%
206.8
-1.6%
209.3
1.2%
210.3
0.5%
209.6
-0.3%
Cost
Share
65.7%
64.7%
63.9%
63.8%
63.6%
62.9%
62.1%
62.0%
60.8%
61.5%
61.1%
60.1%
Total Cost
Growth
Million $ Rate
275.2
NA
278.3 1.1%
281.2 1.0%
290.3 3.2%
298.2 2.7%
309.5 3.7%
325.0 4.9%
339.1 4.3%
340.0 0.3%
340.5 0.1%
344.2 1.1%
349.0 1.4%
O&M
Growth
Rate
Level
100.0
NA
98.9
-1.1%
96.6
-2.4%
101.8
5.2%
100.7
-1.1%
104.1
3.3%
110.6
6.1%
117.1
5.7%
120.5
2.9%
114.0
-5.6%
111.4
-2.3%
111.3
-0.1%
Capital1
Growth
Rate
Level
NA
NA
100.0
NA
99.7
-0.3%
101.4
1.6%
102.6
1.3%
104.4
1.7%
104.7
0.3%
106.1
1.3%
103.9
-2.1%
102.4
-1.5%
99.8
-2.6%
97.3
-2.5%
Cost-Based Output Indexes
Summary Input
Quantity Index
Growth
Rate
Level
NA
NA
100.0
NA
99.0
-1.0%
101.9
2.9%
102.3
0.4%
104.7
2.3%
107.3
2.5%
110.6
3.0%
110.4
-0.2%
107.1
-3.1%
104.4
-2.5%
102.8
-1.5%
O&M Productivity
Growth
Rate
Level
100.0
NA
100.8
0.8%
102.6
1.7%
102.7
0.1%
103.8
1.1%
104.6
0.7%
107.2
2.5%
110.8
3.3%
113.9
2.8%
116.5
2.2%
119.6
2.6%
122.1
2.0%
E
TFP
Level
NA
100.0
102.1
103.1
105.2
105.8
108.3
111.6
114.5
116.7
119.3
121.3
Growth
Rate
NA
NA
2.1%
0.9%
2.1%
0.5%
2.3%
3.0%
2.6%
1.8%
2.3%
1.7%
Productivity
O&M Productivity
Growth
Rate
Level
100.0
NA
101.9
1.9%
106.2
4.1%
100.9
-5.1%
103.1
2.1%
100.5
-2.6%
96.9
-3.6%
94.6
-2.4%
94.5
-0.1%
102.2
7.8%
107.4
4.9%
109.7
2.1%
E
TFP
Level
NA
100.0
103.2
101.1
102.9
101.1
100.9
101.0
103.8
109.0
114.3
118.0
Growth
Rate
NA
NA
3.1%
-2.0%
1.7%
-1.7%
-0.1%
0.0%
2.7%
4.9%
4.7%
3.2%
Average Annual Growth Rates
2000-2009
3.49%
1.52%
2.27%
1.18%
-0.27%
0.28%
1.91%
1.93%
0.73%
1.66%
NA = Not Available
The summary input quantity index for capital is calculated as a cost share weighted average of the input quantities for three asset categories. The results were produced using the COS method.
1
>>> Different output indexes for different cost categories
Output indexes for O&M & TFP differ slightly
Productivity trends are much lower
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Use of Indexing in Regulation
Index logic provides basis for design of revenue caps & cost caps
Gaz Metro Current Approach
Growth Revenue
= growth Cost
= growth Input Prices + growth Inputs
= growth Input Prices – (growth Throughput – growth Inputs)
+ growth Throughput
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Alternative Revenue Cap Approach
According to Denny, Fuss, & Waverman,
growth Cost = growth Input Prices
- growth Productivity + growth Output
Output index elasticity-weighted
Rearranging terms,
growth Cost - growth Output
= growth Unit Cost
= growth Input Prices - growth Productivity
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Alternative Revenue Cap Approach
If growth Output = growth Customers,
growth Cost/Customer
= growth Input Prices – growth Productivity
This has provided basis for several revenue/customer caps
growth Revenue/Customer = growth Inflation - X
e.g. Enbridge Gas Distribution, Southern California Gas
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Cost Caps
Indexing also provides basis for cost target escalators
e.g.
Gaz Metro proposes separate, index-based cost caps
for O&M and capital expenses
growth “Dépenses”Exploitation/Client = growth Inflation – X
growth “Dépenses”Capital/Client = growth Inflation - X
Precedents
Enbridge Gas Distribution, Gazifere
BC Gas, Fortis BC, Vermont Gas System
Advantages:
Sidesteps need to measure Gaz Metro’s TFP
Theoretical foundation
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X Factors
X = Productivity Base + Stretch Factor
Dividende client shares benefits of accelerated productivity growth
Several possible sources for Base Productivity Target
1.
Gaz Metro’s Productivity Index
Pro: May reflect local business conditions
Regie labor policy preferences
Con: Weakens performance incentives in repeated use
Historical trend may be too slow, too fast
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X Factors
2.
Econometric Productivity Target
Pro: Better incentives
Tailored to local business conditions
Con: Requires econometrics
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Input Price Index Recommendations
Total Cost
GDPIPIFDD
O&M
Weighted average of Quebec salary & wage index,
GDPIPIFDD
Capex
Cost-weighted average of three price indexes



Capital stock price index, engineering structures, gas &
water
Software
GDPIPIFDD
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Stretch Factor
Stretch factor guarantees customers benefit of faster productivity
growth
Common range [0, 1], with 0.50 mean
PEG Research Methodology
Share 50% of expected change in productivity growth
New regulatory system vs. prevalent system of peer distributors
Use Incentive Power Model to measure incentives
No acceleration expected if Gaz Metro data used
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Incentive Power Research Results
Gaz Metro



Symmetric 50/50 sharing
7 year term
No cap on gains or losses
US Sample


3 year rate cycle
No sharing
Results
>>> 40 basis point acceleration in productivity growth
43/2 = 22
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Summing Up
O&M Expenses
growth Cost/Customer = growth Input Prices – X
Input Price Subindexes
Labor
GDPIPIFDD
X = Productivity Target + Stretch
Productivity Target = [0.75, 1.55]
Stretch Factor
= [0.20, 0.50]
X
= [0.95, 2.05]
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Summing Up
Capex
growth Cost = growth Input Prices – X + growth Outputs
Input Price Subindexes



Power distribution construction cost index
Software
GDPIPIFDD
X = Productivity Target + Stretch
Productivity Target = [1.92, 2.38]
Stretch Factor
= [0.20, 0.50]
X
= [1.12, 2.88]
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Appendix
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Table 1
Calculation of Cost-Based Output Indexes
Customers
Line Miles (km)
Summary Output Indexes
Total
Elasticity Weights2
O&M Productivity
TFP
Capital Expenditures
For O&M Productivity
For Capex
100%
73.85%
11.60%
26.15%
48.33%
24.20%
15.87%
Expected Change3
Year
Level
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
146,955
148,198
150,741
150,918
152,565
153,684
157,525
162,791
167,451
171,232
175,816
179,370
Average Annual Growth
Rates
2000-2009
E
For TFP
Growth Change in
Rate
Customers
NA
0.8%
1.7%
0.1%
1.1%
0.7%
2.5%
3.3%
2.8%
2.2%
2.6%
2.0%
1.91%
NA
1,243
2,543
177
1,647
1,119
3,841
5,266
4,660
3,781
4,584
3,554
Expected Change3
Level
Growth Rate
Level1
NA
1,321
1,456
981
2,202
3,409
4,589
4,569
4,342
3,973
3,675
3,362
NA
NA
9.7%
-39.5%
80.9%
43.7%
29.7%
-0.4%
-5.1%
-8.9%
-7.8%
-8.9%
8,030
8,289
8,557
8,833
9,285
9,285
9,472
9,682
9,865
9,939
10,059
10,132
Growth Change in
Rate
Miles
9.34%
NA
3.2%
3.2%
3.2%
5.0%
0.0%
2.0%
2.2%
1.9%
0.7%
1.2%
0.7%
2.01%
NA
259.4
267.8
276.4
451.5
187.0
210.8
183.0
73.2
120.2
73.6
Level
NA
267.8
331.9
242.6
212.8
132.6
193.6
155.7
125.5
89.0
92.8
114.1
Growth
Rate
Total
Customers
Growth
Rate
Econometrically
Weighted
Growth
Rate
Econometrically
Weighted
Growth
Rate
NA
NA
21.4%
-31.3%
-13.1%
-47.3%
37.8%
-21.8%
-21.6%
-34.3%
4.2%
20.6%
100.0
100.8
102.6
102.7
103.8
104.6
107.2
110.8
113.9
116.5
119.6
122.1
NA
0.8%
1.7%
0.1%
1.1%
0.7%
2.5%
3.3%
2.8%
2.2%
2.6%
2.0%
NA
100.0
102.1
103.1
105.2
105.8
108.3
111.6
114.5
116.7
119.3
121.3
NA
NA
2.1%
0.9%
2.1%
0.5%
2.3%
3.0%
2.6%
1.8%
2.3%
1.7%
NA
100.0
107.8
94.7
115.7
119.4
137.9
135.0
130.5
121.7
121.3
123.4
NA
NA
7.5%
-13.0%
20.0%
3.1%
14.5%
-2.1%
-3.4%
-7.0%
-0.3%
1.7%
-8.53%
1.91%
1.93%
2.10%
NA = not available
1
The 1998 and 1999 values for line miles were not available and were imputed using the 1999-2000 growth rate.
2
Elasticity weights are based on Gaz Metro costs and quantities and econometric estimates of marginal costs prepared by PEG Research using data on the operations of U.S. gas distributors.
3
Expected change is a three year moving average of the change in the corresponding variable. Values for 2008 and 2009 use Gaz Metro forecasts.
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Table 2
Gaz Metro O&M Input Quantity Indexes
Costs
1
Year
Salaries & Wages
Growth
Million $ Rate
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Input Prices
1
Materials & Services
Cost
Growth
Rate
Million $ Share
[A]
[B]
[C]
61.5
61.2
64.3
67.5
70.9
75.5
80.9
85.1
88.4
89.7
90.8
93.9
NA
-0.5%
4.9%
4.9%
4.9%
6.3%
6.9%
5.1%
3.8%
1.5%
1.2%
3.4%
32.9
37.1
37.3
37.5
37.7
39.4
42.3
43.8
44.8
41.5
43.1
45.5
Total O&M
Growth
Rate
Million $
2
Salaries & Wages
Growth
Rate
Level
[D]
34.9%
37.7%
36.7%
35.7%
34.7%
34.3%
34.3%
34.0%
33.6%
31.6%
32.2%
32.6%
NA
12.0%
0.5%
0.5%
0.5%
4.4%
7.1%
3.5%
2.3%
-7.7%
3.8%
5.4%
Materials &
Services3
Growth
Rate
Level
[E]
94.4
98.3
101.6
105.0
108.6
114.9
123.2
128.9
133.2
131.2
133.9
139.4
NA
4.0%
3.3%
3.3%
3.3%
5.6%
7.0%
4.5%
3.3%
-1.5%
2.0%
4.0%
84.6
90.9
98.1
94.4
99.9
102.6
103.2
100.5
100.3
105.5
111.4
117.7
NA
7.2%
7.6%
-3.8%
5.6%
2.7%
0.7%
-2.7%
-0.1%
5.1%
5.4%
5.5%
Input Quantities
Summary O&M
Input Price Index
Growth
Rate
Level
Labor (SW/W)
Growth
Rate
Level
[F]
92.7
94.0
96.4
97.8
100.0
101.8
103.1
105.1
106.5
108.6
110.8
112.3
NA
1.4%
2.5%
1.4%
2.2%
1.8%
1.3%
1.9%
1.3%
2.0%
2.0%
1.3%
Materials & Services
Growth
Rate
Level
[B] - [E]
100.0
105.2
111.4
109.3
114.3
117.0
118.0
116.7
117.1
121.9
127.3
132.7
NA
5.1%
5.7%
-1.9%
4.4%
2.4%
0.9%
-1.1%
0.4%
4.0%
4.3%
4.1%
0.73
0.67
0.66
0.71
0.71
0.74
0.78
0.85
0.88
0.85
0.82
0.80
NA
-7.7%
-2.7%
8.7%
-0.7%
3.6%
6.2%
7.8%
3.9%
-3.6%
-4.2%
-2.1%
Cost Shares
Labor
materials
65.1%
62.3%
63.3%
64.3%
65.3%
65.7%
65.7%
66.0%
66.4%
68.4%
67.8%
67.4%
34.9%
37.7%
36.7%
35.7%
34.7%
34.3%
34.3%
34.0%
33.6%
31.6%
32.2%
32.6%
Summary O&M
Input Quantity
Index4
Growth
Rate
Level
[D] - [F]
0.35
0.39
0.39
0.38
0.38
0.39
0.41
0.42
0.42
0.38
0.39
0.41
NA
10.6%
-2.0%
-0.9%
-1.7%
2.6%
5.8%
1.6%
0.9%
-9.6%
1.8%
4.1%
100.0
98.9
96.6
101.8
100.7
104.1
110.6
117.1
120.5
114.0
111.4
111.3
NA
-1.1%
-2.4%
5.2%
-1.1%
3.3%
6.1%
5.7%
2.9%
-5.6%
-2.3%
-0.1%
Average Annual Growth Rates
2000-2009
4.28%
2.04%
3.49%
2.58%
1.78%
2.32%
1.70%
0.26%
1.18%
NA = not available
1
Source: Gaz Metro. Cost data were not provided for the years 2000-2001. Data for these years were imputed using actual data from 2002 and 1999. The method used was to assume that the total growth from 1999-2002 took place uniformly over the period. The
imputations do not affect the average annual growth rates. Capitalized O&M expenditures were removed and included in capital cost for the years 2008-2009.
² Source: Statistics Canada. Table 281-0039 - Fixed weighted index of average hourly earnings for all employees (SEPH), excluding overtime, unadjusted for seasonal variation, for Quebec utilities industry as classified using the North American Industry Classification
System (NAICS), monthly (index, 2002=100)
3
4
Source: Statistics Canada, Gross Domestic Product of Quebec at Market Prices, Table 384-0036 - Implicit price indexes, gross domestic product (GDP) final domestic demand, provincial economic accounts, annual (index, 2002=100)
The O&M input quantity index is a cost-weighted average of growth in labor and M&S input quantities. The index is of Tornqvist form.
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Table 4
34
Comparison of Productivity Trends
Total Cost Efficiency Metric (TFPc)
Gaz Metro
MFP, Private Business Sector
1
2
US Gas Distributors
3
US
Canada
Year
Level
Growth
Rate
Level
Growth Rate
Level
Growth Rate
Level
Growth Rate
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
NA
100.0
103.2
101.1
102.9
101.1
100.9
101.0
103.8
109.0
114.3
118.0
NA
NA
3.1%
-2.0%
1.7%
-1.7%
-0.1%
0.0%
2.7%
4.9%
4.7%
3.2%
1.000
1.027
1.030
1.069
1.078
1.071
1.066
1.041
1.111
1.112
1.125
NA
NA
2.7%
0.3%
3.7%
0.8%
-0.7%
-0.5%
-2.3%
6.5%
0.1%
1.1%
NA
87.898
89.509
91.042
91.749
93.942
96.429
98.966
100.000
100.517
101.025
101.119
101.906
NA
1.8%
1.7%
0.8%
2.4%
2.6%
2.6%
1.0%
0.5%
0.5%
0.1%
0.8%
95.7
97.6
99.8
99.5
100.0
99.5
98.8
99.0
98.3
97.7
95.5
93.4
NA
2.0%
2.2%
-0.3%
0.5%
-0.5%
-0.7%
0.2%
-0.7%
-0.6%
-2.3%
-2.2%
Average Annual
Growth Rates
1999-2008
2000-2009
2000-2008
NA
1.66%
1.48%
1.18%
NA
1.01%
1.40%
1.30%
1.36%
NA = Not available
Source: Mark Newton Lowry and David Hovde (2010),Productivity Research for Southern California Gas, page 9, filed as Exhibit
SCG-37 in Application 10-12-006 before the California Public Utilities Commission.
2
Source: US Bureau of Labor Statistics.
3
Source: Statistics Canada, Table 383-0021.
-0.02%
-0.44%
-0.24%
1
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Table 5
35
Productivity Index for Capital Expenditures
Outputs
Summary Output
Index
Year
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Inputs
Value of Plant
2
Additions
Capex Price Index3
Level
Growth
Rate
$ Million
Growth
Rate
Level
Growth
Rate
100.0
107.8
94.7
115.7
119.4
137.9
135.0
130.5
121.7
121.3
123.4
[A]
NA
7.5%
-13.0%
20.0%
3.1%
14.5%
-2.1%
-3.4%
-7.0%
-0.3%
1.7%
84.93
85.76
92.17
98.87
104.76
132.29
133.52
126.40
146.75
102.74
104.98
[B]
NA
1.0%
7.2%
7.0%
5.8%
23.3%
0.9%
-5.5%
14.9%
-35.7%
2.2%
100.3
102.1
102.5
102.9
102.0
105.6
110.5
116.1
121.4
122.8
123.8
NA
1.8%
0.4%
0.4%
-0.9%
3.5%
4.5%
4.9%
4.5%
1.2%
0.8%
Average Annual Growth Rates
2000-2009
2.10%
2.12%
Productivity of Capital Expenditures
Plant Addition
Quantities
Level
Growth Rate
Level
Level
(1999=100)
Growth
Rate
100.0
99.2
106.2
113.4
121.3
147.9
142.8
128.6
142.8
98.8
100.2
[D] = [B-C]
NA
-0.9%
6.9%
6.6%
6.7%
19.8%
-3.5%
-10.4%
10.4%
-36.8%
1.4%
1.000
1.087
0.891
1.020
0.984
0.933
0.946
1.014
0.852
1.228
1.232
100.0
108.7
89.1
102.0
98.4
93.3
94.6
101.4
85.2
122.8
123.2
[A] - [D]
NA
8.3%
-19.8%
13.4%
-3.5%
-5.4%
1.4%
7.0%
-17.4%
36.5%
0.3%
[C]
2.10%
0.02%
2.08%
NA = Not Available
1
The 1998 value for line miles was not available and was imputed using the 1999-2000 growth rate.
2
3
Source: Gaz Metro
Source: Statistics Canada. Table 383-0025 - Canadian Natural Gas Distribution, Water, and Other Systems Capital Stock Price (index, 2002=100). 1998-2007.
Where this index was not available (in 2008-2009), values were imputed using the growth rates in the comprehensive electric utility construction price index.
Source: Statistics Canada. Table 327-0011
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Table 7
X Factor Reflective of Past Gaz Metro Experience
TFP
Output
Differential
X
[A]
[B]
[A + B]
1.656%
-1.655%
0.001%
C
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Table 8
Calculating Industry-Specific Input Price Indexes
Costs
1
Labor
year
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Million $
61.5
61.2
64.3
67.5
70.9
75.5
80.9
85.1
88.4
89.7
90.8
93.9
Materials &
Services1
Million $
32.9
37.1
37.3
37.5
37.7
39.4
42.3
43.8
44.8
41.5
43.1
45.5
Input Price Indexes
1
Capital
Million $
180.8
180.0
179.6
185.3
189.6
194.6
201.8
210.2
206.8
209.3
210.3
209.6
Labor2
Level
84.6
90.9
98.1
94.4
99.9
102.6
103.2
100.5
100.3
105.5
111.4
117.7
Average Annual Growth Rates
2000-2009
Growth
Rate³
NA
7.2%
7.6%
-3.8%
5.6%
2.7%
0.7%
-2.7%
-0.1%
5.1%
5.4%
5.5%
2.58%
Materials & Services4
Level
92.7
94.0
96.4
97.8
100.0
101.8
103.1
105.1
106.5
108.6
110.8
112.3
Growth
Rate
NA
1.4%
2.5%
1.4%
2.2%
1.8%
1.3%
1.9%
1.3%
2.0%
2.0%
1.3%
1.78%
All O&M
Level
100.0
105.2
111.4
109.3
114.3
117.0
118.0
116.7
117.1
121.9
127.3
132.7
Growth
Rate
NA
5.1%
5.7%
-1.9%
4.4%
2.4%
0.9%
-1.1%
0.4%
4.0%
4.3%
4.1%
2.32%
Capital
Level
100.0
99.3
99.4
100.9
102.0
102.9
106.4
109.3
109.9
112.8
116.3
118.9
Growth
Rate
NA
-0.7%
0.0%
1.5%
1.1%
0.9%
3.3%
2.7%
0.5%
2.6%
3.1%
2.2%
All Inputs
Level
100.0
101.3
103.5
103.8
106.1
107.7
110.3
111.7
112.2
115.8
120.0
123.6
Growth Rate
NA
1.3%
2.1%
0.3%
2.3%
1.4%
2.4%
1.3%
0.4%
3.2%
3.6%
2.9%
1.80%
1.99%
NA = Not Available
1
Source: Gaz Metro
Source: Statistics Canada. Table 281-0039 - Fixed weighted index of average hourly earnings for all employees (SEPH), excluding overtime, unadjusted for seasonal variation, for Quebec utilities industry
as classified using the North American Industry Classification System (NAICS). Where this index was not available (in 2008-2009), values were imputed using the growth rates in the comprehensive
electric utility construction price index. Source: Statistics Canada. Table 327-0011
³ All growth rates calculated logarithmically.
4
Source: Statistics Canada,Gross Domestic Product (GDP) of Quebec at Market Prices, Table 384-0036 - Implicit price indexes, GDP final domestic demand, provincial economic accounts, annual
2
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Table 9
How Selected Macroeconomic Price Indexes Compared to Gaz Metro Input Price Indexes
Quebec Price Indexes
Consumer Price Index1
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Average Annual Growth Rate
2000-2009
Summary Gaz Metro Input Price Indexes
GDP Implicit Price Index - Final
2
Domestic Demand
Level
Growth Rate
Level
Growth Rate
92.1
93.5
95.8
98.0
100.0
102.5
104.5
106.9
108.7
110.4
112.7
113.4
NA
1.5%
2.4%
2.3%
2.0%
2.5%
1.9%
2.3%
1.7%
1.6%
2.1%
0.6%
92.7
94.0
96.4
97.8
100.0
101.8
103.1
105.1
106.5
108.6
110.8
112.3
NA
1.4%
2.5%
1.4%
2.2%
1.8%
1.3%
1.9%
1.3%
2.0%
2.0%
1.3%
1.93%
Operation & Maintenance
Growth
Rate
Level
1.78%
100.0
105.2
111.4
109.3
114.3
117.0
118.0
116.7
117.1
121.9
127.3
132.7
NA
5.1%
5.7%
-1.9%
4.4%
2.4%
0.9%
-1.1%
0.4%
4.0%
4.3%
4.1%
2.32%
Capital Expenditures³
Total
Level
Growth Rate
Level
Growth
Rate
100.0
100.3
102.1
102.5
102.9
102.0
105.6
110.5
116.1
121.4
122.8
123.8
0.3%
1.8%
0.4%
0.4%
-0.9%
3.5%
4.5%
4.9%
4.5%
1.2%
0.8%
100.0
101.3
103.5
103.8
106.1
107.7
110.3
111.7
112.2
115.8
120.0
123.6
NA
1.3%
2.1%
0.3%
2.3%
1.4%
2.4%
1.3%
0.4%
3.2%
3.6%
2.9%
2.10%
1.99%
NA = Not Available
1
Source: Statistics Canada. Table 326-0021 - Consumer Price Index (CPI) of Quebec, 2005 baskets, annual (index, 2000=100)
2
Source: Statistics Canada. Table 384-0036 - Implicit price index, gross domestic product, final domestic demand (GDP FDD) of Quebec, provincial economic accounts, annual (index, 2000=100)
3
Source: Statistics Canada. Table 383-0025 - Canadian Natural Gas Distribution, Water, and Other Systems Capital Stock Price (index, 2000=100). 1998-2007.
Where this index was not available (in 2008-2009), values were imputed using the growth rates in the electric utility construction price index. Source: Statistics Canada. Table 327-0011
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Table 10
39
Calculating External Productivity Targets for Gaz Metro: Standard Elasticities
Estimated
Trend
Effect
Scale Economy Effect
Estimated
Elasticity
Weight
Forecasted Output Growth1
Change
Total
Change in
in Line
Customers Customers Line Miles Miles
[A]
Gaz Metro
Elasticity
Share:
Capex
1.82%
Scale
Economy
Effect
[C]
[D=B*(1-C)]
[A+D]
100.0%
2.00%
1.16%
SUM
Elasticities
Summary
Output
Index
[B]
Gaz Metro
Elasticity
Share:
O&M
Expenses
Forward
Productivity
Growth
Target
11.60%
2.00%
24.20%
48.33%
2.00%
0.80
0.39%
1.55%
1.87%
0.95
0.10%
1.92%
1.95%
0.85
0.30%
1.11%
15.87%
2.00%
1.80%
1.80%
Gaz Metro
Elasticity
Share:
Total Cost
0.81%
73.85%
26.15%
2.00%
1.80%
1
Forecasts prepared by Gaz Metro
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Figure 1
40
How Selected Macroeconomic Price Indexes Compared to
Gaz Metro Input Price Indexes
140
130
120
Price Indexes
110
100
90
80
70
60
1998
1999
2000
2001
2002
2003
Consumer Price Index (all items) Quebec
Summary Input Price Index -O&M
Summary Gaz Metro Input Price index for All Inputs
Index Research for Gaz Metro’s Groupe de Travail
2004
2005
2006
2007
2008
2009
GDPIPI - Final Domestic Demand Quebec
Input Price Index - Capital Expenditures
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Figure A-1
41
Comparing Trends in Alternative Capex Price Indexes
290
280
270
260
250
240
230
220
Price Indexes
210
200
190
180
170
160
150
140
130
120
110
100
90
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Year
Gas & Water Distributor Engineering Structures
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Table A-1
SAMPLE OF GAS DISTRIBUTORS USED IN
THE EMPIRICAL RESEARCH
Baltimore Gas and Electric
Boston Gas
Brooklyn Union Gas
Cascade Natural Gas
Central Hudson Gas & Electric
Connecticut Natural Gas
Consolidated Edison Company of New York
East Ohio Gas
Gaz Metro
Louisville Gas and Electric
Madison Gas and Electric
New Jersey Natural Gas
Niagara Mohawk Power
North Shore Gas
Northern Illinois Gas
Northwest Natural Gas
Orange and Rockland Utilities
Pacific Gas and Electric
PECO Energy
Peoples Gas Light and Coke
Peoples Natural Gas
Public Service Electric and Gas
Public Service Company of Colorado
Public Service Company of North Carolina
Puget Sound Energy
Questar Gas
Rochester Gas and Electric
San Diego Gas & Electric
Southern California Gas
Southern Connecticut Gas
Washington Gas Light
Wisconsin Gas
Wisconsin Power and Light
Econometric
sample
includes most
large US gas
distributors
Number of companies: 33
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Table A-3
43
Econometric Model of Capital Expenditure
VARIABLE KEY
N=
CN =
M=
CM =
UC =
CI =
BS =
E=
Trend =
EXPLANATORY
VARIABLE
Number of Gas Customers
Change in Number of Customers
Miles of Main
Change in Miles of Main
Urban Core Binary Variable
% Cast Iron Miles
% Bare Steel Miles
Number of Electric Customers
Time Trend
4 output variables
identified
(N, CN, M, CM)
ESTIMATED
COEFFICIENT
T-STATISTIC
P-VALUE
N
0.339
4.64
0.000
CN
0.044
2.05
0.042
M
0.530
6.49
0.000
CM
0.035
2.96
0.003
UC
0.094
2.10
0.037
CI
0.123
5.21
0.000
BS
0.041
2.66
0.008
E
-0.008
-2.49
0.013
Trend
-0.018
-3.17
0.002
Constant
6.846
80.91
0.000
System Rbar-Squared
Sample Period
Number of Observations
Trend = 1.8%
0.807
1998-2007
264
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Table A-4
44
Econometric Model of Total Cost
VARIABLE KEY
N=
M=
UC =
E=
CI =
Trend =
EXPLANATORY
VARIABLE
Number of Gas Customers
Miles of Main
Urban Core Binary Variable
Number of Electric Customers
% Cast Iron Distribution Miles
Time Trend
2 output variables
(N, M)
ESTIMATED
COEFFICIENT
T-STATISTIC
P-VALUE
N
0.757
42.623
0.000
M
0.089
3.445
0.001
UC
0.100
5.740
0.000
E
-0.004
-2.429
0.016
CI
0.069
6.323
0.000
Trend
-0.008
-6.123
0.000
Constant
12.504
435.444
0.000
System Rbar-Squared
Sample Period
Number of Observations
Nombre de
clients
dominant
Trend = 0.8%
0.957
1998-2008
363
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Table A-5
45
Macroeconomic Inflation Measures for Quebec and Canada
Canada
CPI (all items)¹
Core CPI¹ ²
Gross Domestic Product Implicit Price Indexes³
Comprehensive
Year
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Level
33.6
36.6
40
44
49.5
54.9
58.1
60.6
63
65.6
68.5
71.2
74.8
78.4
82.8
84
85.6
85.7
87.6
88.9
90.4
91.3
92.9
95.4
97.8
100
102.8
104.7
107
109.1
111.5
114.1
114.4
116.5
Growth Rate⁴
7.7%
8.6%
8.9%
9.5%
11.8%
10.4%
5.7%
4.2%
3.9%
4.0%
4.3%
3.9%
4.9%
4.7%
5.5%
1.4%
1.9%
0.1%
2.2%
1.5%
1.7%
1.0%
1.7%
2.7%
2.5%
2.2%
2.8%
1.8%
2.2%
1.9%
2.2%
2.3%
0.3%
1.8%
Level
62.9
65.1
68
71
74
77.2
79.8
82.1
83.6
85.3
86.9
88.8
90.3
92
93.2
94.5
95.7
97.7
100
102.2
103.8
105.5
107.5
109.8
111.7
113.6
115.6
Growth Rate
3.4%
4.4%
4.3%
4.1%
4.2%
3.3%
2.8%
1.8%
2.0%
1.9%
2.2%
1.7%
1.9%
1.3%
1.4%
1.3%
2.1%
2.3%
2.2%
1.6%
1.6%
1.9%
2.1%
1.7%
1.7%
1.7%
Level
55.7
60.4
63.7
65.8
67.8
69.9
73.1
76.4
79.8
82.4
84.8
85.9
87.2
88.2
90.2
91.6
92.7
92.3
93.9
97.8
98.9
100
103.3
106.6
110.1
113
116.7
121.4
118.8
NA
Growth Rate
8.1%
5.3%
3.2%
3.0%
3.1%
4.5%
4.4%
4.4%
3.2%
2.9%
1.3%
1.5%
1.1%
2.2%
1.5%
1.2%
-0.4%
1.7%
4.1%
1.1%
1.1%
3.2%
3.1%
3.2%
2.6%
3.2%
3.9%
-2.2%
NA
CPI (all items)¹
Final Domestic Demand
Level
53.6
58.7
61.9
64.4
66.7
69.2
72
74.7
77.9
80.9
83.7
85.1
86.8
88.1
89.2
90.2
91.5
92.7
93.9
96.1
97.8
100
101.5
103.2
105.5
107.9
110.4
112.9
114.4
NA
Quebec
Gross Domestic Product Implicit Price Indexes³
Comprehensive
Growth Rate
Level
Growth Rate
Level
9.1%
5.3%
4.0%
3.5%
3.7%
4.0%
3.7%
4.2%
3.8%
3.4%
1.7%
2.0%
1.5%
1.2%
1.1%
1.4%
1.3%
1.3%
2.3%
1.8%
2.2%
1.5%
1.7%
2.2%
2.2%
2.3%
2.2%
1.3%
NA
40.5
44.7
50.2
56
59.1
61.5
64.2
67.3
70.2
72.8
75.9
79.2
85
86.6
87.7
86.6
88.1
89.5
90.8
92.1
93.5
95.8
98
100
102.5
104.5
106.9
108.7
110.4
112.7
113.4
114.8
9.9%
11.6%
10.9%
5.4%
4.0%
4.3%
4.7%
4.2%
3.6%
4.2%
4.3%
7.1%
1.9%
1.3%
-1.3%
1.7%
1.6%
1.4%
1.4%
1.5%
2.4%
2.3%
2.0%
2.5%
1.9%
2.3%
1.7%
1.6%
2.1%
0.6%
1.2%
51.9
57
60.3
63.1
65.4
70
73.6
77.2
80.8
83.2
86.5
87.9
88.3
88.9
90.9
91.7
92.7
93.6
94.7
96.8
98.2
100
102.6
104.7
106.5
108.6
111.4
112.8
113.6
NA
Growth Rate
9.4%
5.6%
4.5%
3.6%
6.8%
5.0%
4.8%
4.6%
2.9%
3.9%
1.6%
0.5%
0.7%
2.2%
0.9%
1.1%
1.0%
1.2%
2.2%
1.4%
1.8%
2.6%
2.0%
1.7%
2.0%
2.5%
1.2%
0.7%
NA
Final Domestic Demand
Level
55.2
60.6
63.7
66.4
69
71.4
74.3
76.9
79.9
83
85.8
87.3
88.6
89.1
89.9
90.6
91.8
92.7
94
96.4
97.8
100
101.8
103.1
105.1
106.5
108.6
110.8
112.3
NA
Growth Rate
9.3%
5.0%
4.2%
3.8%
3.4%
4.0%
3.4%
3.8%
3.8%
3.3%
1.7%
1.5%
0.6%
0.9%
0.8%
1.3%
1.0%
1.4%
2.5%
1.4%
2.2%
1.8%
1.3%
1.9%
1.3%
2.0%
2.0%
1.3%
NA
Annual Growth Rates
1988-2007
1998-2007
1990-2009
2000-2009
2.44%
2.10%
2.12%
2.08%
2.18%
1.77%
1.93%
1.84%
2.34%
2.30%
1.99%
2.35%
2.14%
1.88%
1.92%
1.97%
2.26%
1.95%
2.01%
1.93%
2.07%
1.84%
1.70%
1.82%
1.90%
1.68%
1.70%
1.78%
Standard Deviation
1990-2010
1.20%
0.48%
1.52%
0.70%
1.52%
0.86%
0.81%
Footnotes
¹ Statistics Canada. Table 326-0021 - Consumer Price Index (CPI), 2005 basket, annual (2002=100 unless otherwise noted) (table).
² The Core CPI excludes from the all-items CPI the effect of changes in indirect taxes and eight of the most volatile components identified by the Bank of Canada:
fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers' supplies.
³ Statistics Canada. Table 384-0036 - Implicit price indexes, gross domestic product (GDP), provincial economic accounts, annual (index, 2002=100).
⁴ All growth rates are calculated logarithmically.
Notes:
• Annual CPI data become available for the previous year near the end of January of the following year(e.g. Annual 2010 data became available on 1/25/2011).
• CPI data are not revised. Only seasonally adjusted CPI data are subject to revision and are also available at the end of January of the following year.
• Annual GDPIPI data become available for the previous year near the beginning of November of the following year(e.g. Annual 2010 data become available November 2011). Preliminary data for the previous year are released
near the end of April of the following year.
• GDP data are revised periodically as improved data sources and/or methodology become available.
• "NA" is defined as "Not available."
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Table A-6
46
Salary and Wage Price Indexes for Quebec and Canada
Fixed weighted index of average hourly earnings for all employees¹ ²
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
1992-2009
2000-2009
Canada
Industrial Aggragate
Utilities
Quebec
Industrial Aggregate
82.02
84.71
86.44
87.63
89.62
91.73
92.28
93.78
94.81
96.73
98.03
100.18
103.13
105.90
109.23
112.09
117.25
121.34
125.02
67.38
70.17
72.41
73.23
74.57
75.88
77.70
80.83
86.13
88.73
95.01
99.90
105.16
107.02
108.92
111.24
117.38
118.86
125.52
85.18
88.48
89.84
90.19
91.71
93.21
93.98
94.39
94.06
95.98
97.14
100.15
102.83
105.81
108.73
111.14
117.08
120.08
123.62
2.3%
2.8%
3.5%
3.8%
2.1%
2.7%
Utilities
71.51
74.20
77.67
78.22
79.62
81.30
81.31
84.58
90.93
98.08
94.43
99.88
102.56
103.24
100.46
100.33
105.53
111.39
117.66
Average weekly earnings
(Industrial aggregate excluding
unclassified businesses)² ³
Canada
553.15
572.41
582.87
592.88
598.67
611.01
623.43
632.72
640.47
655.55
656.74
672.68
690.79
709.41
737.29
755.48
788.06
810.52
823.53
Annual Growth Rates
2.8%
2.2%
2.6%
2.5%
Composite construction
union wage rate index⁴
Quebec
Canada
Quebec
545.45
566.03
572.63
575.46
579.41
585.52
594.29
602.17
605.74
616.25
622.83
639.04
656.64
673.69
695.58
708.27
738.73
751.19
759.42
40.0
43.7
49.2
51.0
52.2
53.7
55.2
57.2
59.9
63.2
67.0
70.1
71.7
73.2
74.6
75.3
76.8
78.4
79.7
81.8
83.8
87.0
89.3
91.4
94.1
97.0
100.0
104.9
109.2
37.1
40.4
44.9
46.6
48.0
49.4
52.1
54.6
57.5
60.3
64.1
67.8
68.5
69.1
69.1
69.1
71.9
73.8
74.8
77.3
78.8
83.7
86.8
89.6
94.3
97.3
100.0
102.9
106.0
3.6%
3.0%
3.7%
3.1%
1.8%
2.3%
1982-2009
1990-2009
Footnotes
¹ Statistics Canada. Table 281-0039 - Fixed weighted index of average hourly earnings for all employees (SEPH), excluding overtime, unadjusted for
seasonal variation, for selected industries classified using the North American Industry Classification System (NAICS), monthly (index, 2002=100)
² Industrial aggregate covers all industrial sectors except those primarily involved in agriculture, fishing and trapping, private household services, religious organisations
and the military personnel of the defence services.
³ Statistics Canada. Table 281-0027 - Average weekly earnings (SEPH), unadjusted for seasonal variation, by type of employee for selected industries classified
using the North American Industry Classification System (NAICS), annual (current dollars)
⁴ Statistics Canada. Table 327-0045 - Construction union wage rate indexes, monthly (index, 2007=100)
Notes
• Payroll employment, earnings and hours data are released on a monthly basis. Data are released near the end of each month for the month two months prior (e.g.
August 2011 data will be released near the end of October 2011).
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Table A-7
Canadian Natural Gas Distribution, Water, and Other Systems Capital Stock Price
Indexes
Information and communication
technologies machinery and equipment¹
Year
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Level
3091.7
3102.6
3165.2
3205.4
3282.6
3226.8
3312.1
3325.9
3353.1
3408.4
3505.1
3522.7
3564.8
3466.6
3606.7
3213.5
2807.1
2060.2
1826.7
1347.4
1139
1108.6
793.6
688.1
576.5
486.4
409.9
373.8
316.2
286.2
230.6
204.5
197.5
185.6
169
146.3
135.1
122.6
109.7
105.2
103.6
100
92.5
85.8
79.5
76.3
74.7
Annual Growth Rates
1962-2007
1968-2007
1978-2007
1988-2007
1998-2007
Growth Rate⁴
0.4%
2.0%
1.3%
2.4%
-1.7%
2.6%
0.4%
0.8%
1.6%
2.8%
0.5%
1.2%
-2.8%
4.0%
-11.5%
-13.5%
-30.9%
-12.0%
-30.4%
-16.8%
-2.7%
-33.4%
-14.3%
-17.7%
-17.0%
-17.1%
-9.2%
-16.7%
-10.0%
-21.6%
-12.0%
-3.5%
-6.2%
-9.4%
-14.4%
-8.0%
-9.7%
-11.1%
-4.2%
-1.5%
-3.5%
-7.8%
-7.5%
-7.6%
-4.1%
-2.1%
-8.1%
-9.5%
-12.1%
-8.5%
-5.9%
Non-information and communication
technologies machinery and equipment²
Level
17.5
17.9
20.1
18.7
19.3
19.7
19.5
19.4
19.8
20.9
21.5
22
23
26.2
31
32.8
36.2
40.5
45.2
50.4
56.2
60.7
61.8
64.7
68.5
70.6
70.6
70.1
72.2
74
72
74.8
77.8
81.5
84.7
86.3
87.5
93.3
94.8
95.7
98.3
100
93.3
89.6
87.6
85.6
84.5
Growth Rate
2.3%
11.6%
-7.2%
3.2%
2.1%
-1.0%
-0.5%
2.0%
5.4%
2.8%
2.3%
4.4%
13.0%
16.8%
5.6%
9.9%
11.2%
11.0%
10.9%
10.9%
7.7%
1.8%
4.6%
5.7%
3.0%
0.0%
-0.7%
3.0%
2.5%
-2.7%
3.8%
3.9%
4.6%
3.9%
1.9%
1.4%
6.4%
1.6%
0.9%
2.7%
1.7%
-6.9%
-4.0%
-2.3%
-2.3%
-1.3%
3.4%
3.7%
2.8%
0.9%
-0.3%
Building structures
Level
17.9
17.8
18.2
18.4
19.2
20.5
21.3
21.2
22.2
23.3
24.6
26.9
29
35.4
40.4
41.3
42.2
43.8
46.9
52.1
60.4
65.3
64
62.7
63.9
66.5
70.8
75.2
80.4
83.2
80.4
80.4
80.6
82.2
84.7
86
87.7
89.3
91
95.6
98.5
100
102.6
108.7
114
122.8
136
Growth Rate
-0.6%
2.2%
1.1%
4.3%
6.6%
3.8%
-0.5%
4.6%
4.8%
5.4%
8.9%
7.5%
19.9%
13.2%
2.2%
2.2%
3.7%
6.8%
10.5%
14.8%
7.8%
-2.0%
-2.1%
1.9%
4.0%
6.3%
6.0%
6.7%
3.4%
-3.4%
0.0%
0.2%
2.0%
3.0%
1.5%
2.0%
1.8%
1.9%
4.9%
3.0%
1.5%
2.6%
5.8%
4.8%
7.4%
10.2%
Engineering structures³
Level
12.6
12.7
13.1
13.6
14.4
15.2
16
16.2
17.1
18.1
19.3
20.5
21.8
26.1
30.8
33.4
36
38.8
42.7
47.1
52.2
57.9
60.8
62.8
64.6
66.5
68.2
71.9
74.6
77.5
79.6
81
82.5
85.6
86.1
89.2
91.7
94.6
96.4
98.7
98.8
100
101.1
107.2
113.9
122.1
128.4
4.4%
4.6%
3.9%
3.3%
4.4%
Growth Rate
0.8%
3.1%
3.7%
5.7%
5.4%
5.1%
1.2%
5.4%
5.7%
6.4%
6.0%
6.1%
18.0%
16.6%
8.1%
7.5%
7.5%
9.6%
9.8%
10.3%
10.4%
4.9%
3.2%
2.8%
2.9%
2.5%
5.3%
3.7%
3.8%
2.7%
1.7%
1.8%
3.7%
0.6%
3.5%
2.8%
3.1%
1.9%
2.4%
0.1%
1.2%
1.1%
5.9%
6.1%
7.0%
5.0%
5.0%
5.2%
4.2%
3.2%
3.4%
47
Land
Level
35.4
32.8
30.4
28.6
28
27.9
27
25.8
25.7
25.6
26.1
27.6
31
36.1
39.7
40.9
43.4
45.2
49.9
56.7
62.8
65.2
63.6
64
64
66.2
69.3
74
78.2
81
80.3
79.8
81.8
84.5
87.1
89.8
91.3
92.7
94.7
97.2
98.1
100
103.9
112.9
123.2
137
151.2
Growth Rate
-7.6%
-7.6%
-6.1%
-2.1%
-0.4%
-3.3%
-4.5%
-0.4%
-0.4%
1.9%
5.6%
11.6%
15.2%
9.5%
3.0%
5.9%
4.1%
9.9%
12.8%
10.2%
3.8%
-2.5%
0.6%
0.0%
3.4%
4.6%
6.6%
5.5%
3.5%
-0.9%
-0.6%
2.5%
3.2%
3.0%
3.1%
1.7%
1.5%
2.1%
2.6%
0.9%
1.9%
3.8%
8.3%
8.7%
10.6%
9.9%
3.2%
4.3%
4.2%
3.9%
5.0%
Footnotes
¹ Information and communication technologies machinery and equipment consists of computer hardware, software and telecommunication equipment.
² Those assets are machinery equipment other than computer hardware, software and telecommunication equipment.
³ Engineering assets provide the foundation capital for railways, utilities, oil and gas, and pipelines.
⁴ All growth rates are calculated logarithmically.
Sources:
Statistics Canada. Table 383-0025 - Investment, capital stock and capital services of physical assets, by North American Industry Classification System (NAICS), annual (dollars unless otherwise noted)
(index, 2002=100)
Notes
• Table 383-0025 data become available near the end of December or beginning of January for the year three years or four years prior, respectively (e.g. Data for 2007 became available on December 24, 2010)
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Table A-8
Canadian Electric Utility Construction Price Indexes
Distribution Systems
Year
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Level
17.7
18
17.4
18.1
18.7
18.7
19
19.1
19.5
19.9
20.9
21.7
21.5
22.4
24.1
25
26.1
28.5
34.3
38.5
40.7
43.4
46.6
52.9
60.3
65.7
71.8
74.8
78.1
82.1
84
86.6
91.9
95.5
98.5
97.7
100
102.5
108.2
116.7
116.6
118
122.8
126.1
128.7
129.6
130.5
130.6
131.1
133.6
142.4
148.8
150.3
151.1
Annual Growth Rates
1962-2007
1968-2007
1978-2007
1988-2007
1998-2007
1980-2009
1990-2009
2000-2009
Growth Rate¹
Total direct
costs
Materials
48
Transmission line systems
Total
Total
1.7%
-3.4%
3.9%
3.3%
0.0%
1.6%
0.5%
2.1%
2.0%
4.9%
3.8%
-0.9%
4.1%
7.3%
3.7%
4.3%
8.8%
18.5%
11.6%
5.6%
6.4%
7.1%
12.7%
13.1%
8.6%
8.9%
4.1%
4.3%
5.0%
2.3%
3.0%
5.9%
3.8%
3.1%
-0.8%
2.3%
2.5%
5.4%
7.6%
-0.1%
1.2%
4.0%
2.7%
2.0%
0.7%
0.7%
0.1%
0.4%
1.9%
6.4%
4.4%
1.0%
0.5%
25.6
26.6
29.1
35.6
39.7
41.7
44.4
47.7
54.5
62.3
67.8
73.7
76.2
79.4
83.7
85.5
87.9
93.6
97.3
99.9
97.9
100
102.5
109.1
118.7
118.2
119.3
123
126
129.1
129.8
130.6
130.9
131.3
134.2
144.2
150.7
151.9
150.7
29.8
30
32.6
42.3
45.7
45.5
46.7
50.3
60.3
70.6
75
79.9
79.1
83
88.7
90.7
93.3
101.7
105
106.9
98.5
100
102.1
112.5
128.1
126.1
125
125.4
126
128.6
127.7
127.6
127.8
132.5
138.2
155
165
167.6
167.4
Labour
8.3
8.6
9.3
9.8
10.4
10.9
11.4
11.9
12.3
12.9
13.5
15.1
16.2
17.5
18.9
20.3
22.1
25
27.4
32.5
37.2
41.4
44.2
47
51.6
57.5
64.5
71
73.6
76
78
80.7
83.6
88
91.3
96.9
100
102.7
104.3
106.1
106.6
110.1
117.6
123.6
128.8
130.7
132.3
132.7
127.2
125.3
127.5
130.3
127.7
127.2
4.5%
4.8%
4.1%
2.7%
2.3%
3.5%
2.3%
1.8%
NA
NA
4.1%
2.4%
2.3%
3.4%
2.2%
1.8%
NA
NA
4.2%
2.4%
2.8%
3.4%
2.3%
2.8%
5.4%
5.4%
3.8%
2.2%
1.7%
3.3%
1.8%
0.3%
Construction
equipment
17.3
18.3
19
24.7
20
20.3
20
20.2
20.4
20.5
20.9
22
22.5
23.3
24.7
26
26.9
27.9
32
34.8
39.1
43.3
48.3
54.2
61.7
74
82.1
86.2
88.9
93
90.4
91.3
89.5
91.9
97.2
99.4
100
104.8
111
120.3
125.7
129.8
138.1
141.5
135.3
142
145.5
145.5
148
157.7
160
160
173.8
158.7
Construction
indirects
4.5%
5.0%
4.4%
2.9%
2.1%
3.6%
2.7%
1.1%
NA
5.5%
4.3%
2.6%
2.2%
4.1%
2.9%
1.9%
14.5
15.6
16.8
18.1
19.6
21.2
23.2
24.7
27.7
31.9
35.2
38.3
41
44.5
49.4
55.2
62.3
67.2
70.9
74.1
76.5
79.5
83
85.7
90.8
96.8
100
102.3
103.3
105.5
107.9
111.1
121.4
126.9
126.7
128.9
129.9
129
129.9
130.4
132.6
138.4
141.4
153.4
Level
20
20.6
19.5
20.1
19.8
18.6
19.3
19.7
20.4
21.4
22.3
22.5
22.2
22.9
25
26.1
27.3
29.3
35.5
41.6
44.6
47
50.6
56.5
63.3
69.7
75.1
77
80.6
81.6
84
89.2
96.5
102.6
104
100.4
100
103
108.1
112.8
113.5
115.7
121
122.2
124.7
127
129.2
126.4
129
130.9
136.2
142.6
148.8
149.7
Growth Rate
3.0%
-5.5%
3.0%
-1.5%
-6.3%
3.7%
2.1%
3.5%
4.8%
4.1%
0.9%
-1.3%
3.1%
8.8%
4.3%
4.5%
7.1%
19.2%
15.9%
7.0%
5.2%
7.4%
11.0%
11.4%
9.6%
7.5%
2.5%
4.6%
1.2%
2.9%
6.0%
7.9%
6.1%
1.4%
-3.5%
-0.4%
3.0%
4.8%
4.3%
0.6%
1.9%
4.5%
1.0%
2.0%
1.8%
1.7%
-2.2%
2.0%
1.5%
4.0%
4.6%
4.3%
0.6%
4.4%
4.6%
3.7%
2.3%
2.1%
3.2%
1.9%
2.0%
Footnotes
¹ All growth rates are calculated logarithmically.
Source: Statistics Canada. Table 327-0011 - Electric utility construction price indexes (EUCPI), annual (index, 1992=100)
Notes:
• Table 327-0011 release schedule is as follows for a year t :
In September/October of t, preliminary first-half data are released for t ;
in April of t + 1, preliminary annual data are released for t;
in September/October of t + 1, revised annual data are released for t;
and in April of t + 2, final annual data are released fort.
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Table A-9
49
Canadian Non-Residental Building Construction Price Indexes
Seven census metropolitan area composite
Total, non-residential
building construction
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Level
58.3
62.8
62.0
60.9
62.2
65.0
69.7
74.6
79.5
81.8
78.8
78.7
79.2
80.9
83.4
84.9
86.7
88.5
90.1
95.1
98.2
100.0
103.0
109.7
115.9
124.9
136.8
150.9
142.0
141.5
Annual Growth Rates
1988-2007
1998-2007
1982-2010
1991-2010
2001-2010
Growth Rate¹
7.4%
-1.2%
-1.9%
2.2%
4.3%
7.1%
6.8%
6.4%
2.9%
-3.8%
-0.1%
0.6%
2.0%
3.1%
1.8%
2.2%
2.0%
1.8%
5.4%
3.2%
1.8%
3.0%
6.3%
5.5%
7.5%
9.1%
9.8%
-6.0%
-0.4%
3.4%
4.6%
3.1%
2.7%
4.0%
Total, commercial
structures
Level
59.8
64.4
63.2
61.8
63.1
66.0
71.0
76.1
81.1
83.3
79.8
79.6
80.0
81.5
84.0
85.3
87.0
88.8
90.4
95.3
98.3
100.0
102.9
109.4
115.5
124.6
137.3
151.3
141.4
140.6
Growth Rate
7.4%
-1.9%
-2.3%
2.1%
4.5%
7.2%
7.0%
6.4%
2.7%
-4.3%
-0.2%
0.5%
1.9%
3.0%
1.5%
1.9%
2.1%
1.8%
5.3%
3.1%
1.7%
2.9%
6.1%
5.4%
7.6%
9.6%
9.8%
-6.8%
-0.6%
3.3%
4.6%
2.9%
2.6%
3.9%
Montréal, Quebec
Total, industrial
structures
Level
52.5
56.5
56.4
56.3
58.7
62.0
65.9
70.6
75.8
78.1
76.0
76.1
76.7
78.8
81.2
82.8
85.0
86.8
88.6
94.3
97.9
100.0
103.1
111.1
118.0
127.3
138.4
154.2
146.7
146.2
Growth Rate
7.2%
-0.2%
0.0%
4.0%
5.5%
6.1%
7.0%
7.1%
2.9%
-2.7%
0.1%
0.9%
2.6%
3.1%
1.9%
2.7%
2.0%
2.1%
6.2%
3.7%
2.2%
3.1%
7.4%
6.1%
7.5%
8.4%
10.8%
-5.0%
-0.3%
3.7%
4.9%
3.5%
3.1%
4.4%
Total, non-residential
building construction
Level
58.0
63.2
64.1
65.7
68.4
72.2
76.4
80.3
83.5
85.3
82.2
81.8
80.6
81.7
84.4
85.5
87.9
89.8
91.6
95.9
97.5
100.0
102.5
108.1
113.1
117.4
121.6
130.4
134.5
136.1
Growth Rate
8.5%
1.4%
2.5%
4.0%
5.5%
5.7%
5.0%
3.9%
2.1%
-3.7%
-0.5%
-1.4%
1.3%
3.2%
1.3%
2.9%
2.1%
2.0%
4.7%
1.7%
2.5%
2.4%
5.3%
4.6%
3.8%
3.5%
6.9%
3.2%
1.1%
2.3%
3.2%
2.9%
2.3%
3.5%
Total, commercial
structures
Level
59.5
64.9
66.1
67.6
70.2
73.9
78.4
82.2
85.3
87.0
83.4
82.5
81.6
82.4
85.1
86.1
88.5
90.2
92.0
96.3
97.7
100.0
102.6
107.8
112.8
117.1
121.1
130.0
134.0
135.5
Growth Rate
8.6%
1.8%
2.3%
3.7%
5.2%
5.9%
4.7%
3.7%
2.0%
-4.3%
-1.0%
-1.1%
1.0%
3.1%
1.3%
2.7%
1.9%
2.0%
4.6%
1.5%
2.3%
2.5%
5.0%
4.5%
3.7%
3.4%
7.1%
3.0%
1.1%
2.2%
3.1%
2.8%
2.2%
3.4%
Total, industrial
structures
Level
55.0
59.4
59.6
61.2
64.3
68.2
71.8
76.0
79.5
81.3
79.2
79.4
78.4
79.8
83.0
84.2
86.9
89.0
90.9
95.5
97.5
100.0
102.5
109.2
115.0
119.4
123.8
132.9
138.4
139.5
Growth Rate
7.8%
0.3%
2.7%
4.8%
6.0%
5.1%
5.6%
4.5%
2.3%
-2.6%
0.2%
-1.2%
1.8%
3.9%
1.4%
3.1%
2.5%
2.1%
4.9%
2.0%
2.6%
2.4%
6.3%
5.2%
3.8%
3.6%
7.1%
4.0%
0.8%
2.7%
3.5%
3.2%
2.7%
3.8%
Footnotes
¹ All growth rates are calculated logarithmically.
Source:
Statistics Canada. Table 327-0043 - Price indexes of non-residential building construction, by class of structure, quarterly (index, 2002=100)
Notes
• Data are released on a quarterly basis. Data for each quarter are released during the second or third week of the month two months following the end of the quarter (e.g. Q1 2010 data were
released 5/18/2010)
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HOW
HOW GAZ
GAZ METRO
METRO BUSINESS
BUSINESS CONDITIONS
CONDITIONS COMPARED
COMPARED TO
TO U.S.
U.S. SAMPLE
SAMPLE MEANS
MEANS
Output Variables
Output Variables
Number of Customers
Number of Customers
Change in Customers
Change in Customers
Miles of Main
Miles of Main
Change in Main
Change in Main
Output Quantity Level Index (US sample mean = 1.00)
Output Quantity Level Index (US sample mean = 1.00)
O&M
O&M
Capex
Capex
Total
Total
Average Annual Growth in Output
Average Annual Growth in Output
Number of Customers
Number of Customers
Miles of Main
Miles of Main
Change in Customers
Change in Customers
Change in Main
Change in Main
Input Prices
Input Prices
Purchasing Power Parity 2009 (C$/US$)
Purchasing Power Parity 2009 (C$/US$)
Wage Level
Wage Level
RSMeans City Cost Index
RSMeans City Cost Index
Other Business Condition Variables
Other Business Condition Variables
Urban Core Dummy
Urban Core Dummy
Number of Electric Customers
Number of Electric Customers
Percent of Main that is Cast Iron
Percent of Main that is Cast Iron
Index Research for Gaz Metro’s Groupe de Travail
Gaz Metro
Gaz Metro
2009
2009
[A]
[A]
U.S. Sample
U.S. Sample
Mean 1998-2009
Mean 1998-2009
[B]
[B]
Ratio
Ratio
179,370
179,370
4,614
4,614
6,292
6,292
110
110
874,233
874,233
13,017
13,017
10,816
10,816
192
192
20.5%
20.5%
35.4%
35.4%
58.2%
58.2%
57.3%
57.3%
0.205
0.205
0.456
0.456
0.269
0.269
1.00
1.00
1.00
1.00
1.00
1.00
20.5%
20.5%
45.6%
45.6%
26.9%
26.9%
1.9%
1.9%
2.0%
2.0%
12.5%
12.5%
-4.1%
-4.1%
1.4%
1.4%
1.9%
1.9%
-7.1%
-7.1%
-4.9%
-4.9%
138.0%
138.0%
107.6%
107.6%
-175.1%
-175.1%
85.3%
85.3%
1.197
1.197
759.42
759.42
107.10
107.10
1.000
1.000
740.95
740.95
100.00
100.00
119.7%
119.7%
102.5%
102.5%
107.1%
107.1%
1
1
0
0
0
0
0.78125
0.78125
641,078
641,078
10.11%
10.11%
128.0%
128.0%
0.0%
0.0%
0.0%
0.0%
[A/B]
[A/B]
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51
Use of Indexing in Regulation
Price Caps
growth Revenue = growth Rates + growth OutputsR
growth Cost = growth Input Prices + growth Intrants
If
growth Revenue = growth Cost
Then
growth Rates = growth Input Prices
– (growth OutputsR – growth Intrants)
Precedents: Ontario power distributors, ENMAX,
Maine, Massachusetts
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52
Summing Up
Total Cost
Growth Cost = growth GDPIPIFDD – X + growth Output
X = Productivity Target + Stretch
Inflation measure: Quebec GDPIPIFDD
Productivity Target = [1.11, 1.67]
Stretch = [0.20, 0.50]
X = [1.21, 2.17]
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